Mandatory enrollment for foreign companies and individuals
- Brazil
- 09/01/2002
- Azevedo Sette Advogados
Starting from December 01, 2002, individuals who live abroad, regardless if Brazilians or foreigners, and who own assets or rights in Brazil, must file application before the Brazilian Federal Revenue Secretariat under the so-called “CPF cadastre” (Individual Tax Payer Register). The enrollment with the CPF – Individual Tax Payer Register shall be compulsory for individuals who live abroad and own: (i) real estate, (ii) cars, (iii) ships and vessels, (iv) aircrafts, (v) equity interest, (vi) bank accounts, including the Non Resident Accounts (known as “CC-5”), and (vii) investments in the financial and capital markets in Brazil.
The legal basis for this new regulation is Decree # 4.166, of 03/13/02, which has altered paragraph 1 of article 33 of Decree # 3000/99, and Normative Instruction # 190 of the Federal Revenue Secretariat, dated of 08/09/02, which establishes that the foreigners must proceed with the registration before the Secretariat of the Federal Revenue in Brazil, appointing a representative (Brazilian resident) by means of a power of attorney issued by a local Public Notary, or before the Brazilian consulates abroad.
Please note that the foreigner shall not be considered a Brazilian resident for taxation purposes simply by the enrollment with the CPF. The simple enrollment of the foreigner with the CPF does not characterize him/her as a resident and, consequently, does not subject him/her to the taxation provisions established for residents in Brazil. The enrollment with the CPF does not imply nor create any immediate tax collection obligation, except if the foreigner already owns taxable revenues in Brazil. In such cases, withholding income tax will be due and shall be collected through the “Carnê Leão” receipt.
In spite of the above, the enrollment with the CPF creates the obligation of reporting the Annual Exempted Statement, a sort of tax return, declaring that the individual did not receive any taxable income in Brazil. All individuals enrolled with the CPF, residents in Brazil or not, that are discharged of presenting the Annual Income Tax Statement, such as foreigners residing abroad that are enrolled with the CPF, are obliged to file the Annual Exempted Statement. The obligation to present tax return so called the Annual Income Tax Statement is applicable only to individuals residing in Brazil who receive taxable income.
The Federal Revenue also extended the obligation to register with the Brazilian Corporate Tax Payer Register (CNPJ) to legal entities existing abroad that own (i) real estate, (ii) cars, (iii) ships and vessels, (iv) aircrafts, (v) equity interest, (vi) bank accounts and (vii) investments in the financial and capital markets in Brazil and any other asset located in Brazil subject to registration before local public agencies, by means of the Normative Instruction # 200/02. The foreign entity must designate an attorney in fact resident in Brazil to represent the foreign entity and to stand responsible before the corporate taxpayer registry, including but not limited to communicate any changes or amendments in any data contained in the registry within 30 days of its occurrence. This rule became effective on August 01, 2002 for companies acquiring new assets in Brazil. The companies that already possess assets in Brazil shall make the registration until November 29, 2002, for investments mentioned in items (i), (ii), (iii) and (iv) above, and until December 30, 2002, for other investments.
With said regulation, the Federal Revenue Service intends to broad the control of assets in Brazil owned by foreigners, identifying the persons and nature of performed transactions. In effect, the rule brought more bureaucracy for those who are interested in investing in Brazil.
Azevedo Sette Advogados will be assisting foreign firms and individuals with the procedures to enroll with the CPF or CNPJ, according to the new regulation. Please contact us for further information or assistance.
