entities (i.e. entities applying for a CNPJ
number in Brazil). Entities already
enrolled in CNPJ in July 2017 must
disclose this information by the end of
2018.
According to the new regulation, a
final beneficial owner is the individual
who ultimately, directly or indirectly,
owns, controls or has significant
influence in the entity, or the individual
on behalf of whom the transaction is
made.
The one having significant influence
is the individual who directly or
indirectly holds more than 25 percent
of the entity's capital, or who directly
or indirectly makes the majority of
the corporate decisions and holds the
power to appoint the majority of its
administrators (directors or officers),
even without controlling it.
Some exceptions apply, as the
following entities are not required to
disclose information on final beneficial
owner(s):
require the public disclosure of all
shareholders deemed relevant (and
as long as the respective jurisdiction
is not considered a tax haven under
Brazilian laws);
and as long as they are regulated by
a competent local authority and are
not incorporated in a tax haven, as
defined by Brazilian laws;
related to sovereign funds;
authority; and
Commission (CVM), as long as their
quotaholders' Tax ID numbers are
disclosed to the Federal Revenue.
as such entities already disclose
similar information in their respective
jurisdiction, are regulated by competent
authority and/or may not even have final
beneficial owner(s) as defined by IN
1634.
Notwithstanding the exemption, each
of those entities must disclose to the
Brazilian Federal information on the
individuals authorized to represent the
entity, its controlling individuals/entities,
its administrators and managers, if any,
as well as the individuals or entities in
favor of/on behalf of whom the entity has
been created.
Please note that any quotaholder of
a foreign investment fund who falls into
the category of final beneficial owner
must have his/her information disclosed
to the Federal Revenue.
Also, an individual acting solely
as administrator (manager, officer,
etc.) of a foreign entity applying for a
CNPJ number is not deemed as its final
beneficial owner, even if he/she has
authority to decide on most corporate
matters and/or to appoint the majority
of the administrators, However, his/her
information must be disclosed to the
Federal Revenue (as an administrator,
not a beneficial owner).
IN 1634 sets forth the procedures
for new CNPJ applications as well as
the timeframe and procedures to update
existing CNPJ registrations.
The new rule is in line with the
growing global trend regarding transpar-
ency and the fight against harmful tax
practices, money laundering, terrorist
financing and other crimes.
terrorist financing, for instance, the
Brazilian Securities Commission is also
strengthening the rules applicable to
the entities under its jurisdiction, in
order to follow international trends and
recommendations.
As to harmful tax practices, the
disclosure of the beneficial owner of
foreign investors may help to prevent
Brazilian investors from taking undue
advantage of certain tax benefits granted
exclusively to foreign investors.
In light of the above, foreign entities
holding (or intending to hold) assets and/
or investments in Brazil, as well as those
practicing (or intending to practice)
certain activities related to Brazil, must
be prepared to disclose information on
individuals deemed as beneficial owners
under IN 1634.
In addition to IN 1634, the Brazilian
Federal Revenue Service also enacted IN
1680 and IN 1681 in order to facilitate
the exchange of information with other
jurisdictions.
IN 1680 establishes the parameters
of the Common Reporting Standard
(CRS), as defined by the Organization for
Economic Cooperation and Development
(OECD), to allow Brazilian authorities
to exchange with foreign jurisdictions
information obtained from financial and
similar institutions.
Under IN 1681, if an entity based in
Brazil for tax purposes is the ultimate
controlling entity of a multinational
group it must present to Brazilian tax
authorities the Declaração País-a-País
(Jurisdiction-to-Jurisdiction Report), with
detailed information on the activities of
the group in each jurisdiction.
vehicle or scheme.