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26/11/2019

When will Brazil regain the investment grade?

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This report from Novus Capital, an investment management firm, shows that, by 2027, Brazil may reach an acceptable debt to GDP ratio for purposes of receiving investment grade, provided that the government does a very good job on the management of the budget.   In a less than optimistic scenario, the goal of a maximum of 63% of debt to GDP would only be reached by 2040.   The findings are similar to the reports issued by the Brazilian Central Bank on the matter.   Although the findings are not stelar, they are positive. The study shows that the country may stabilize and improve its finances without much effort, just by not increasing expenses.   The cabinet is very much willing to speed up this kind of good news. I would bet that, before long, Brazil will receive at least an update in its rating.   You can download the full report (in… Leia mais

 
21/10/2019

OPENING A BANK OR FINTECH IN BRAZIL IS CHEAP AND EASY NOW. HERE IS THE PROCEDURE.

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 As mentioned in my last post, Brazil has eased restrictions to foreign investment in the financial market. The text of the new regulation was a bit ambiguous about the definition of “branch”. But the Brazilian Central Bank has issued a public statement that indicates that the term “branch” is to be understood as “new company”.   As a result, the process for incorporating a bank in Brazil has become much more streamlined. And, due to the current exchange rate, minimum capital requirements are very low. This post will give you a list of the minimum capital requirements for finance companies and  a general overview of the process to obtain authorization from the Brazilian Central Bank. MININUM CAPITAL FOR FINTECHS THAT DO NOT ACT AS FINANCIAL INSTITUTION The definition of financial institution is not totally clear in Brazilian law. A good rule of thumb is that any company that provides loans at interest rates determined by the market (which, in case of… Leia mais

 
29/09/2019

Brazil eases restrictions to foreign investment in the banking industry

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I study regulations on foreign investments from many countries. From experience I know that it is never a good sign when a company needs authorization from the President himself before it can incorporate in a given place. Brazil, embarrassingly, required a presidential decree, no less, before authorizing any foreign financial institutions to invest in Brazil (even though foreign investment in other areas, including mining, cattle and farming, is mostly unrestricted). Fortunately, this rule has changed. As from September 27, 2019, the Brazilian Central Bank will be the sole responsible for authorizing foreign investments in the financial sector in two cases: Opening of new Brazilian branches of foreign institutions; Increase in the participation of foreign investors in the equity of Brazilian financial institutions. It should be noted that the Brazilian Central Bank (Bacen) is not only a Central Bank, in the financial sense, but it is also the main regulatory agency… Leia mais

 
02/09/2019

FINDING INFORMATION ABOUT YOUR JV PARTNER IN BRAZIL

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Brazil has a lot of government databases. Several of them are available through internet search. They are very useful when evaluating potential suppliers or targets for a Joint Venture or Acquisition This post will cover the Federal tax registration, the São Paulo state registration and the status of mining rights. CNPJ – THE MASTER CODE Everything in the Brazilian business world is centered around the CNPJ number. CNPJ is the tax enrollment number for companies. It is similar to the EIN code used by American companies, but much more prevalent. It is also usually public. You can ask your target for his CNPJ number. If he doesn’t give you one, there are two probable explanations: The project is not yet incorporated. It could be a seed project, for example. Or, it could be an individual working alone; It is scam or fraud. Get out. You can consult the CNPJ number at the Federal Revenue Service website:… Leia mais

 
15/08/2019

Mandatory representative in Brazil – nuissance or safeguard?

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The first step when incorporating a company in Brazil is to prepare a PoA to the local representative, who must be a permanent resident in the country. The local representative will have powers to represent the investor before the commercial registry and the tax authorities. The representative must also have powers to receive summons and subpoenas on behalf of the investor, and to manage local assets of the investor (this means, in practical terms, that he must have powers to deal on the investor’s shares) Now, due to the way Brazilian tax and labour courts work, this representative might also be liable for tax debts or labour responsibilities of the Brazilian company. On top of that, the local representative’s credit score may affect the BR subsidiary’s business. For example, by restricting its acess to lines of credit. The representative will usually receive powers to represent the investor in several dealings involving the company. For example: naming a local… Leia mais

 
31/05/2019

Swiss-brazilian tax information exchange agreement enters into force in Brazil

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Today, with the publication of Federal Decree n. 9.814 from 2019 (link here), the agreement between Switzerland and Brazil regarding the exchange of tax information became enforceable in Brazil. This means that it can now be used by the Brazilian Federal Revenue Service and other agencies as if it were a local Act. The agreement was signed in 2015 but, in practical terms, this decree is the starting point for its application and full validity in Brazil. Please notice that this is not the double tax treaty signed in 2018, which is still waiting for approval of the Brazilian… Leia mais

 
30/05/2019

Non-residents individuals do not pay income tax on gains from Brazilian real estate funds

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As long as the real estate fund abides by a few conditions, such as having at least 50 investors, gains arising from it and paid to individual investors who reside abroad are exempt from income tax in Brazil. To be eligible for this tax break, the non-resident investor must not own more than 10% of the quotas in the fund. However, the benefit applies even when the non-resident investor is based on a low tax… Leia mais

 
30/05/2019

How to set up a Bitcoin arbitrage business in Brazil

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Brazil has been a good market for Bitcon/cryptocurrency arbitrage. Although the last months have been rough, prices spikes always occur and specialists have pointed out to me that, if one can keep costs down, it is possible to set up a stable and recurring arbitration business. The restrictions faced by entrepreneurs are more due to bureaucracy and business culture than to legal regulation. Brazilian law is relatively welcoming of bitcoins and other cryptocoins. In this article I will explain both the theory and the practice behind it. Note: I`m using Bitcons as the general term for cryptocurrencies.   LEGAL FRAMEWORK OF BITCON ARBITRATION IN BRAZIL   Bitcoins did not receive a specific legal classification in Brazil, as of yet. So far, they are subsumed under the general class of “intangible goods”, but without any special designation such as software, services, intellectual property, etc. This turns out to be very consequential. The broad… Leia mais

 
22/05/2019

Can foreign individuals own mining companies in Brazil?

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Below, an interesting exchange with a reader (all personal details have been deleted). Dear Professor Adler Martins I like your blog very much, for I love International Law, negotiation and the art of drafting contracts. I would like you to help me with a doubt. May a foreign investor acquire a concession for mining exploration (gold) in Brazil? Is it necessary that Brazilian individuals also have equity in the company? What are the legal procedures and ways to accomplish that? Thanks in advance Abraço   Dear Reader, Thank you for following the blog. Regarding your question: The Brazilian Constitution, in its Article 176, says that the exploration and exploitation of mining deposits can only be pursued by a Brazilian individual or by a Company established in Brazil. Thus, if a foreigner wishes to acquire any kind of mineral rights in Brazil, it shall first set up a company in Brazil. This company may either have 100% foreign capital or be a… Leia mais

 
16/05/2019

Don’t leave bank accounts behind in Brazil, unless you set them straight

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I have been noticing a surge of tax audits regarding clients who lived in Brazil for a while and then went back home but kept financial investments in Brazil. This is how it happens: let’s say and American executive, or an Italian entrepreneur, works in Brazil for 03 years. During this time, he will notice that Brazilian banks pay very attractive interests for even the most basic investment. Naturally, he will get a taste for it. Everybody loves developing countries’ interest rates.   After leaving Brazil, the ideal procedure would be to  file a tax statement declaring definitive tax leave;  liquidate all investments;  open a non-resident bank account;  invest again, now through the non-resident bank account. Most people will file the tax statement declaring leave and will do none of the rest. It works for a while. The banks will turn a blind eye and maintain the accounts and investments. However, this is technically wrong, because… Leia mais

 
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