Both the investor and the recipient of investments must be aware of the obligations related to FDI.

Brazil is an attractive country for foreign businesses or individuals, but there are key points to consider regarding foreign direct investment (FDI) concerning registration of inflows and capital declarations.

When planning to direct resources to Brazil, the investor should seek an understanding of the landscape, concepts, and procedures, surrounding themselves with local partners who can support them in their decisions. Here are some essential points to consider:

What is Foreign Direct Investment?

According to the Central Bank of Brazil (Bacen), foreign direct investment is defined as the “direct participation of a nonresident entity in the capital stock of a company in the country, or any other economic right of a nonresident entity derived from an act or contract whenever the return on this investment depends on the business’s results.”

Brazilian companies can receive foreign direct investment from both nonresident individuals and legal entities.

FDI can be done through the opening or expansion of firms, mergers and acquisitions, reinvestment of profits obtained from overseas operations, among other modalities.

An important characteristic of direct investment is its long-term intention and acquisition outside the organized over-the-counter markets and stock exchanges. In other words, it is distinct from speculative investments, involving withdrawals due to fluctuations and contingencies.

Inflow of Foreign Capital.

The entry of foreign capital into Brazil must be formally made through the traditional banking system. Foreign capital can enter freely, with only a few exceptions and restrictions.

According to the rules of the Federal Revenue Service, direct foreign investors, whether individuals or legal entities, must be registered, respectively, with the CPF or CNPJ.

Respecting the imposed restrictions and meeting certain requirements, nonresidents are generally authorized to invest in the same instruments available to Brazilian residents.

Foreign capital participation is prohibited in the following activities:

• Activities involving nuclear energy 
• Healthcare assistance (except in cases provided by law) 
• Postal and telegraph services 
• Aerospace industry (satellite launching and positioning, vehicles, aircraft, or commercialization of these goods, except for manufacturing or trading) 

Foreign capital participation is restricted in the following activities:

• Acquisition of rural lands and areas near borders 
• Financial institutions 
• Exploration of public air services 
• Ownership of newspapers, radio, television, magazines, and other publications 
• Mining sector 

Registration of Foreign Capital

Even before entering the country, whether through individuals or legal entities, foreign investment must be registered with the Central Bank.

This registration must be carried out through the System for Reporting of Foreign Capital Information for Foreign Direct Investment (SCE-IED).

Periodic Declaration of Foreign Capital Resulting from FDI.

Investments must be reported in various situations, including financial transfers and movements of funds equal to or exceeding US$ 100,000 or its equivalent in other currencies.

The recipient with total assets above the reporting thresholds must account for them to Bacen:

• Quarterly: Total assets equal to or above R$300 million on the quarterly reference date of March 31. Deadline for submission: Until June 30.

• Quarterly: Total assets equal to or above R$100 million on the quarterly reference dates of June 30 and September 30. Deadline for submission: Until September 30 and December 31, respectively.

• Annual: Total assets equal to or above R$100 million on December 31 of the previous year. Deadline for submission: Until March 31 of the subsequent year.

• Quinquennial: Total assets equal to or above R$100,000 on December 31 of a calendar year ending in 0 or 5. There will be no annual declaration in years with quinquennial declaration. Deadline for submission: Until March 31 of the subsequent year.

The Periodic Declaration is made through the Economic-Financial Declaration (DEF) functionality of the System for Reporting of Foreign Capital Information for Foreign Direct Investment.

Related Penalties

Failure to submit these periodic declarations, providing false, incomplete, or incorrect information, or submitting them outside the deadlines subjects the responsible parties to fines of up to R$250,000.