Juliana Mello

Juliana Mello

The Brazil Business


Paying dividends from Brazil to abroad

Juliana Mello

Juliana Mello

The Brazil Business


In this article, we outlined the process of paying dividends from a Brazilian company to foreign investors.

Even after the valuation of the Bovespa Index at a rate of 14% this year, the Brazilian Stock Exchange deems attractive to investors compared to other emergent markets. Among the BRICS countries, Ibovespa presents the largest return in dividends to the investors. Besides, the local stock market is cheaper than the other emergent on average.

In 2011, Brazil has sent abroad a record volume of profits and dividends: USD 38.166 billion, according to the Central Bank, of which USD 4.741 billion in December, after deducting amounts received as a result of Brazilian investments in other countries.

According to the legislation, the profits and reserves in accordance can be distributed to partners or shareholders by way of profit or dividend and may, under the same title be transferred abroad, registered as reinvestment.

Registration of foreign capital

All foreign investments must be registered at the RDE system of the Central Bank of Brazil when entering the country. A non-registered investment is not eligible for repatriation nor can the dividends or profits generated by the investment be remitted abroad through the commercial rate exchange market.

However, it is important to note that nothing prevents the foreign investor from repatriating or remitting dividends or profits abroad through the floating exchange market or transferring local currency abroad to purchase foreign currency outside Brazil.

Apart from the aspects relating to registration, repatriation and certain tax consequences, the non-registered investment is subject to the same rules applicable to the registered investment.

Remittance of dividends and profits

After resolution of the partners/shareholders, the remittance of dividends shall have its destination recorded with the module IED of the RDE system, before the capital is sent abroad. There are no restrictions imposed on the amount of dividends distributed to the shareholders domiciled abroad. The remittance of dividends to investors domiciled abroad is conditional to two precedents:

  • The foreign investments made by the partners/shareholders shall be duly recorded with the RDE-IED.

  • The Brazilian company shall evidence profits.

As for the taxation:

  • Dividends paid out of profits generated on or after January 1996, are not subjected to withholding income tax.

  • Dividends paid out of profits generated on or before December, 1995 are subject to withholding income tax at a rate of 15% or 25%, unless otherwise provided by an applicable tax treaty between Brazil and the other country involved.

The process

To remit dividends to the shareholders of Brazilian companies abroad:

1) Register the determination of shareholders at the local Board of Trade, with the value of dividends to be distributed

2) Request folders of the Articles of Association, Central Bank and Balance Sheets

3) Register in the SISBACEN

Sign in as a SISBACEN user with password, and institution and select the option for dividends

  • Include the balance of the year of the value to be distributed

  • Register distributing profits

  • Allocate resources

Provide a copy of the process, the Articles of Association and the documents of the Central Bank to the bank responsible for the remittance.

The minimum mandatory dividend

The legislation determines that the Brazilian companies must pay at least 25% of their profits their shareholders. For the company, dividends are distributed from the net profits, after the payment of Income tax and social contributions and fees.

Thus, the values to be paid in dividends to the shareholders are already net of income tax, since the company already made the payment of taxes on those profits.

The remittances will not be allowed when destined for payment of "royalties", the use patent and trademark industry or commerce between subsidiary or affiliated company located in Brazil and its headquarters abroad.