Registration of foreign capital in Brazil
In this article, we will outline the process of registering foreign capital destined to direct investments in country, through the RDE‐IED computerized system of the Central Bank of Brazil.
The foreign capital destined to direct investments in Brazil must be registered/declared when entering the country. According to Law 4.131, “Foreign capital is considered to be any goods, machinery and equipment that enter Brazil with no initial disbursement of foreign exchange, and are intended for the production of goods and services, as well as any funds brought into the country to be used in economic activities in the country, that belong to individuals or companies resident or headquartered abroad”.
The registration of foreign capital is be made through the RDE-IED (Registro Declaratório Eletrônico – Investimento Externo Direto - Eletronic Declaration Register), which is part of the Central Bank Information System (Sistema de Informações do Banco Central – SISBACEN).
This registration allows the foreign investors to remit profits, dividends and the capital initially invested abroad through the same exchange market used to bring the capital to Brazil. If the parties do not register the investment, the investments will be treated as domestic investments. Furthermore, the foreign investor and the recipient of the capital in Brazil may be subject to heavy fines for not having registered the investment with Bacen within the prescribed period.
The foreign investments must be done according to the laws of the country that is receiving the investments. All foreign investments must be registered with the Central Bank of Brazil. This registration is essential for offshore remittances, capital repatriation and registration of profit reinvestment.
In the case of direct investments, the responsible for the capital registration is the company or the representative of a foreign company in Brazil that is receiving the capital.
The RDE system
The registration of foreign capital is made through the RDE (Registro Declaratório Eletrônico) . RDE is a computerized system structured in five modules, each designed for a specific kind of foreign investment:
- Foreign Direct Investments (RDE-IED)
- Financial Operations (RDE-ROF)
- Portfolio Investments (RED-PORTFOLIO)
- Brazilian Capitals Abroad (RED-CBE)
In order to register at RDE-IED system it is required to first have a previous registration at CADEMP. The inscription in this system will generate a code that will be required while accessing the RDE system afterwords.
CADEMP is the Central Bank registration of individuals or companies, resident and non resident in the Brazil. For the registration of foreign capital in the RDE, it is necessary that the holders involved, individuals or legal entities, residents and non residents in the country, as well as their representatives are registered in CADEMP.
Registering at RDE-IED
First, the company that is receiving the foreign investments has to accredit in the SISBACEN system as a usuário especial (special user) what can be done by several ways:
- Registering in person at one of the BCB's offices throughout Brazil
- By mail, sending a accreditation request to the BCB office in Brasília
- Through internet
Once the recipient is registered at Sisbacen, and has its CPF or CNPJ also registered at CADEMP he can access the Sisbacen system to get a number of RED-IED for its foreign investors, using the transaction PRDE600.
Registering the foreign capital
The whole process is done through the transaction PRDE600 of the RED-IED system.
1) The foreign investor will send a payment order in the name of the recipient from a bank in his country to a Brazilian bank.
2) The recipient company or the representative of a foreign company in Brazil will contract a currency exchange operation from a Brazilian Bank authorized by the Central Bank to operate with exchange. Here, the recipient will inform the RED-IED number of the investor. The two official exchange markets in Brazil, both of which are subject to Central Bank of Brazil regulations, are:
I - the commercial/financial rate market, basically reserved for trade-related transactions and foreign currency investments in Brazil
II - the tourism rate market, destined to certain other transactions, such as inbound and outbound transactions.
3) After the currency exchange, the recipient of the capital will register the capitalization of the resources (subscription and payment in full)
Registration deadline: After receiving the capital, the company has up to 30 days to register it in the RDE.