Brazilian Government demands greater transparency from companies, including information on ultimate beneficiary owners
The Brazilian Federal Tax Authority issued Normative Ruling 1,634 on 6th May 2016, which introduced new obligations for companies registered with the Federal Corporate Taxpayer’s Registry – CNPJ.
Among such obligations is that of informing who their ultimate beneficiary owners are. This obligation is applicable to Brazilian and foreign companies alike, and certain documents must be filed to this end.
This means that the Federal Tax Authority must be informed of the individuals who directly control or influence the entity. Normative Ruling 1,634 defines “influence” as the direct or indirect holding of more than 25% in the company or the direct or indirect predominance in corporate deliberations and election of the majority of the members of management.
Among other exceptions to this rule, such information does not need to be provided by publicly traded companies in Brazil or abroad, if located outside of tax havens.
Such information must be submitted in January 2017 and by no later than the end of 2018. Failure to comply with this obligation is punishable by suspension of the CNPJ enrolment and a ban to transact with banks, except in certain specific circumstances.
In practice, Brazilian companies with foreign investors already have to submit this information to banks when opening their bank accounts. In this way, the greatest change is the governmental control of such information, which is in line with the global tendency of ending corporate anonymity.
Normative Ruling 1,634 also establishes that entities holding LEI – Legal Entity Identifier – registrations must inform the number of such enrolment to the Federal Tax Registry. The LEI is an international registration for entities engaging in financial transactions and grants each entity a unique code number.