Banking Law, Investment,
Foreign Capital

The financing of business activity, through the public or private sectors, involves many possibilities that often have numerous complexities and specificities, not always easily understood by those who exercise business activity. From knowledge about credit and financing lines to the rediscussion of banking contracts, a specialized legal follow-up is indispensable.

Barank Advogados works from the simplest operations to high value contracts, especially in the sector of investments and foreign capital, Exchange Law and several banking contracts, with highlight to the following work fronts:

• Foreign exchange transactions;
• Technology Transfer;
• Internal and External Loans;
• Special Lines of Credit;
• Direct Investment;
• Brazilian Investments Abroad and Foreign Investments in Brazil;
• Operations through the Central Bank of Brazil (“BC”) and the National Bank for Economic and Social Development of Brazil (“BNDES”).

Frequently Asked Questions on Banking Law, Investment and Foreign Capital in Brazil

Barank Advogados, a business law firm based in Maringá, Paraná, Brazil, answers the most common questions from companies and foreign investors about investing in Brazil, Central Bank of Brazil rules, foreign exchange and banking contracts. We work in English, Portuguese and French.

How can a foreigner open a company or invest in Brazil?

Foreign individuals and companies can be partners in Brazilian companies, either by incorporating a new entity or by acquiring a stake in an existing business. To do so, they must register with the Brazilian Federal Revenue Service, appoint a legal representative in Brazil and comply with the Central Bank of Brazil reporting rules. Some sectors have specific restrictions on foreign capital, and the structure chosen at the outset directly affects taxation and future profit remittances.

Does foreign investment need to be registered with the Central Bank of Brazil?

Yes. Foreign direct investment must be reported to the Central Bank of Brazil through the SCE-IED system, in the cases and deadlines set out in BCB Resolution No. 278/2022. This information is the basis for proving the capital brought into the country and for enabling future dividend remittances and the repatriation of the investment. Errors or delays may lead to fines and make foreign exchange transactions more difficult.

What changed with Brazil’s new foreign exchange framework (Law No. 14,286/2021)?

The new foreign exchange framework, in force since the end of 2022, modernized and simplified Brazil’s rules on foreign exchange and foreign capital, consolidating dozens of older regulations. Changes include replacing the former registration model with a reporting system and more flexible rules for foreign currency accounts and transactions. Companies whose investments were structured under the old rules should review whether they comply with the new model.

Does a foreign shareholder need a CPF, a CNPJ and an attorney-in-fact in Brazil?

Yes. A foreign individual shareholder needs a CPF (individual taxpayer number), and a foreign company needs a CNPJ (corporate taxpayer number). It is also mandatory to appoint an attorney-in-fact resident in Brazil with powers to represent the investor, including to receive service of process. Choosing this representative and defining the scope of the power of attorney require care, as they affect liability and control over the investment.

How are profits and dividends sent abroad, and which taxes apply?

Profits and dividends are remitted to the foreign investor through a foreign exchange transaction, which requires the investment to be properly reported to the Central Bank. The taxation of these amounts has changed with Brazil’s income tax reform, and double taxation treaties may affect the final outcome. Planning how and when to remit can lawfully reduce the tax cost.

How can capital invested in Brazil be repatriated?

Foreign capital can be returned through a capital reduction, the sale of the stake or the winding up of the company, always through a foreign exchange transaction. It is essential to prove the amount invested based on the information reported to the Central Bank, since any capital gain is taxed in Brazil. Investments without proper documentation usually face delays and higher costs on exit.

How do foreign loans to Brazilian companies work, and do they need to be registered?

Brazilian companies can raise loans and financing abroad, including from companies in the same group. These external credit transactions must be reported to the Central Bank in the cases set out in the regulations, and interest paid abroad is subject to Brazilian withholding income tax. The contract structure, guarantees and transfer pricing rules between related parties should be reviewed before signing.

I am a guarantor of a company loan in Brazil. Are my personal assets at risk?

As a rule, yes. Under Brazilian law, guarantors (avalistas and fiadores) back the debt with their personal assets, and bank contracts usually waive the right to require the lender to pursue the company first. Even if the company files for judicial reorganization, collection against guarantors may continue. On the other hand, there are possible defenses, such as challenging abusive charges and reviewing the validity of the guarantee itself.

Can the bank take property or equipment given as fiduciary collateral (alienação fiduciária)?

Yes, and quickly. Under fiduciary transfer of ownership, the asset belongs to the bank until the debt is fully paid. In case of default, Brazilian law allows fast procedures, including out-of-court ones, to consolidate ownership of real estate or recover machinery and vehicles. Deadlines to respond are short, and acting right after the notice may allow renegotiation or the challenge of improper charges before the asset is lost.

Can a bank freeze a company’s account or withhold its receivables?

It depends on the contract and the circumstances. When there is a fiduciary assignment of receivables or contractual authorization, the bank may withhold card payments and trade receivables to pay down the debt. Court-ordered freezes may also occur in enforcement proceedings. Withholdings without contractual basis, or that compromise the company’s working capital, can be challenged, and a prompt review of the contract is decisive.

Planning to invest in Brazil, send funds abroad or review a banking contract? Contact the Barank Advogados team.