Analysis of the Impacts of BACEN Circular No. 3,814/16 on the Remittance of Profits and Dividends Abroad

On December 7, 2016, the Central Bank of Brazil (“BACEN”) issued Circular No. 3,814/16 (“Circular”), with the objective of detailing the legislation relating to foreign investments in Brazil and the remittance of funds abroad. Following this, the Circular amended Circular No. 3,689/13, which originally regulated the rules on foreign capital in Brazil and on Brazilian capital abroad, and will enter into force on January 30, 2017.

Accreditation in Sisbacen

With the issuance of the Circular, prior accreditation in Sisbacen was formalized as a condition precedent to the remittance of funds abroad. This is not exactly a novelty, since in practice this obligation already existed and was detailed in the BACEN “Declarant Manual”.

For accreditation, the instructions on the BACEN website (www.bcb.gov.br) must be followed, which will then allow the investor to register in the Foreign Direct Investment (FDI) module of the Electronic Declaratory Registry (RDE).

This is also a requirement for the non-resident investor’s representative in Brazil to access the system for consultations.

RDE-IED Code

With accreditation and registration in Sisbacen, an RDE-IED code will be provided to jointly identify, before BACEN, the foreign investor and the Brazilian company invested in. The Circular stipulates that, in any financial transaction with a foreign entity, the RDE-IED code must be included in the exchange contract or in the record of the transaction in accounts domiciled abroad.

Remittance of Profits and Dividends Abroad:

Current regulations require that, for the closing of the foreign exchange contract and the remittance of profits and dividends abroad, the investor must present the following documents to the financial institution authorized by the Central Bank of Brazil (BACEN) to operate in the foreign exchange market (“Financial Institution”):

Articles of Incorporation or Bylaws of the Brazilian investee company;

Latest balance sheet of the Brazilian investee company, signed by an accountant;

Corporate act of the Brazilian investee company approving the profit and dividend distribution operation; and a printout of the Sisbacen system screens proving the prior registration of the operation with BACEN.

The Circular has changed requirement “d” above. Now, instead of providing the registration of the operation in the system and delivering a printout to the financial institution, the investor must only inform the Financial Institution of the RDE-IED code.

In fact, in accordance with Article 33-A of the Circular, the registration with the Central Bank of Brazil (BACEN) of the remittance of funds abroad becomes  automatic,  dispensing with the prior declaration by the investor in Sisbacen. Thus, the registration of the transaction with BACEN  becomes the responsibility of the financial institution.However, the requirement to present the documents listed in items “a” to “c” above remains unchanged.

In practice, this change signals a transfer of responsibility from the Central Bank of Brazil (BACEN) to the Financial Institutions, which, by virtue of this new responsibility, must act with greater rigor. However, as the Circular is not yet in force, it is still uncertain exactly how the Financial Institutions will react to the Circular and what measures they intend to implement for their greater security.

However, the Circular establishes that it will be mandatory for the investor to proceed with the declaratory registration with the Central Bank of Brazil (BACEN) in the following cases: distribution of profits and dividends that are used for reinvestment in other recipient companies in the country; and distribution of profits and dividends that are used for payments in the country or directly abroad.

For such cases, the Circular established that registration in the RDE-IED must be done within 30 (thirty) days from the corporate act that authorizes the distribution of profits and dividends. In

conclusion

, in addition to:  (a)  formalizing the mandatory prior registration in Sisbacen for remittances;  (b)  establishing a 30 (thirty) day deadline for registration with the Central Bank of other operations besides foreign direct investment in the country; and  (c)  introducing a differentiation between:  (i) the automatic  prior registration   of remittance operations abroad, via code IED-RDE, which will become the responsibility of financial institutions (Article 33-A, item V); and  (ii)  the declarative prior registration  , to be made by the investor (Article 33-B, items VI and VII), the Circular introduced little innovation.

It is possible to state, therefore, that the greatest impact of the Circular will be felt by Financial Institutions operating in the foreign exchange market, in their new role as responsible for registering remittance operations of profits and dividends abroad in Sisbacen, a responsibility assigned to them by the Circular.