I. - INTRODUCTION

The Central Bank registers all investments, whether in the form of capital or in the form of loan. In both cases, whether capital or loan, the funds sent to Brazil must be converted into Reais through the commercial rate market, in order to qualify for registration with the Central Bank.

II. - REGISTRATION OF THE FOREIGN INVESTMENT

The registration process of foreign investments, whether in the form of capital or loan, is relatively simple and straightforward. Central Bank requires certain documents, such as filling out certain forms and presenting certain accounting documents, as well as copy of the exchange contract.

III. - PROFIT AND CAPITAL REGISTRATION OR OVERSEAS REMITTANCE

Profits which are reinvested in the business are also registered as Foreign Registered Capital- FRC (normally called reinvestment), and will also generate registration in foreign currency, in the same amount of the profits which would be remissible as dividends. The capitalized profits will generate the right to tax-free capital repatriation if such capital remains in the country for at least five years until this calendar year (1996).

As of January 1996, however, the transfer of profit and dividends overseas to the Brazilian subsidiary parent company is free of any withholding tax (article 11 of Law nr. 9.249 of 26 of December of 1995).

If a capital reduction related to such capitalized profits takes place before such date, for the periods before the 1996 calendar year, then it shall be deemed to be a dividend payment, and therefore subject to the 15% withholding income tax.

It should be pointed out that the registration of an investment in Brazil, subject to the issuing of FRC, is optional, therefore, not mandatory. However, the absence of such a formality will trigger the treatment of the investment as a domestic one, and for this reason not allowing the repatriation of capital or any profit or capital remittance overseas.

The main advantage of securing registration of the foreign investment is the acquisition of the right of remitting dividends through the so called commercial rate exchange market, as well as the repatriation FRC through the same market. Securing FRC also helps in obtaining work visas for expatriates.

* The content of this article is intended to provide a general guide to the subject matter. A specialist's advice should be sought in order to provide professional advice on a case to case basis which will meet specific circumstances.

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