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Pedro Gonzalez Tinoco               Ruy Menezes Neto

By means of Normative Instruction 1.634/16, the Brazilian Federal Revenue Service established the obligation, for local and foreign companies duly enrolled with the Legal Entity Taxpayers’ Register (CNPJ), to identify the individual that is their beneficial owner.

Pursuant to such Normative Instruction, beneficial owner is the individual that:  (i) ultimately, directly or indirectly, holds more than 25% (twenty-five percent) of the entity’s capital; (ii) directly or indirectly exercises preponderance in the corporate decisions and the power to appoint the majority of the administrators, even without controlling the company; or (iii) the individual in which behalf a transaction is conducted.

Foreign companies that do not present such information may have their CNPJ suspended and may be prevented from transacting with financial institutions, including the handling of bank accounts, effecting financial investments and obtaining loans.

In case the foreign entity does not have a beneficial owner, it shall inform such condition to the Federal Revenue within ninety (90) days as of its enrollment with the CNPJ.

In addition to the documentation evidencing the link between the legal entity and the beneficial owner, it must also be informed his/her name, date of birth, nationality, country of residence, and Brazilian tax identification number (if national or resident in Brazil).

This obligation, however, is not applicable to legal entities that are organized as publicly held companies incorporated in countries in which the public disclosure of all relevant shareholders are mandatory, provided that those countries are not considered tax heavens by Brazil.

In case the Brazilian entity is obliged to inform its beneficial owner, but does not have anyone who falls within this concept, as defined in IN RFB n. 1.634/2016, there is no need to report such condition.

The obligation to inform the beneficial owner, originally scheduled to commence on January 1, 2017, is due as of July 1, 2017 to entities that is enrolled with the CNPJ as of such date. In this sense, foreign entities are obliged to inform their beneficial owner and present the documents within 90 (ninety) days from the date of their enrollment with the CNPJ.

The entities enrolled with the CNPJ before July 1, 2017 must submit such information by December 31, 2018.

Therefore, it is important that national and foreign entities assure the conditions of applicability of the rules to appropriately submit the information and documents to the Federal Revenue within the established term.

Our legal team is prepared to assist you on any questions or issues regarding this matter.