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New rules for non-resident investors in Brazilian financial and capital markets

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Published on the 27th of August by the National Monetary Council, Resolution nº 4852, has changed the application rules for non-resident investors in Brazilian financial and capital markets

Our tax consultant, Camila Cabral, explained how these new changes will impact the situation for foreign investments made by individuals in Brazil.

These rules apply to individuals classified as “non-resident investors”, that is, those who have a residence or domicile abroad. The resolution brings important changes in this respect, which states that:

  1. The Securities and Exchange Commission (CVM) will oversee the necessary procedures for the registration of non-resident investors, and may exempt them from this obligation.
  2. This type of investor will be exempt from the obligation of contracting a custodian registered with the CVM and allows them to leave their Brazilian funds in the hands of a third party intermediary hired in the country.
  3. All business activities regarding financial assets and securities carried out by non-resident investors must follow the same regulations and procedures as those that apply to individuals who are Brazilian residents, thus equalizing the treatment in the provision of custody services between resident and non-resident investors.

Camila Cabral, tax consultant at Drummond Advisors, explains how these changes will impact the situation for foreign investments made by individuals in Brazil.

“The need to appoint a custodian agent so that non-resident investors are able to invest in Brazilian retail operations in capital markets created a bureaucratic and financial barrier for individual investors. To give you an idea, the approximate cost for the maintenance of a custodian was approximately R $ 3,000.00 to R $ 5,000.00 per month.” 

According to Camila, “This cost didn’t just affect foreigners interested in the Brazilian capital market, but also Brazilian citizens who became non-tax residents, by filing the Declaration of Definitive Exit from the Country.  The latter group often has the intention of maintaining their investment portfolio in Brazil, but is discouraged due to the costs and bureaucracy attributed to non-residents.”

This Resolution comes into force on the 1st of October, 2020 and can be accessed here.