Brazilian Federal Law No. 14.286/21 entered into force on December 30, 2022, and established a new legal framework for the Brazilian foreign exchange market.
The legal provisions aim to modernize, simplify, and consolidate the legislation of the foreign exchange and international capital market in Brazil, promoting the development of the business environment and making foreign exchange operations less bureaucratic.
With the purposes of reducing barriers to exports and imports of goods and services and to promoting the free movement of capital, Law No. 14.286/21 and the Resolutions published by the Brazilian Central Bank to regulate the Law brought significant changes in the operational aspects of the Brazilian exchange market, such as:
- The execution of exchange agreements is no longer required for the closing of FX transactions, which may be carried out by any means such as telephone call, WhatsApp or e-mail.
- Bank accounts held by residents and non-residents in Brazil shall be granted equal treatment.
- Brazilian bank accounts may now be held in foreign currencies. We note that this rule still needs to be regulated by the Central Bank of Brazil so that it becomes available for personnel accounts. So far, this possibility is only available for brokerage houses, insurance companies and credit managers.
- Remittances abroad by way of profits, dividends, interests no longer need to be registered with the Brazilian Central Bank.
- Individuals are now allowed to trade foreign currency in kind provided that such transactions are carried out occasionally and not professionally and do not exceed the US$500 cap per transaction.
- The list of transactions which set forth obligations enforceable in Brazil that can be paid in foreign currency was expanded.
- Private compensation of credits and debits between residents and non-residents through simple accounting entries are now permitted.
- The external interest indicator was updated due to the extinction of LIBOR.
The legal changes make foreign capital more attractive, both for investments in the financial and capital markets as well as for direct investment in long-term opportunities such as companies and infrastructure projects and concessions.
The Law will contribute to make transactions in Brazil involving foreign currency simpler, more agile, and competitive for individuals and companies, making the exchange market more accessible for those who send or receive funds from abroad.
For more information about Law No. 14.286/21, please check our website:https://drummondadvisors.com/en/2022/01/31/the-key-changes-brought-by-the-new-legal-framework-of-the-foreign-exchange-market-in-brazil-law-no-14-286-21/