Electronic payments in Brazil - A telecom business, more than a bank one

Brazil  has just published a provisional measure (which has the force of a  bill) that regulates electronic payments in the country (link to the Portuguese text).

Brazilians already make heavy use of credit and debit cards. So, this is not the news.

What is new is that the new rules put electronic payment providers under the control supervision of the Brazilian Central Bank. Think of pay pal, bitcoin, small credit card companies, etc.

The credit card giants, such as Visa and Master Card, will also be subject to a higher degree of supervision. It is like they were integrated to the Brazilian bank system.

This has some benefits, such as a higher level of security, as well as disadvantages, such as more bureaucracy and elevation of costs.

The rules are very broad, and will depend heavily of further regulations to be issued by Brazilian Central Bank.

A central point, that many people might have overseen, is that electronic payment by cell phone have been clearly described as a joint responsibility of the Brazilian Central Bank and the Brazilian Telecom Agency (Anatel).

So, I will probably be posting about a joint rule to be issued by Anatel and the Central Bank very soon.

A curious fact: I have been receiving calls from providers of electronic payments software since last year. Probably, the telecom operators already knew about the new rules and started asking for proposals abroad.

They were well informed! The rules are finally here.

If you also want to sell your payment software in Brazil, I'd recommend you to read about taxation of software in Brazil.

What do you think about it?

How to get cash back from Brazil to Europe

See also:

Business Basics in Brazil

Capital gains tax in Brazil  – what foreign companies should know

Automatic taxation of subsidiaries ruled unconstitutional 

So, how can an investor transfer his profits and capital back home? Is Brazil safe?  Find out here.  (It is boring, unless you have your money in Brazil, in which case it becomes suddenly interesting!)

Foreign investments in Brazil are subject to registration with the Central Bank of Brazil (BACEN), and the information the investor provides becomes part of the Information System of the Central Bank (SISBACEN). This registry is a key requirement, without which the investor cannot remit the profits obtained in his operations in Brazil abroad, repatriate the capital or reinvest the profits.

After Law n. 9.249/2005, the profits earned and distributed from 01/01/1996 became exempt from income tax as well as from the supplementary income tax in Brazil. 

Therefore, there are no restrictions to the distribution or remittance of dividends abroad. The remittances have to be made by banks authorized by the Central Bank, in conformity with the general rules established by the National Monetary Council.

Capital repatriation is allowed, at any time and without any kind of authorization, as long as the foreign capital is duly registered and the amount remitted is equivalent to the amount declared. 

Remittances that exceed the amount declared by the investor will be considered as capital gains, and, thus, will be subject to 15% taxation by way of income tax and also subject to the approval of the Central Bank. If that happens, the BACEN may examine, if it deems necessary, the net worth of the investor company through the analysis of its balance sheet. If the result of this analysis proves that the net worth of the company is negative, and the BACEN understands that there was a dilution of investment, it may deny authorization to the capital repatriation at an amount proportional to the negative result found in its analysis.

In Brazil, capital repatriation is regulated by Law n. 4.131/1962, which had the wording in some of its articles altered by Law n. 4.390/1964.

 According to the modifications brought by Law n. 4.390/1964, the amounts invested in Brazil may be repatriated to the country of origin at any time without any restrictions (nor quantitative nor qualitative) and with no need of previous authorization by the BACEN. The only established condition is that the amount remitted cannot exceed the value declared by the investor with the BACEN.

            According to the Regulation of the Exchange Market and International Capital (RMCCI) from the Central Bank, individuals and legal entities can buy and sell foreign currency or perform international transfers of any kind in reais with no value limitation. . The only stipulated condition is the legality of the transaction, which is analyzed in conformity with the economic grounds and the responsibilities defined in the appropriate documentation.

        There is no fixed or mandatory conversion rate for euros or dollars  in Brazil. However, the Central Bank publishes referential rates, based on the average prices determined by the market on any given day. 

LEGAL REFERENCES

CUNHA, Rodrigo A. Azambuja da.Reinvestimento do lucro obtido no Brasil com a entrada do capital estrangeiro. Pontifícia Universidade Católica do Rio Grande do Sul, 2007. Availableat:<http://www3.pucrs.br/pucrs/files/uni/poa/direito/graduacao/tcc/tcc2/trabalhos2007_2/Rodrigo_Azambuja.pdf>Accessedon: 02/10/2012.

BRAZIL.Law n. 4.131/1962.Available at:<http://www.planalto.gov.br/ccivil_03/leis/L4131.htm>.Accessed on: 02/10/2012.

BRAZIL. Law n. 4.390/1964. Available at: <http://www.planalto.gov.br/ccivil_03/leis/L4390.htm>. Accessed on: 02/10/2012.



See also:


Business Basics in Brazil
Capital gains tax in Brazil  – what foreign companies should know
Automatic taxation of subsidiaries ruled unconstitutional 

No to purchase of land by foreigners. Uruguay joins Brazilian sad club

Sometimes, you only need to observe the supporters of an idea to know whether or not it is a good one.

Take restrictions on land purchase by foreigners. It is ardently supported by the noble group of Venezuela, Argentina and Brazil.

Uruguay, which, otherwise, seemed a nice place, now joins this sad sad camarilla.

I hate such restrictions. I have written about it on many occasions:

Brazil and Argentina have restricted land acquisition by foreigners

Unconstitutional regulation in Brazil

To think I was contemplating buying a second home in Uruguay....

Mr. Mujica, I have a steeled soul, hardened by all the government injustice I must bear, being a lawyer in the 3rd world.

Still, you broke my heart. 

Easier rules for work visas in Brazil

You may also want to see:

Foreigners with a working Visa in Brazil, steps to get your documents in order.

The long and treacherous quest to get a work visa permit in Brazil

What changes:

1) Documents must be presented mainly electronically.

2) Most of translations (e.g. diplomas, graduation certificates) can be presented after the visa is required, and not before;

3) Foreigners may switch jobs while in Brazil in a much easier way. The visa is not cancelled when the worker change jobs, but automatically renewed.

4) Postgraduation students can come to Brazil in order to work during their vacation time (up to 90 days a year)

It is also expected that the analysis will be made much faster. 

Please notice that part of the old regulations still apply. The gates are still closed to workers without qualification and a Brazilian company must sponsor the visa request. 

The visa still has to be obtained before you come to Brazil!

Nevertheless, a change for the better. 

You may also want to see:

Foreigners with a working Visa in Brazil, steps to get your documents in order.

The long and treacherous quest to get a work visa permit in Brazil

Capital gains tax in Brazil – what foreign companies should know

See also:

Business Basics in Brazil

Time frame to incorporate in Brazil and Royalties

I recently received a question from one of my blog readers in the UK, concerning capital gains tax in Brazil. His question was as follows:

Dear Adler, I’m looking to setup a company here to buy assets with funds from UK investors. I assume the Brazilian company would be subject to Brazilian capital gains tax. Would UK investors be subject to UK capital gains tax also?

Amazo

______________

Dear Mr. Amazo,

Thanks for the message. 

I have recently been working with quite a few investors from UK and The Netherlands with similar business strategies. 

There are two sets of tax structures that may apply to your case:

(1) If you set up a Brazilian Company and invest through it, you will pay taxes as a Brazilian company. But, after taxation, the gains can be sent back to the UK without profits remittance tax. When the original capital is to be sent back, you may have to pay taxes on the currency appreciation.

(2) If you invest as a foreign company, directly in the stock market, the taxation may vary from 0% (in case of federal bonds) to 25% (day trade and some investment funds). In this case you do not have to set up a company in Brazil, but will have to hire a bank or broker here, who will represent you. 

In both cases, the taxation in the UK is independent from the taxation in Brazil, and may apply.

The Brazilian Central Bank does not charge anything for the registration. The registration before it is only for regulatory purposes. All transferences and business are managed by private banks. 

I hope to hear more from you. 

Regards, 

Adler 

See also:

Business Basics in Brazil

Time frame to incorporate in Brazil and Royalties

Homosexual marriage made easier in Brazil

Note: Please check: Same sex marriage allowed in São Paulo. 

The National Council of Justice (CNJ) approved on the last 14th of May a resolution that orders notary public offices to convert stable unions between homosexual couples to a formal marriage, should the couple wish to do so.

Most homosexual couples used to formalized their union through a stable union agreement. Now, instead of having to marry in order to transform the civil union into a regular marriage, they can just convert the stable union, which is easier and faster.

The same goes for the validation of gay marriages celebrated abroad.

There is a risk of the measure being questioned before the Supreme Court. But, personally, I do not believe it will happen.


Note: Please check: Same sex marriage allowed in São Paulo. 

Quick Data on Bankruptcy and Tax Free areas

(Feel free to send me more questions, I will try to answer them the best way I can)

Q: Are you aware if Brazil has any "bonded tax-free areas" like Shanghai Waigaoqiao? thanks

Comment: Brazil has a few "Zonas francas", which have considerably lower taxation, such as the Zona Franca de Manaus, in the Amazon Forest. 

In addition to that, Brazil has some tax benefit zones, such as a big one in the Northeasth, where taxation is generally lower. 

Finally, Brazil also has some other tax benefits for parts and raw materials that are imported, industrialized here and then reexported.

Q: Can you provide an overview of the bankruptcy process in Brazil? If so, please briefly elaborate on how your background enables you to discuss this topic.

Comment: Yes. The bankruptcy process in Brazil is relatively fair, by which I mean it is more favorable to the debtors, but not absolutely.

However, government credits, employee’s credits and credits secured by mortgages have clear preferences over commercial debts. 

Thus, big companies seldom pay more than 20% of its outstanding debts to ordinary creditors after the liquidation procedure.  

See also:

Which are the best brazilian ports?

Brazil: A User’s Guide