In force since 12.31.2022, the New Legal Framework of Foreign Exchange, defined by the Law n. 14.286, of December 28, 2021, seeks to unify, modernize, and simplify foreign exchange operations, consolidating rules about the Brazilian exchange market, Brazilian capital abroad, foreign capital in the Country, and the rendering of information to the Brazilian Central Bank (BCB).

The expectation is that the new legal framework decreases the sector’s concentration in financial institutions and increases competitiveness, opening space for digital banks and fintech. Other relevant consequences will occur in foreign trade operations, the private offset of debts and credits, transactions between individuals, international travels, and accounts abroad.

We highlight below nine relevant changes introduced by the law, some of them already regulated:

1. Brazilian Reais Accounts of Non-Residents will be treated as Resident Accounts.

Brazilian banks may fulfill payment orders in Reais received from or sent abroad, using accounts in Reais held at banks, owned by institutions domiciled or headquartered abroad and subject to financial regulation and supervision in their country of origin. To carry out such operations, banks must obtain information about the institution to understand the nature of its activity, its reputation, and the quality of financial supervision to which it is subject, and to evaluate its internal compliance controls concerning anti-money laundering and terrorist financing (Article 5, § 4º and Article 6).

The subject was regulated by articles 67 and 68 of BCB Resolution no. 277, of 12.31.2022, which allow institutions authorized to operate in the exchange market to open, maintain and close deposit and payment accounts in reais held by non-residents under the same conditions they can open and maintain those owned by residents. Each movement in a prepaid payment account in reais is limited to R$ 100,000.00; movements in higher amounts require, as a counterpart, credit or debit to the deposit or payment account held with financial institutions or payment institutions that, by their adhesion to Pix, integrate the Brazilian Payment System (SPB).

2. Foreign Currency accounts in the country.

The new legal framework of foreign exchange has expanded the possibilities of opening and maintaining foreign currency accounts in the country (Article 5, IX), which were previously restricted to Brazilians living abroad, foreigners temporarily in the country, and some specific agents, such as subsidiaries of foreign banks and tourism agencies. Some digital banks and fintechs already offered current accounts in dollars but, without specific regulations, the operations were maintained in other countries.

It is, therefore, a relevant provision for the resident or domiciled in Brazil who invests or intends to invest in international assets.

The regulation is no longer under the competence of the National Monetary Council (CMN), and is now contained in Resolution BCB no. 277, of 12.31.2022, articles 69 to 76. According to the rule, banking institutions authorized to operate in the exchange market may open, maintain and close deposit accounts in foreign currency, and the funds may be freely invested in the international market, except for any restriction established by special legislation.

With the new regulation, besides tourism agents, deposit accounts in foreign currency may be held by: (i) embassies, foreign delegations and international organizations; (ii) company providing postal services; (iii) issuers of credit cards for international use, with movement restricted to the payments destined abroad for the use in duty-free stores, and payments abroad of cards issued in Brazil, forbidden movement of amounts in cash; (iv) direct and indirect public administration entities; (v) companies in charge of implementing and developing energy sector projects; (vi) insurance, reinsurance and reinsurance brokerage companies; (vii) non-resident transporters; (viii) institutions authorized to operate in the foreign exchange market; and (ix) companies holding oil and natural gas exploration and production rights.

3. Private Offsetting of Credits or Values between Residents and Non-Residents.

The new legal framework of foreign exchange authorized the private offsetting of credits or amounts between residents and non-residents, in cases to be foreseen in a BCB’s regulation (Article 12). Article 10 of DL no. 9.025/1946 prohibited the private compensation of credits and the Central Bank has never regulated exceptions to the rule.

The Central Bank Regulation on the private offset of credits will also indicate the penalties applicable for violations, such as fines and coercive measures.

4. Definition of the Concepts of Resident and Non-Resident.

To apply the new legal framework of foreign exchange, BCB Resolution no. 280, of 12.31.2022 established the definition of resident and non-resident applicable to individuals and legal entities.

The concepts applicable to individuals are similar to those provided in the tax legislation (SRF Normative Instruction no. 208/2002). As to legal entities, it is considered a resident the entity domiciled or headquartered in Brazil, and non-resident the entity domiciled or headquartered abroad and that does not have domicile or headquarters in the country.

5. Carrying valuables in cash when entering and leaving the country up to US$ 10.000.

As a rule, the entry and exit of national and foreign currency must be carried out exclusively through an authorized institution, except for cash up to the limit of US$ 10,000.00 (Article 14, § 1, I).

The previous limit for carrying cash was R$10,000.00, set with the implementation of the Real Plan in 1994, when there was parity between the Brazilian currency and the dollar.

6. Purchase and Sale of Foreign Currencies by Individuals.

Regardless of an exchange transaction, individuals can buy and sell foreign currency in cash among themselves, as long as the transactions are occasional and not professional, up to the limit of US$ 500.00 or its equivalent in other currencies (Article 19).

Before the new legal framework of foreign exchange, any operations involving foreign currencies were restricted to authorized institutions, at the risk even of conviction for contravention.

7. Flexibility of the Obligation to Present Documents, Data and Certificates.

The institution authorized to operate in the exchange market may not demand documents, data, or certificates available in its databases or public and private databases of broad access. In these cases, the customer’s presentation of these documents, data, or certificates is optional (Article 27).

8. Foreign Capitals in Brazil – Economic-Financial Declaration (DEF).

The new legal framework of foreign exchange reaffirmed the competence of the BCB to regulate and monitor Brazilian capital abroad and foreign capital in the country.

BCB Resolution 278, of 12.31.2022 regulated the topic and brought general rules about foreign capital in the country, foreign credit operations, foreign direct investment, and the provision of information.

According to the Resolution, as of November 1, 2023, the recipient of foreign direct investment (Economic-Financial Declaration – DEF) must inform the BCB (Article 32):

  1. when there is a financial transfer related to a non-resident investor of an amount equal to or higher than US$ 100 thousand or its equivalent in other currencies;
  2. within 30 days of the occurrence of movement of an amount equal to or greater than US$ 100 thousand in the cases of: (i) through tangible or intangible assets; (ii) conversion into investment of rights remissible abroad not reported as foreign credit; (iii) assignment, exchange and transfer of quotas or shares between resident and non-resident investors, or between non-resident investors; (iv) international quota of share conference; (v) corporate reorganization; (vi) distribution of profits and dividends, payment of interest on shareholder’s equity, disposal of equity interest, return of capital and net assets resulting from liquidation, when made directly abroad or in national currency in the country; (vii) payments and receipts in national currency in non-resident accounts; or (viii) reinvestment.
  3. on the base date of the periodic declarations, as follows:
  • Quarterly Statement:
    Mandatory for total assets in value equal to or greater than BRL 300 million, on the base date of March 31st, June 30th and September 30th (Article 38). The deadlines for providing the information will be, respectively: (a) from April 1st to June 30th, (b) from July 1st to September 30th, and (c) from October 1st to December 31st. The base date of September 30th, 2023 will be from November 1st to December 31st, 2023 (Article 41).
  • Annual Statement:
    Mandatory for total assets worth BRL 100 million or more on the base date of December 31st of the previous year (Article 39). The deadline for sending is from January 1st to March 31st of the subsequent year.
  • Five-year declaration:
    Mandatory for total assets in value equal to or greater than BRL 100 thousand on the base date of December 31st of the previous calendar year, when ending in 0 or 5. Its submission waives the sending of the annual statement in the respective year (Article 40). The deadline for submission is January 1st through March 31st of the following year.

In the periodic quarterly, annual, and quinquennial statements, one must provide information regarding: (i) the corporate structure and identification of non-resident investors; (ii) the accounting and economic value of the recipient; (iii) the operating and non-operating profit of the recipient; and (iv) complementary accounting data of the recipient. In the annual and quinquennial statements, economic information may be required for mapping the activities of multinational companies in Brazil and its regions, such as the sector of activity, employment, revenues, technology, and international trade (Article. 37).

Resolution BCB no. 281, dated 12.31.2022 regulates transitory provisions to be observed among Resolution BCB no. 278/2022. That is, until November 1st, 2023, when the deadlines outlined in this Resolution come into force, one must observe the following deadlines:

  1. Quarterly periodical statement (Article 6):
    The quarterly periodical statements of foreign direct investment must be provided in the information rendering system, through the functionality of economic-financial statements. Those statements must be submitted by the recipient of foreign direct investment that, on the base date of December 31st, 2022, has total assets worth BRL 300 million or more. The deadline for this declaration is January 1st, 2023 to March 31st, 2023.
  2. Annual periodic declaration (Article 7):
    The annual periodic declaration of foreign direct investment for the base date of December 31st, 2022 must be provided through the Census of Foreign Capital system. The deadline for filing this declaration is from July 1st to 6 pm on August 15, 2023. This statement must be filed by:
    I – legal entities headquartered in the country, with direct participation of non-residents in their capital stock, in any amount, and with a net worth equal to or greater than the equivalent to US$ 100 million on the respective base date; and
    II – investment funds with non-resident quota holders and net worth equal to or greater than the equivalent of US$ 100 million, on the respective base date, through their managers.

9. Brazilian Capitals Abroad

The BCB also regulated, through Resolution BCB no. 279, of 12.31.2022, procedures relating to Brazilian capital abroad, as well as flows, stocks, and the provision of information on Brazilian capital abroad.

The information must be provided in annual and quarterly electronic declarations, in the form below:

  1. Quarterly Statement:
    Quarterly declaration must be submitted when Brazilian capitals abroad total an amount equal to or greater than US$ 100 million on the base date of the quarter. The base dates for quarterly declarations are (i) March 31st, (ii) June 30th, and (iii) September 30th (Article 11).
    The deadlines for providing the information will be, respectively: (i) from April 30th until June 5th; (ii) from July 31st until September 5th; and (iii) from October 31st until December 5th (Article 14).
  2. Annual Statement:
    The declaration must be submitted when the Brazilian capitals abroad total an amount equal to or greater than US$ 1,000,000.00 or its equivalent in other currencies on the base date, which is December 31st (Article 10).

The Fraga, Bekierman & Cristiano Advogados’ teams are prepared to clarify any aspects of the new legal framework of foreign exchange.