Foreign exchange reform in Brazil amends provisions on royalty payments abroad
New framework introduces changes to remittance payments and requirements for tax deductions in intellectual property contracts
Having recently been sanctioned by Brazil’s president, a new law regarding the Brazilian exchange market, foreign capital and the provision of information to the Brazilian Central Bank (Bacen) is set to come into effect on December 30, 2022. The law is set to have a major impact on how foreign capital is treated in Brazil, including in regard to processes for remitting royalty payments abroad.
Within the scope of Intellectual Property, the following changes stand out:
- Companies will no longer be required to register contracts with Bacen to be eligible for tax deductions on royalty payments to entities outside Brazil
Amendments to Article 50 of Law No. 8,383/1991 mean that once the new law takes effect, intellectual property contracts will only need to be registered with the National Institute of Intellectual Property (INPI). This change is in alignment with updates to Bacen’s rules, which make royalty payments possible regardless of whether corresponding exchange contracts are registered with it.
- A ban on Brazilian subsidiaries sending remittance payments to parent companies located abroad for royalties exceeding tax deduction limits has been lifted
The ban has been removed in light of the new reform’s changes to Article 9 and 14 of Law No. 4,131/1962. This issue is highly important to several companies, as they have used the tax deduction limit to assist in complying with foreign transfer pricing rules.
*With the collaboration of Clara de Almeida Thomé da Silva, Júlia Leite Contri and Lorena de Freitas Moraes Sampaio Pereira.
*The summary of this article is available in Spanish and German at this link.