Ultimate Beneficial Owners in Brazil

Yes, Brazil has been dealing with Ultimate Beneficial Owners (“UBO”) since 2016 when the Brazilian Federal Revenue issued Normative Instruction (“IN”) no. 1,634/2016 creating the obligation to inform the UBO(s) of legal entities registered with the Brazilian federal taxpayer number (CNPJ), which was amended over the years.

The same IN created the obligation to obtain a CNPJ, for control purposes, for all entities domiciled abroad holding certain rights in Brazil or conducting certain activities in Brazil, as well as all foreign banking institutions that carry out foreign currency purchase and sale operations with banks in Brazil, receiving and delivering reais in cash in the settlement of foreign exchange operations.

The legislation aimed at increasing transparency of corporate structures and preventing financial crimes such as money laundering, corruption and tax evasion, by making it more difficult to use companies to hide assets or illicit operations.

Currently the main legal basis is, Normative Instruction No. 2,119/2022 (“IN 2119/22”), also issued by the Brazilian Federal Revenue Service, and the rights and activities that require companies domiciled abroad to hold a CNPJ are:

a) hold rights over real estate; vehicles; vessels; aircraft; bank accounts; investments in the financial or capital markets; or shareholdings incorporated outside the capital market;

b) carry out external commercial leasing (leasing); chartering of vessels, equipment rental and simple leasing; the import of goods without exchange coverage intended for the capitalization of Brazilian companies; or securities consultancy.

IN 2119/22 considers as UBO the natural person who ultimately, directly or indirectly, owns, controls or significantly influences the entity; or the natural person on whose behalf a transaction is conducted.

The significant influence referred to above is presumed when the natural person owns more than 25% (twenty-five percent) of the entity's share capital or voting rights, directly or indirectly; or directly or indirectly, acting individually or jointly, holds or exercises a preponderance in corporate resolutions and the power to elect the majority of the entity's administrators, even without controlling it.

The characterization of the UBO includes any natural person who, as part of the entity's corporate chain, falls within the situations set out above.

The officers of foreign entities applying for registration with the CNPJ who are not partners or shareholders are not characterized as UBOs, even if they hold or exercise the preponderance in corporate resolutions, and the power to elect the majority of the entity's managers.

In the case of trusts, the settlers, the administrators, the trustees if any, the beneficiaries, and any other natural person who exercises effective final control of the trust are considered as UBOs.

There are a few exceptions to the obligation to declare the UBO, among them:

• legal entities or their subsidiaries whose shares are regularly traded on a market regulated by an entity recognized by the Brazilian SEC (“CVM”) in countries that require public disclosure of shareholders considered relevant, according to the criteria adopted in the respective jurisdiction, and which are not resident or domiciled in countries with favorable taxation or subject to the privileged tax regime;
• investment funds set up exclusively to receive funds from supplementary pension benefit plans or personal insurance plans, provided they are regulated and supervised by the competent government authority in their country of origin; and
• collective investment vehicles domiciled abroad that fulfill certain requirements.

An entity is obliged to inform its UBO or the lack thereof, within 30 (thirty) days from the date of registration with the CNPJ. Such registration is required before the foreign entity acquires the relevant assets in Brazil. For Brazilian companies, the CNPJ registration is obtained at the time of its incorporation.

The following information is required on the UBO: name, date of birth, country of Nationality and country of Residence. If the country of nationality or residence is Brazil, the taxpayer number (“CPF”) must be filled in. In the case of foreigners, the Tax Identification Number (NIF) is optional. The information is disclosed within the Federal Revenue’s electronic system.

The documentation to be submitted to prove the UBO are: (i) articles of incorporation in its country of origin or a full certificate proving the current corporate composition of the share capital or voting rights; (ii) an act demonstrating the management powers of its legal representative in the country of origin, if this information is not included in the articles of incorporation; (iii) the identification document or passport of its legal representative in the country of origin and of the Ultimate Beneficial Owners, if they are not registered with the CPF; (iv) other corporate or deliberative acts provided for in the legislation of its country of origin, and (v) the power of attorney appointing their legal representative in Brazil (please refer to our Guide “How to Set up a Company in Brazil” for further information).

If the foreign entity has a shareholder or partner who is not a natural person, may submit an organization chart showing its corporate chain, registered with the competent body in its country of origin or signed by the legal representative of then foreign entity in Brazil. The organizational chart must identify each member entity by its business name, tax identification number (in its country of origin) and country of origin, showing at the end of the corporate chain the UBO(s) or the non-existence of a natural person who falls within the concept established in the legislation.

In case of any alterations on UBOs or their data must be informed, and respective proof documents be submitted within 30 (thirty) days to the Federal Revenue.

Yes, being identified as a UBO in Brazil does entail legal consequences, although not necessarily immediate obligations or liabilities just for being listed. However, the status of UBO carries certain implications and potential exposures under Brazilian law, especially in the contexts of compliance, tax, anti-money laundering, and criminal liability.

Merely being identified as a UBO in the CNPJ with the Federal Revenue does not create new tax duties (e.g. you are not taxed just for being a UBO), does not require registration as a company officer or representative, and does not imply control over daily operations (unless otherwise indicated).

However, being identified as UBO does come with greater scrutiny and potential legal consequences, particularly in the following contexts:

Anti-Money Laundering Law. Under Law No. 9.613/1998, UBOs may be held criminally and civilly liable if they benefit from, participate in, or are linked to illicit financial activity. If a company is used for illicit purposes, UBOs may be investigated and prosecuted, and the Courts may decide on lifting the corporate veil to reach the UBO.

Civil Liability. Under the Brazilian Civil Code (art. 50) and Consumer Defense Code, UBOs may face personal liability if the legal entity is used to: commit fraud or abuse of legal personality, evade obligations or engage in illicit acts.

International Cooperation and Transparency. UBOs of Brazilian entities may be reported under international tax cooperation agreements (e.g. CRS, FATCA), exposing them to scrutiny in other jurisdictions.

Compliance Obligations. Banks, notaries, real estate agencies, and other regulated entities may conduct enhanced due diligence on the UBO and they may be asked to provide documents or explanations regarding origin of funds, corporate structures and business purposes.

All information and documents provided to the Federal Revenue are only accessed by its personnel or by other governmental bodies, such as Central Bank of Brazil, Brazilian SEC, Federal Police, Attorney general’s office, etc.

In the context of international tax information exchange agreements, especially those signed within the OECD (such as the Common Reporting Standard - CRS), the Federal Revenue can share data with tax administrations in other countries, provided there is reciprocity and a guarantee of confidentiality.

Information on UBO is not public. Access by private individuals or companies is forbidden, except if there is a Court order or if the entity itself or the UBO disclose the information.

Failure to comply with UBO identification and registration requirements in Brazil leads to a range of legal sanctions and consequences, both administrative and potentially broader, depending on the circumstances. These rules are primarily established by the IN and the entity may have its CNPJ status changed to suspended, which means it is prevented from conducting business, including issuing invoices, accessing banking services, obtaining government permits or financing or participating in tenders and contracts with public authorities.

The entity may also be blocked from registering changes in the corporate structure or incorporating subsidiaries or other entities.

While the IN does not set a fixed monetary fine, noncompliance may lead to fines under the Brazilian Tax Code if false or omitted information is submitted and/or fines imposed by the Central Bank or CVM, in cases of regulated entities (e.g., financial institutions or investment funds).

Noncompliance may raise red flags with COAF (financial intelligence unit), Federal Revenue, and other authorities. It may result in the classification of the entity as high-risk for money laundering prevention, tax audits and international exchange of information (e.g., under the CRS or FATCA frameworks).

The intentional omission, concealment, or misrepresentation of UBO information may be considered fraud, obstruction of oversight, or false declaration, leading to civil liability, criminal liability (e.g., Article 299 of the Penal Code), liability under Law No. 12.846/2013 (Anti-Corruption Law) if the omission facilitates corruption or fraud against the public administration.