In Brazil, the access of non-resident investors (or foreigners) to the financial and capital markets are based on the Resolutions 2689 and 2687, dated 01/26/2000, of the National Monetary Council.

Even though both relate to non-resident investors, they strongly diverge on both the operational aspect and the applicability. Generally, the Resolution 2689 provides for the access of the non-resident investor to the same markets available to the resident investor requiring therefore that the investor would internalize resources in Brazil, in local currency, through the hiring of currency exchange operations. As for the Resolution 2687, it establishes that non-resident investors clear their operations abroad in the accounts of the commodities and futures market in which they operate, but are restricted to the operation in the farming and cattle raising markets contemplated in this Resolution.

It is worth highlighting that non-resident investors may benefit from agreements that protect them from double taxation. On the other hand, in case the percentage of the income tax applied in his country of origin would be inferior to 20%, the applicable percentage of the income tax will be the resident's percentage. Finally, if the income tax applies, it will be applied with the same percentage and at the same time of the one applicable to resident investors' operations, given that, in case of investments on investment funds, the application of the tax will only happen when the shares are sold.

Final Considerations

This document aimed at presenting the main legal, operational and tax aspects related to the non-resident investor operations, according to the CMN Resolutions 2689/2000 and 2687/2000. On the other hand, given that it does not possess legal value, the information detailed and updated must be obtained directly from the legislation in effect in Brazil and from its regulating bodies.

We furthermore highlight that the Securities and Exchange Commission, through its Rule 419/2005, created the simplified registration of the non-resident investor. Generally, based on this Rule, the brokerage firms (and the custodians) may perform the simplified registration of its non-resident clients given that the following prerequisites are complied with:

  • the non-resident investor must be a client of a foreign intermediary institution, before which he is duly registered under the applicable country of origin legislation;
  • the referred intermediary institution would take before the brokerage firm the obligation to present, whenever requested, all the information required by the CVM Rules that deal with investor registration within the ambit of the securities market, duly authorized, as well as other information required by Brazilian public bodies with inspection powers; and
  • the capital market regulating body of the foreign intermediary institution's country of origin would have signed with the CVM a mutual cooperation agreement that would allow the exchange of investors' financial information.

Furthermore, the country in which the foreign intermediary institution is located should not be considered high risk as regards money laundering and terrorism financing, and should not be classified as non-cooperative by international organs, in relation to the fight against illicit actions of that nature.

This Rule simplified and sped up the access of non-resident investors to the Brazilian domestic market.

Finally, to learn more about the Brazilian market, the interested non-resident investor may check out the BEST Brazil, which is an initiative purposing to promote the Brazilian capital market for the international investor community. The following participate in this initiative: the Securities and Exchange Commission [Comissão de Valores Mobiliários] CVM, the Central Bank of Brazil [Banco Central do Brasil] BCB, the National Treasury Office [Secretaria do Tesouro Nacional] TN, the Commodities & Futures Market [Bolsa de Mercadorias & Futuros] BM&F, the São Paulo Stock Exchange [Bolsa de Valores de São Paulo] BOVESPA, the Brazilian Clearing and Custody Central Office [Central Brasileira de Liquidação e Custódia] CBLC and the National Investment Banks Association [Associação Nacional dos Bancos de Investimento] ANBID.