Brazilian National Monetary Counsel (“CMN”) Act number 4.246/2013: End off concurrent exchange agreement for non-resident investors (Investor 2689) on domestic migrations between their investments in Brazil
July 2nd, 2013
Brazilian National Monetary Counsel Act number 4,246, published in Brazilian Federal Official Gazette of July 2nd, 2013, repeals Brazilian National Monetary Counsel Act number 3.912/2010, which consisted in the requirement of simultaneous exchange transactions for non-resident investors in case of domestic migrations between their investments made in Brazil and according to Brazilian National Monetary Counsel Act number 2,689/2000.
The repealed Brazilian National Monetary Counsel Act number 3.912/2010 demanded simultaneous exchange transactions in all domestic migrations derived from the following investments made by non-resident Investors in Brazillian financial and capital markets:
(i) securities traded at Brazilian Stock Exchange or at Brazilian Commodity Exchange as per Brazilian Monetary Counsel applicable legislation, except derivatives resultant in predetermined income;
(ii) public offer registered or exempted of register stock acquisition in Brazilian Securities and Exchange Commission or stock subscription, provided that the issuing companies were registered for Stock Market trading;
(iii) acquisition of securities issued as required by sections 1 and 3 of Law number 12,431/2011.
The Brazilian Monetary Counsel, on latest June 28 Meeting, approved the mentioned Brazilian National Monetary Counsel Act number 4,246/2013, on the basis that “those simultaneous transactions were provided in the past to enforce the IOF [Financial Operations Tax] measures upon fixed income investment, due to the difference of the tax rate levied on the revenue at variable income (IOF rate reduced to zero). In view of the reduction from 6% to zero of the IOF rate on revenues of fixed income, the end of the simultaneous exchange transactions requirement became a possibility“.
As already informed in V&G News number 64, the reduction of the IOF/Exchange rate applied to transactions closed at financial and capital markets, including fixed income, was brought by the Decree number 8,023 and applies to transactions engaged as from June 5th, 2013, according to the Interpretative Declaratory Act number 03, from June 28, 2013 (as mentioned in V&G News number 66).
The end of the requirement of simultaneous exchange transctions in the event of domestic migrations between investments ruled by Brazilian National Monetary Counsel Act number 2,689/2000 made by non-resident investors in Brazil will allow a cost reduction to the benefit of the investor, considering that those exchange transactions could be subject to rate charges.
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