Brazil Wants to Know: Who’s the Beneficial Owner?

National and foreign legal entities applying for a Brazilian taxpayer ID number (CNPJ) must disclose beneficial ownership. Similar to the Corporate Transparency Act in the US, the goal is to help fight corruption, money laundering and tax evasion.

According to federal tax authority regulation 1863/2018, a beneficial owner is the person who owns, controls or significantly influences the legal entity, either directly or indirectly, or the person in whose name a transaction is conducted. Significant influence is defined as more than 25% ownership interest or the power to make corporate decisions.

In addition to the beneficial ownership requirement, the 2018 regulation requires disclosure of information about any person who is authorized to represent the company, including its administrators.

After obtaining its CNPJ, a legal entity has 90 days to inform the Receita Federal of the beneficial owners through a system called Coletor Nacional. The deadline can be extended for another 90 days upon request. Failure to comply with this requirement is subject to the suspension of the company’s CNPJ. In other words, the company won’t be able to do business in Brazil, including being prohibited from completing routine transactions with financial institutions.

Only a few types of legal entities are exempted from the regulation. This includes publicly traded companies formed in Brazil or another country that isn’t a tax haven so long as there’s public disclosure of all shareholders. So unless you fit the exception, be prepared to tell Brazil who’s the beneficial owner.