Brazilian tax authority requires information on companies’ tax beneficiaries

Seeking to avoid tax evasion, closing loopholes that were notoriously used until 2018 to circumvent the taxation of income tax – notably the use of offshore companies, in tax havens, and complex corporate structures, the Brazilian tax authority instituted mandatory information of the final beneficiaries in the registration with the CNPJ – the Brazilian equivalent to the Employer Identification Number and the Tax ID.

To learn more about the subject, keep reading.

Power to the tax authority

In practice, the measure establishes that the Federal Revenue of Brazil is empowered to demand all the necessary documents to establish who the recipients are, individuals, who will be entitled to the dividends sent abroad. The premise is that, once the real beneficiary of the profits of the Brazilian operation is identified, it will be possible to demand the correct taxation, according to the actual legal framework of the company and its beneficiary.

According to IN 1863/2018, legal entities registered with the CNPJ before July 1, 2017 had until June 26, 2019 to inform their final beneficiaries. New ventures and entities must disclose this information as part of the opening process of the CNPJ in Brazil. Failure to comply with this regulation will result in the cancellation of the registry altogether.

The Internal Revenue Service clarifies the final beneficiary as the individual who, ultimately, directly or indirectly, owns, controls or significantly influences a certain entity. In this sense, the knowledge of this relationship in the CNPJ by the tax and customs administration, as well as by the other inspection, control and criminal prosecution authorities, is essential for the proper accountability and penalization of unlawful conduct. 

Informing the final beneficiary

Within 90 days of the registry, the legal representative must access the National Collector application and inform their final beneficiaries with the generation of the DBE (Basic Entry Document ) for the CNPJ. Information relating to the Final Beneficiary must be provided in a new specific form (Final of Final Beneficiaries), by selecting the option “Final Beneficiaries” in the FCPJ.

The matter is especially relevant at the moment, because now in 2021 the Internal Revenue Service began to actively suspend the registration with the CNPJ of companies that failed to provide the necessary information about the final beneficiaries – or did so in error or possible fraud. In these cases, the company may receive an administrative summons to, within the indicated period, provide the necessary data under the risk of cancellation of registration – which makes operations in the country illegal.

To find out how to correctly inform the final beneficiaries, and keep your Brazilian activity in full compliance with the country’s tax legislation, count on Gescon’s experts. Our professionals have extensive experience in taxation and regulatory compliance, and can guarantee the assertiveness your business needs to achieve great results in Brazil.

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Final Beneficiary