In late 2021, President Jair Bolsonaro sanctioned the Law 14.286/2021, which deals with the Brazilian foreign exchange market. The new exchange rate framework will modernize an 87-year-old legislation and replace rules in force since 1935.
The new law, which will come into force on December 30th 2022, will bring, among the main changes, provisions related to remittances of royalties abroad.
The new text extinguishes the obligation to register contracts with the Brazilian Central Bank so that the tax deductibility of remittances as payment for royalties is possible, leaving the need to register these contracts with the Brazilian Patent and Trademark Office (BPTO) (INPI in Portuguese). This change reflects the possibility of royalty payments being made regardless of the closing of exchange contracts registered with Central Bank.
Another novelty is the end of the prohibition of remittances of royalties between Brazilian subsidiaries and branches and the headquarters abroad in excess of tax deductibility. This point may redefine business strategies that used the cap to comply with foreign transfer pricing rules.
According to of Gabriel Di Blasi, founding partner of Di Blasi, Parente & Associados, the new Legal Framework for Exchange represents opportunities to modernize, simplify and bring more efficiency to foreign trade and internationalization of companies, in addition to offering a competitive advantage for companies to adapt to the new rules.
“In 2017, the Brazilian Patent and Trademark Office (BPTO) issued a normative Instruction No. 70/2017, which made the procedural rules applicable to the annotation/registration of contracts more flexible, bringing more simplicity and speed to the issuance of the Annotation/Registration Certificates. However, back then the laws tax and exchange rate that governed the matter were not adjusted to reflect this practice of the BPTO. In view of the sanction of Law No. 14.286/2021, the rules for remittances of royalties abroad became simpler, without the need to close contracts of exchange registered with the Central Bank, as well as the possibility of remittance of royalties between Brazilian subsidiaries and the headquarters abroad in excess of tax deductibility according to bill 436/1958” – analyzes Di Blasi.
To know the details of Law 14.286/2021, access the link bellow: