Brazilian Government updates rules for remittance of industrial property royalties abroad

December 30, 2021

Brazilian Government updates rules for remittance of industrial property royalties abroad

In the twilight of 2021, Statute #14,286 aims to reduce bureaucracy in Brazil’s foreign capitals regulation and may impact the BRPTO’s role in the registration of licensing and technology transfer agreements.

Following recent initiatives by the Brazilian government in order to improve Brazil’s business environment, Statute #14,286 brings much awaited changes in Brazilian foreign exchange regulation. It has streamlined some reporting obligations to the Brazilian Central Bank when it comes to operations involving foreign capital in Brazil and the remittance of Brazilian capitals abroad.

More specifically, Statute #14,286 has authorized, among others:

(i) the opening of checking accounts in international currency;

(ii) the private offsetting of credits among residents and non-residents; and

(iii) contract prices to be determined in foreign currency.

In addition, Statute #14,286 expressly revoked, among others:

(i) the Brazilian Central Bank’s role in the supervision of the tech transfer agreements that require the payment of royalties abroad (article 10 of Statute #4,131 of 1962);

(ii) the need to submit proof of validity of Brazilian patents and trademarks to be licensed for royalty payments abroad (article 11 of Statute #4,131 of 1962);

(iii) the restriction of royalty payments by a subsidiary to its parent company (article 14 of Statute #4,131 of 1962); and

(iv) Brazilian Central Bank’s power to limit royalty payments to 5% of the annual gross revenue of the Brazilian company (note: Brazilian IRS’s powers have not been expressly revoked) (article 28 Paragraph 3 of #4,131 of 1962).

However, Statute #14,286 did not eliminate the need for licensing and technology transfer agreements registration for tax deduction purposes, which shall remain in force.

Statute #14,286 will become effective on December 29, 2022 and we should expect meaningful changes in the regulation of the BRPTO, the Brazilian Central Bank and, perhaps, in the regulation of the Brazilian IRS as well. We will keep monitoring any updates and will report them as they come up.

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