FOREIGN CORPORATE CAPITAL

Usually, foreign investors invest in Brazil by means of Equity. Brazilian tax law imposes the taxation of IOF (Taxes on Financial Operation), in case of foreign investors invest in foreign currency (99.9% invest in foreign currency, since it is hard to find out Brazilian Reais in overseas).

The tax rate applicable is 0.38% upon the amount invested.

Thus, in case of foreign investor invests USD 100.000 in a Brazilian company, the following should be the entries:

On the date of capital injection, the exchange rate is USD 1.00:1.85 BRL.

D - Cash - BRL - 185.000

C - Corporate Capital - BRL 185.000

D - IOF Cost (P/L) - BRL 703

C - Cash - BRL 703

Brazilian Central Bank requires the registration of foreign investments in the electronic system RDE-IED. The registration is simple and it could be concluded in 30 minutes through the internet.