Brazilian regulation requires all companies, both national and foreign, registered in the National Registry of Legal Entities (CNPJ), to declare the existence or non-existence of an Ultimate Beneficial Owner (UBO) within thirty (30) days from the date of registration with the CNPJ, in accordance with the guidelines set out in Normative Instruction No. 2119/2022, issued by the Federal Revenue Service.
For declaration purposes, the UBO is defined as the natural person who exerts control over a company or group, wielding the authority to make pivotal decisions and derive substantial benefit from its outcomes. An individual qualifies as a UBO if they possess more than 25% of the company’s share capital, whether directly or indirectly, or if they hold or exercise predominance in the company’s decisions and have the power to elect the majority of its officers.
Officers and directors of foreign companies who are not shareholders are not considered UBO, even if they have the power to elect the majority of the company’s officers. Foreign companies must declare their UBO or confirm its absence. In contrast, companies domiciled in Brazil only need to indicate the existence of a UBO. If no natural person qualifies as a UBO, no declaration is required. Among the documents that need to be submitted to the Federal Revenue Service for analysis is a corporate organization chart, as well as the equity interest of each shareholder.
The purpose of the UBO declaration is to provide greater transparency, enabling the Federal Revenue Service to identify who controls a company and the source of the company’s funds, thereby helping to prevent illegal practices. However, some companies whose information is publicly available, and which are already subject to stricter regulation and control mechanisms, such as public companies or listed companies registered with the Securities and Exchange Commission (CVM), are not obliged to make this declaration.
Failure to comply with this obligation or to provide supporting documentation may result in sanctions, including the suspension of the CNPJ. This suspension can disrupt the company’s daily operations and prevent, among other things, transactions with banking establishments, including the operation of current accounts, making financial investments and obtaining loans.
The requirement to declare the UBO represents an advance in corporate governance and the fight against illicit practices in Brazil. The distinction between national and foreign companies reflects the Federal Revenue Service’s concern with corporate structures used for tax evasion and asset concealment. Compliance with this obligation ensures fiscal regularity and transparency, strengthening integrity in the business environment. Therefore, companies must pay attention to deadlines and requirements to avoid penalties that could compromise their operations in Brazil.