BRAZIL Law and Practice Contributed by: Ihury Bastos Pereira Darmont, Filipe Starzynski, Karyn Yoshisaki, Ariel Goldstein and Artur Marangoni Cabral Fagundes, Darmont Advogados
shareholders are residents of the State in which the fund is established. Otherwise, the benefits provided for in double-taxa - tion treaties – such as reduced tax rates on dividends and interest paid by foreign entities – are not normally directly applicable to Brazilian funds, but rather to their shareholders, provided they meet the eligibility requirements set forth in the respective agreements. Nevertheless, in more complex structures, it is advis - able to assess each case individually, considering the type of fund, the counterparty jurisdiction, and any divergent interpretations by tax authorities. 4.10 Foreign Account Tax Compliance Act (FATCA)/Common Reporting Standard (CRS) Compliance Regime FATCA and CRS Compliance in Brazil Brazil is a signatory to both the Foreign Account Tax Compliance Act (FATCA) – Model 1 (IGA Model 1A) – and the Common Reporting Standard (CRS). Responsibility of Service Providers In the context of investment funds, due diligence and reporting obligations are generally assigned to the trustee, as the financial institution responsible for compliance with tax and regulatory obligations. However, it is essential that asset managers and other service providers cooperate in collecting, updating, and validating investor registration information to ensure full compliance with reporting regimes. Penalties and Risks for Non-Compliance Failure to comply with the obligations set forth in FATCA and CRS may result in fines and administra - tive sanctions imposed by the Brazilian Federal Rev - enue Service and significant reputational risks for the institutions involved, without prejudice to the penal - ties provided for in FATCA and CRS themselves, as applicable. 4.11 Anti-Money Laundering (AML) and Know Your Customer (KYC) Regime Brazil has a robust and consolidated regime for the prevention of money laundering and terrorist financing (AML/CFT), in accordance with international stand -
ards established by the Financial Action Task Force (FATF), of which the country is a member. Furthermore, the Brazilian regime establishes specific obligations related to the Know Your Customer (KYC) process. Obligated institutions must also maintain effective systems for monitoring clients and their transactions, as well as report to the Financial Activities Control Council (COAF) whenever there are indications of ille - gal activities or activities incompatible. 4.12 Data Security and Privacy for Investors Data Protection and Privacy Regime The processing of personal data in the context of investment funds in Brazil is subject to the Gener - al Personal Data Protection Law (LGPD – Law No 13,709/2018), which establishes specific rules for the collection, use, storage, and sharing of investor data by managers, trustees, and other service providers. Information Security and Governance Those responsible for processing must adopt tech - nical and administrative information security meas - ures in accordance with the LGPD, CVM regulations, and the guidelines of self-regulatory entities such as ANBIMA. Sharing With Third Parties The sharing of data with third parties – such as distrib - utors, custodians, auditors, or legal advisors – must be supported by contracts with specific data protec - tion clauses. Data Subject Rights and Responsibility Investors have the right to access, correct, limit, or delete their data, among other rights. Managers and administrators must maintain effective channels for responding to these requests. 4.13 Anticipated Changes for Investors The Brazilian regulatory environment, especially with regard to the taxation of investment funds and their investors, has undergone significant changes in recent years and remains subject to frequent regulatory changes, including through laws, infra-legal regula -
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