BRAZIL Law and Practice Contributed by: Carlos Vilhena, Roberta Bilotti Demange and Marina Bertucci Ferreira, Pinheiro Neto Advogados
4.3 Transfer Tax and Capital Gains on the Sale of Mining Projects As a general rule, if the seller of a mining project has a capital gain arising from the transaction, the seller shall pay capital gains tax. In the case of corporate structures outside Brazil, Brazilian tax rules provide that if a non-Brazilian entity has any capital gain arising from the dis - posal of a Brazilian asset, then such gain could be subject to withholding tax at a sliding scale rate between 15% and 22.5%, as described in 4.1 Mining and Exploration Duties, Royalties and Taxes . (If the seller is based in a tax-haven jurisdiction, the applicable rate will actually be 25%.) 5. Mining Investment and Finance 5.1 Attracting Investment for Mining Attracting investments for mining is crucial for the development of the Brazilian economy, since the mining sector contributes to the creation of direct and indirect jobs, the expansion of infra - structure and the increase of the Brazilian trade balance. Since Brazil does not have any bilateral invest - ment treaties in place, the federal government relies on general policies and legislation appli - cable to businesses in general (eg, exemption of export tax in the exportation of non-manu - factured goods, and exemption of ICMS tax on exported goods before the full transition to the new rules of the tax reform). 5.2 Foreign Investment Restrictions and Approvals in the Exploration and Mining Sectors Foreign capital in Brazil is governed by Law No 4131/1962 (the “Foreign Capital Law”). As a gen -
eral rule, foreign capital can enter Brazil freely, without constraints over the total amount to be invested and without the need of prior approval by the government. The registration of foreign capital with the Central Bank of Brazil is required when bringing funds into Brazil, remitting profits abroad, repatriating capital, and reinvesting proceeds. Investment is registered in the foreign currency in which it is made, or in Brazilian currency if the funds origi - nate from a non-resident account properly kept in Brazil or from assets located in the country. The main restriction with regard to foreign invest - ment in the Brazilian mining sector is related to foreign ownership of mining companies that have rights in certain areas. The current interpre - tation of the federal government is that legisla - tion does not allow mining companies that have 51% equity interest held directly or indirectly by non-Brazilians to hold mineral rights and per - form exploration and/or mining activities within the country’s border area (ie, the 150 km strip of land parallel to the country’s dry borders). 5.3 International Treaties Related to Exploration and Mining Brazil has not ratified any bilateral or multilat - eral investment treaties. Brazilian authorities, at some point, considered that those treaties might lead to international disputes and could limit the government’s ability to change policies and regulations. In this context, Brazil chose to rely exclusively on domestic legislation to pro - tect investment and private property in general (both Brazilian and foreign). 5.4 Sources of Finance for Exploration, Development and Mining The main financing options for mining devel - opment in Brazil are the banking system, the
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