Treasury Management Profile 2016 Brazil

Transcription

1 France Treasury Management Profile 2016

2 Contents Introduction...3 Legal and Regulatory...5 Taxation...7 Banking Payment Instruments Payment Systems Cash Management Electronic Banking Trade Finance Useful Contacts This is one of a series of Guides specifically designed for treasury managers offering a detailed picture of the banking and cash management arrangements for an extensive range of locations. Please note that the information contained in this document is of a general nature only and is subject to change whether for economic, political, social or other reasons. It is not intended to be comprehensive and does not constitute financial, legal, tax or other professional advice on which you should rely. Accordingly you should not act upon the information contained in this document without obtaining your own independent professional advice. The materials contained in this document were assembled in January 2016 (unless otherwise dated) and were based on the law enforceable and information available at that time. We make no representations, warranties or guarantees (express or implied) that the information in this document is complete, accurate or up to date. We will not be liable for any liabilities arising under or in connection with the use of, or any reliance on, this document or the information contained within it. 2

3 Introduction Capital/Other major cities: Brasília/São Paulo, Rio de Janeiro, Salvador, Belo Horizonte, Fortaleza, Porto Alegre, Curitiba, Manaus, Recife Area: 8,511,965km 2 Population: m Language: Currency: Portuguese ian real (BRL) Country telephone code: 55 Weekend: National holidays: Source: Saturday and Sunday Jan, 27, 28 Feb, 14, 21 Apr, 1 May, 15 Jun, 7 Sep, 12 Oct, 2, 15 Nov, 25, 31 Dec Jan, 12, 13 Feb, 30 Mar, 21 Apr, 1, 31 May, 7 Sep, 12 Oct, 2, 15 Nov, 25, 31 Dec Business hours: Banking hours: Stock exchange: Leading share indices: Sectoral distribution of GDP (% of GDP): 08:30 17:30 (Mon Fri) 10:00 16:00 (Mon Fri) Bolsa de Valores do São Paulo (BOVESPA) IBOVESPA, IBrX, IBrX50, IVBX-2, IGC, IEE, ITEL, ITAG Agriculture 5.9%, Industry 22.2%, Services 71.9% (2015 estimate) Government Legislature Federal republic with a bicameral National Congress (Congresso Nacional) composed of the Federal Senate (Senado Federal) and the Chamber of Deputies (Camara dos Deputados). Head of state and political leader Michel Temer, acting president (head of state and government) since 12 May The president is directly elected every four years. Federal Senate: 81 members are elected to serve eight year terms. Chamber of Deputies: 513 members are elected to serve four-year terms. 3

4 Economy Q3 Q4 Year Q1 Q2 Exchange rate* (BRL/USD)** Interest rate (MMR)** (%) NA Unemployment (%) NA NA NA Consumer inflation*** (%) GDP volume growth*** (%) NA NA NA NA NA NA GDP (BRL bn) 3,770 4,143 4,403 4,845 5,521 5,904 GDP (USD bn) 2,143 2,477 2,254 2,247 2,346 1,773 GDP per capita (USD) 10,978 12,576 11,137 11,001 11,382 8,528 BoP (goods/services/income) as % GDP * Principal rate. ** Period average. *** Year on year. Sources: IMF, International Financial Statistics, September 2016 and 2015 Yearbook. Country credit rating Fitch Ratings rates for issuer default as: Term Short Long Long-term rating outlook Issuer Default Rating B BB Negative Source: January s economy shrank 3.3% in The government has responded by increasing spending in agriculture and infrastructure. 4

5 Legal and Regulatory Central bank Established in 1964, the Banco Central do Brasil (BCB) is an autonomous institution operating in accordance with the 1988 Complementary Law of the National Financial System. Bank supervision The BCB supervises the banking sector in. Resident/non-resident status A company is considered resident in if it is incorporated in. Bank accounts Foreign exchange accounts and domestic currency (BRL) accounts can be held by residents both domestically and abroad. Residents holding foreign exchange accounts domestically are required to be one of the following: authorised foreign exchange dealers, the ian Post Office Administration, credit card companies, companies involved in energy sector projects, tourist agencies, insurance companies, reinsurance companies and reinsurance brokers. Resident domestic currency accounts are not freely convertible into foreign currency. Non-resident bank accounts are permitted in both foreign and domestic currency. Non-residents holding foreign exchange accounts are required to be one of the following: foreign citizens travelling through the country; ian citizens living abroad; international organisations; embassies; foreign delegations; foreign transportation companies; and reinsurance companies. The use of non-resident accounts to conduct international transfers in BRL on behalf of third parties is prohibited. Non-resident domestic currency accounts are convertible into foreign currency. Interest is not offered on current accounts. Overdraft facilities are available to residents and non residents. Reporting All foreign exchange transactions between residents and non-residents must take place through the intermediary of authorised financial institutions. Financial institutions are required to record every resident/non-resident transaction involving foreign currency into the BCB s dedicated electronic system. The statistics generated by the system are supplemented with information provided on a cooperative basis by enterprises and other government agencies (including information on resident/nonresident transactions involving domestic currency and foreign currency holdings abroad), and with data from the interim balance sheets of the financial institutions, including holdings abroad. The BCB encourages all resident companies conducting BRL-denominated transactions with non residents to participate in the BCB s voluntary survey scheme. Residents are required to report any assets maintained abroad to the BCB on an annual basis. There is a threshold exemption of USD 100,000. Exchange controls The ian real (BRL) is s official currency. Exchange controls on foreign capital and international reserves are administered by the BCB. The National Monetary Council (NMC) is responsible for foreign exchange policy. is a member of the Latin America Integration Association (LAIA). Regional payment and clearing arrangements exist between Argentina,, Bolivia, Chile, Colombia, the Dominican Republic, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela. Payments can be made through unique central bank accounts within the framework of the multilateral clearing system of the LAIA. Foreign exchange can be traded by authorised banks on a forward basis, but it is required to be settled within 360 days. Interbank and export payments are required to be settled within 1500 days. Individuals importing/exporting in excess of BRL 10,000, or its equivalent in cash and/or cheques, are required to notify the customs authorities. Some foreign exchange transactions are subject to a financial transaction tax (IOF). This is usually around 5

6 0.38%, although other rates can apply to specific transactions: Remittances relating to the obligations of credit card administration companies to pay for client purchases: 6.38% IOF tax rate; Future foreign exchange transactions resulting in an increase in short and long dollar exposures: 1% IOF tax rate; Foreign exchange transactions related to the use of debit cards, international pre-paid cards and traveller s cheques abroad: 6.38% IOF tax rate; and Repayment or interest inflows resulting from external loans with a minimum coverage maturity of up to 180 days: 6% IOF tax rate. Some transactions, such as the inflow of export proceeds, interbank transactions between institutions authorised to operate in the foreign exchange market, foreign exchange transactions related to investments by investment funds in the international markets, foreign capital returns, outflows of interest on shareholders equity and dividend remittances, are subject to a 0% IOF tax rate. There are no requirements for repatriating export proceeds or proceeds from invisible transactions and current transfers. Non-resident capital transactions are required to be reported to the BCB. Restrictions are applied to foreign direct investment into certain economic activities. All foreign direct investment is required to be registered with the BCB. Anti-money laundering/counter-terrorist financing 1 has implemented anti-money laundering and counter-terrorist financing legislation, including: A Financial Action Task Force (FATF) member, observes most of the FATF+49 standards. It is also a member of the South American Financial Action Task Force (GAFILAT) and the Organisation of American States/Inter-American Drug Abuse and Control Commissions (OAS/CICAD). has an established financial intelligence unit, the Conselho de Controle de Actividades Financieras (COAF), which is a separate entity within the Ministry of Finance. The COAF is a member of the Egmont Group. Account opening procedures require formal identification of the account holder and beneficial owner. Financial institutions are required to conduct ongoing due diligence. Financial institutions are required to identify customers making single transactions or wire transfers of BRL 1000 and above. Customers making transactions exceeding BRL 10,000 in the same calendar month, must also be identified. Financial institutions must report actual or proposed cash transactions equal to or exceeding BRL 100,000 to the COAF. Banks are required to report identifying data on both parties to the COAF for all foreign exchange transactions and money remittances, regardless of the amount of the transaction. Financial institutions in the broadest sense are required to report suspicious transactions to the COAF within 24 hours. All records must be kept for a minimum of five years after account closure or the date of the last termination. Individuals transporting more than BRL 10,000 in cash, cheques or traveller s cheques into or out of must file a customs report. Law No of 1998, as amended by Law No of 2002, Law No of 2003 and Law No of 2012, plus associated regulations. s financial intelligence unit, the COAF, has issued a series of Resolutions and the BCB has issued a number of related Circulars. 1 Data as at January

7 1 Taxation Resident/non-resident A business is considered resident in if it is incorporated there. There are specific situations in which non-residents may be treated as residents, because their branches, local agents or representative offices operate in. Tax authority ian Revenue Service. Tax year/filing The tax year corresponds to the calendar year. Every business entity in (including corporations, partnerships, branches and agencies of companies domiciled abroad) must file an annual income tax return for the previous calendar year by the last working day of June. Corporate taxes (IRPJ and CSLL) are usually due on annual adjusted profit, with monthly advance payments; excess tax paid is available to offset future taxes. Consolidated returns are not permitted and each company must file a separate return. Corporate taxation Resident companies are subject to taxation on their worldwide income. Non-resident companies are taxed on income from activities carried out in and on income originating in. Corporate income tax (a combination of federal corporate income tax and social contribution taxes) applies to net income derived by a company in. Net income is defined as gross operating receipts, less the cost of goods sold or services rendered. ian companies may opt to be taxed on actual or presumed income. The Lucro Real method is based on actual annual or quarterly taxable income; the Lucro Presumido method is based on estimated or deemed taxable income. Generally, corporate income tax under the Lucro Real method is assessed on net income (before income tax and social contribution tax accruals), adjusted for add-backs (non-deductible expenses, such as tax penalties) and exclusions (non-taxable income such as accounting adjustments relating to investments in subsidiaries and dividend income). Subject to certain restrictions, businesses may elect to calculate corporate income tax on a quarterly basis on revenues from the supply of goods and services, financial income and any other revenue that a company may have, under the Lucro Presumido method (based on estimated or deemed taxable income). In this event, the income tax depends on a presumed profit rate defined in the legislation, and in some cases this method may result in a reduction in the tax burden. In addition to the statutory corporate income tax rate of 15%, a surtax of 10% on income in excess of BRL 240,000 per year is imposed on legal entities. There is no alternative minimum tax. In general, social contribution (CSLL) at a rate of 9% is also imposed on net income, making an overall rate of 34%. Specifically, financial institutions and insurance companies are assessed for CSLL at 20%. IRPJ and CSLL are paid on a quarterly basis under the Lucra Presumido and Lucro Real Trimestral (quarterly) methods and through monthly pre payments with a final adjustment by the year-end under the Lucro Real Anual (annual) system. A foreign tax credit for qualifying foreign taxes paid is available to offset the IRPJ and CSLL imposed on foreign-source income. Further limitations on the credit include a per-company limitation for foreign subsidiaries (some consolidation of branches and of lower tier subsidiaries is allowed) and a per-country limitation for foreign branches. Dividends received from other ian companies are not included in taxable income. Qualifying small enterprises with annual gross income not exceeding BRL 3.6 million may elect to be taxed under a simplified regime (for purposes of corporate income tax, federal excise tax (IPI), federal social contributions on gross income (PIS and COFINS), state 1 All tax information supplied by Deloitte Touche Tohmatsu ( and Deloitte Highlight,

8 VAT on sales and services (ICMS), tax on services (ISS) and social security contributions). Profits generated by affiliated foreign subsidiaries or branches are taxable to resident companies, whether or not distributed. If such profits are subject to income tax in the source country, this tax may be offset against ian tax if certain conditions are met. Tax losses must be segregated as operating or non operating. Non-operating losses may be set off only against non-operating gains. Tax losses incurred in one fiscal year may be carried forward indefinitely, but the amount of the carryforward that can be utilised is limited to 30% of taxable income in each carryforward year. Carryback of losses is not permitted. R&D projects and information technology qualify for some direct assistance and tax relief. An exclusion is allowed from the corporate income tax base of % of R&D project expenses (a provisional measure published on 30 September 2015 would suspend the R&D incentive for calendar year 2016, but the provisional measure has not yet been approved). The IPI on the acquisition of assets is reduced and accelerated depreciation is allowed for R&D assets. Subsidised financing is available to purchase capital goods, invest in infrastructure projects and build ships. Interest paid to non-residents is generally subject to a 15% withholding tax, unless reduced by an applicable tax treaty. 8

9 Export sectors qualify for duty drawback on imports and for special financing through an export-promotion programme. Exporters of manufactured goods are entitled to a tax refund of a percentage of the value of their export revenue, depending on the type of goods exported. There also are regional incentives for federal and state taxes granted by the ian govenrment. Advance tax ruling availability While there is no advance tax ruling system, allows formal consultations on the application of tax laws to the taxpayer s specific facts. The resulting decisions are binding only on the taxpayer, with the possibility of an appeal depending on the existence of inconsistent separate decisions, in which case an affected taxpayer may request a final statement that binds all taxpayers that have received decisions on the same facts/law. Capital gains tax Capital gains are treated as ordinary income for tax purposes (subject to restrcitions on the offsetting of capital losses against ordinary profits in certain cases). Capital gains realised by non-resident entities may be subject to withholding tax at a rate of 15% (25% if the recipient is located in a low-tax jurisdiction). A provisional measure published on 22 September 2015 proposed changes to the tax rates applicable to capital gains; the proposed rates would be progressive ranging from 15% to 30%. The provisional measure has not yet been approved. Foreign investors in the financial market may be subject to different rates. Capital losses realised in the current year may be relieved against ordinary income as well as capital gains. Capital losses may also be carried forward indefinitely, but they may only be offset against capital gains. Withholding tax (subject to tax treaties) Interest paid to non-residents is generally subject to a 15% withholding tax, unless reduced by an applicable tax treaty. The rate is 25% if the recipient is resident in a jurisdiction that is deemed to be low-tax. No withholding tax is imposed on dividend distributions that are paid from profits earned from 1 January The ian tax authorities have issued controversial guidance that provides that tax-exempt profits and dividends are to be calculated using the accounting criteria in effect on 31 December 2007; any excess dividends/profits (i.e. dividends/ profits that are not calculated based on the accounting standards in effect on 31 December 2007) are taxed at the level of the recipient, based on the provisions of the guidance. As from calendar year 2015, dividends are determined based on IFRS. Royalty payments to non-residents are generally subject to withholding tax at a rate of 15%, as well as 10% CIDE (Contribution to the Economic Intervention Domain). See Royalty and technological services taxation. The general withholding tax rate on technical service and technical assistance fees, administrative assistance and similar payments to non-residents is 15%, unless the rate is reduced or eliminated under a tax treaty. Payments for technical services that do not involve the transfer of technology are subjetc to a 25% or 15% withholdng tax. The CIDEW also is imposed at a rate of 10%. Tax treaties/tax information exchange agreements (TIEAs) has exchange of information relationships with 41 jurisdictions through 33 double tax treaties, eight TIEAs and one multilateral mechanism. Thin capitalisation Under s thin capitalisation rules, interest paid to related parties that are not located in a low-tax Withholding tax (subject to tax treaties) Payments to: Interest Dividends Royalties/ fees Technical fees Branch remittances Resident companies % None 0 1.5% None NA Non-resident companies 0%/15%/25% None 15%/25% 15%/25% None 9

10 jurisdiction or that do not benefit from a privileged tax regime may be deducted on an accrual basis for corporate income tax purposes if the expenses are necessary for the company s activities, and if both of the following thresholds are met: The related-party debt-to-equity ratio does not exceed 2:1 calculated based on the proportion of related-party debt to direct equity investment made by related parties; and The overall debt-to-equity ratio does not exceed 2:1 based on the proportion of total debt to total direct equity investment made by the related parties. Interest paid to an entity or individual that is located in a low-tax jurisdiction or that benefits from a privileged tax regime (regardless of whether the parties are related) is deductible if it is necessary for the company s activities and if both of the following thresholds are met: The amount of the ian entity s indebtedness to the low-tax jurisdiction resident does not exceed 30% of the net equity of the ian entity; and The ian entity s total indebtedness to all entities located in a low-tax jurisdiction or benefiting from a preferential tax regime does not exceed 30% of the net equity of the ian entity. Any excess interest is treated as a non-deductible expense for IRPJ and CSLL purposes. The transfer pricing rules affecting cross-border loans remain in effect, as do the general requirements for deductibility. Transfer pricing ian transfer pricing rules apply only to cross border transactions between related parties, or carried out with entities resident in countries considered by the ian tax authorities to be low tax jurisdictions or privileged tax regimes (PTR). The concept of related party in the ian transfer pricing rules may also encompass parties under exclusive arrangements. The ian transfer pricing rules deviate from the OECD Transfer Pricing Guidelines and require statutory profit margins to be applied, rather than the arm s-length principle. Profit-based methods are not allowed in. The regulations provide specific methods for import and export transactions. Calculations must be carried out on a product-by-product basis. The transfer pricing rules also provide that interest derived from a cross-border loan is subject to certain limits regardless of whether the loan agreement is registered with the ian central bank. The limits vary, depending on the type of currency adopted, type of interest (fixed or variable), etc., and take into account market rates and a spread to be determined by the Minister of Finance. For inbound financial transactions, where the ian taxpayer is paying interest to a foreign related party, the annual spread is limited to a maximum rate of 3.5%. For outbound financial transactions, where the ian taxpayer is receiving interest from a foreign related party, the annual spread has a minimum rate of 2.5%. Controlled foreign companies (CFC) Profits earned by CFCs and certain foreign affiliates (non-controlled subsidiaries) of ian entities are included in the base for calculating the IRPJ and CSLL liability of the ian controlling or parent company. Provided certain requirements are met, ian taxpayers have the option to make an irrevocable election (on a calendar year basis) to consolidate the profits and losses of CFCs until 2017 and to carry forward losses incurred by CFCs for five years. Until calendar year 2022, a ian controlling entity in certain business sectors may utilise a 9% presumed credit to offset the income tax related to CFC profits included in its taxable income. 10

11 Tax haven/low-tax jurisdiction/privileged tax regime The ian government published guidance on 7 June 2010 (Normative Instruction No 1.037/2010) expanding the list of jurisdictions considered to be low-tax jurisdictions and introducing a new list of regimes designated as privileged tax regimes (PTRs). Although PTRs are not deemed low-tax jurisdictions, stricter thin capitalisation and transfer pricing rules may apply to payments benefiting PTR residents. General anti-avoidance General anti-avoidance rules apply. Under the rules, any amount paid, credited, delivered, used or remitted directly or indirectly to an entity or individual incorporated or resident in a tax haven jurisdiction or benefiting from a preferential tax regime may be deducted only if the taxpayer can identify the beneficial recipient of the proceeds; provide proof that the entity or individual has the operational capacity to carry out the transaction for which the payment is made, and submit documentation showing the purchase price paid and the receipt of goods, rights or the use of services. (See Transfer pricing and Thin capitalisation sections for additional rules specific to interest payments.) Stamp duty There is no stamp duty. Real property tax The real property tax is collected by the municipality where property is located and is calculated on a deemed sales price of the property. The tax rate varies by municipality, but may be estimated in the range of %. Rural property tax is an annual fee federal tax assessed on the ownership of rural property at rates ranging from 0.03% to 20%, depending on the region and the utilisation of the property. A real estate transfer tax is due upon the transfer of title to real property (land, buildings). The tax rate is progressive, from 2% to 6%, and roughly calculated on the sales price. The buyer is responsible for payment of the tax. Cash pooling has no specific tax rules for cash pooling arrangements. 11

12 Sales taxes/vat/excise operates a multiple rate system, with tax levied at the federal, state and municipal levels. Two different value added taxes are imposed in on the importation and supply of goods and certain services. The IPI is a federal VAT, usually imposed on the importation of goods and at the manufacturing level of the economic chain. The IPI rate varies depending on the type of product, but averages 20%. Exports are exempt. The IPI is paid monthly. The ICMS is a state VAT imposed on the importation and supply of goods and communication and certain transport services. The ICMS rates range from 4% to 25%. The ICMS is paid monthly. ian municipalities also impose a service tax (ISS) on the supply of services not subject to the ICMS. The ISS standard rate is 5%, although it may vary from 2% to 5%. The importation of goods and services is subject to PIS/COFINS taxes at a combined rate of 9.25%. Financial transactions/banking services tax The IOF (financial transactions tax) is levied on financial transactions such as loans, foreign exchange (FX), insurance, securities and gold transactions. As IOF is considered an instrument of economic policy, its rates can be changed by ian authorities at very short notice. The standard IOF financial rates vary from depending on the type of transaction. Variable income return transactions undertaken in the stock exchange and investments in shares listed in the stock exchange benefit from a 0% IOF rate on FX when certain conditions are met. Royalty and technological services taxation (CIDE) CIDE (Contribution to the Economic Intervention Domain) is a federal tax levied at a rate of 10% on the payment or credit of certain royalties (except for software) and technical services to non-residents. The burden of CIDE lies with the ian payee. CIDE is not a withholding tax and does not generally qualify for foreign tax credit. Royalties are also subject to withholding income tax. (See Withholding tax section.) Federal social security contributions on turnover Although not corporate income taxes, the PIS/ PASEP (social integration programme) and COFINS (tax for social security financing) are federal taxes imposed on gross revenue at rates of 0.65% (PIS) and 3% (COFINS), where a ian entity pays corporate income tax under the deemed taxable income regime. Where a ian entity pays corporate income tax based on actual income, the PIS and COFINS rates are 1.65% and 7.6%, respectively. In this case, the ian entity may use input PIS and COFINS credits to offset its PIS and COFINS liabilities. Export companies are exempt as long as funds actually entered the country. The importation of goods and services is subject to PIS and COFINS at a combined rate of 11.75% and 9.25% respectively. Payroll and social security contributions There is no payroll tax payable by employers. Employers are required to contribute 8% of wages to each employee s deferred salary account to the Severance Fund (FTGS), as well as 20% of an employee s wages to the public pension system (National Institute for Social Security or INSS), and a maximum of 8.8% for other social security taxes. In some business sectors, the 20% INSS contribution has been replaced by a contribution levied on gross revenue. 12

13 Banking Overview There are 21 commercial banks (including branches of foreign banks) and 132 multipurpose banks (banks offering commercial banking, investment banking and retail banking services) operating in. In addition there are four development banks, 13 investment banks and one savings bank. There are also 1133 credit cooperatives. s banking sector is dominated by just five banks. These banks accounted for 65% of the banking sector s total assets at the end of September The federal government retains ownership of several financial institutions, including two of the country s largest banks in terms of total assets Banco do Brasil (59%) and Caixa Econômica Federal (100%). In October 2015, the government extended permission, first granted in 2007, for Banco do Brasil and Caixa Econômica Federal to acquire other (state-owned and private) financial institutions in order to protect their financial positions within until December Foreign banks play an active role in the country s financial sector. At the end of September 2015, foreign banks accounted for 17.7% of the banking sector s total assets. However, with Citigroup s sale of its retail banking unit in to Itaú Unibanco in October 2016, Banco Santander remains the only foreign bank offering retail banking services. A number of banks have exited the ian market, since the start of the century. Barclays announced it was to close its operations in the country in January 2016, a year after Société Générale announced it was closing its consumer finance operations subsidiaries in the country, Banco Cacique and Banco Pecunia. In July 2016, Bradesco completed its purchase of HSBC s ian operations for USD 5.2 billion. HSBC plans to maintain a presence in to serve large corporate clients international needs. In December 2015, BTG Pactual, a ian investment bank, put Swiss private bank BSI up for sale just three months after its acquisition of the bank from Italian insurance group Generali for USD 1.68 billion was completed. In February 2016, EFG International agreed to purchase BSI. In May 2015, Bank of Communications, China s fifth largest bank by assets, acquired a controlling 80% stake in s Banco BBM. This follows on from the 2014 acquisition by China Construction Bank of a 72% in s BICBanco. Major banks Bank Total assets (USD millions) 30 September 2016 Banco do Brasil 456,870 Itaú Unibanco 406,348 Caixa Econômica Federal 379,461 Banco Bradesco 327,200 Banco Santander (Brasil) (Grupo Santander) 204,754 Sources: Banco Central do Brasil and January

14 Payment Instruments Payment statistics Millions of transactions % change Traffic (USD billions)* / % change 2014/2013 Cheques (inter and intrabank) 1,304 1, ,357 1, Debit card payments 4,908 5, Credit card payments 5,020 5, Direct debits** 5,083 5, ,359 3, Credit transfers (DOCs, boletos, TECs and TEDs) 9,588 10, ,294 14, Total 25,903 28, ,394 20, * BRL per USD 1 as at December 2013; BRL per USD 1 as at December Source: BSI-Commitee on Payment and Market Infrastructures, Includes interbank and intrabank transactions. December ** Includes interbank and intrabank transactions. Credit transfers include interbank and intrabank TEDs, TECs, DOCs and boletos. Cash Cash is an important payment medium in, particularly for low-value transactions. Credit transfers All credit transfers in are automated. High-value and urgent credit transfers are processed as transferências eletrônicas disponíveis (TEDs) via the STR or CIP-SITRAF payment systems, on a same-day basis. As of 15 January 2016, there is no minimum value limit for TED fund transfers. Transfers equal to or greater than BRL 5000 must be processed as TEDs. There is currently a BRL 1 million value limit in the CIP SITRAF system. There is, however, no value limit in the STR system. Low-value and non-urgent credit transfers are processed as documentos de transferência crédito (DOCs) or transferências especiais de crédito (TECs) and cleared and settled through CIP-SILOC. TECs are settled on a same-day basis while DOCs are settled on the next business day. Both DOCs and TECs are permitted for amounts less than BRL Low-value credit transfers include payroll, supplier and third-party payments. DOCs and TECs are processed electronically in batches by banks, but can be submitted by companies or individuals at a bank branch or electronically through internet banking systems and ATMs. Credit transfers accounted for 73.5% of the value of all cashless payments in 2014, and 37.6% of the volume. Direct debits Direct debits (débitos diretos) are available in for low-value recurring payments such as utility bills. The majority of direct debit payments are made on an intrabank basis where the originator and receiver have accounts with the same bank. Interbank direct debits are possible through TecBan, but are not widely used. Direct debits accounted for 19% of the volume of all cashless payments in 2014, and 18.6% of the value. Cheques The cheque remains a popular cashless payment instrument for both retail and commercial payments. However, cheque use is in decline due to an increasing preference for electronic payments for both high-value and low value transactions. Between 2010 and 2014, the volume of cheques processed in fell by 30.1%. Post-dated cheques (cheques pré-datados) are frequently used in, particularly by consumers. Cheques with a value equal to or greater than BRL 250,000 are settled bilaterally among banks, without netting, via the STR. Cheques with a value below BRL 250,000 are truncated into electronic items 14

15 The izettle card payment service, allows individuals and small businesses to accept card payments through an EMV device, thereby enabling mobile phones and tablets to be used as a POS terminal. and cleared and settled via multilateral netting in COMPE. Cheques with a value equal to and above BRL 300 are available to beneficiaries on T+1. Cheques with a value below BRL 300 are available to beneficiaries on a T+2 basis. Cheques drawn on banks in remote locations of the country (outside the local and regional electronic cheque clearing houses) can take between four and seven days for clearing and settlement. Card payments The use of payment cards in, particularly of debit cards, is becoming increasingly popular. Payment card transactions accounted for 38.4% of the volume of all cashless payments in 2014, but less than 2% of the total value. There were 162 million credit cards and million debit cards in circulation at the end of Visa, MasterCard, American Express and Hipercard are the principal credit card brands issued. Visa Electron, MasterCard s MasterCard and Maestro, Elo, and TecBan s Cheque Eletrônico are the principal debit card brands issued. All cards issued are EMV compliant. The Elo card brand (including debit, credit and pre-paid cards) offers card services to low-income consumers with and without accounts. Most Visa and MasterCard transactions are processed through Cielo (formerly VisaNet) and Rede (formerly 15

16 RedeCard). Eleven other companies are licensed to process payment card transactions in, including Cielo, Rede, Bankpar, Hipercard, Santander Getnet Serviços, Elavon, and Cetelem. However, Cielo and Rede account for the vast majority of the payment card market. There were 180,938 ATMs in at the end of 2014 and an estimated five million POS terminals. All ATMs and POS terminals are EMV-compliant. All the country s major banks operate proprietary ATM networks, but many also participate in Banco24Horas, an ATM network shared by 33 financial institutions and operated by TecBan. Rede Verde-Amarela (RVA) is a non proprietary ATM network operated by ATP Banking Technology on behalf of the ian National Banks Association (ASBACE). It offers ATM services to six state-owned and private banks. Electronic money schemes are available in the form of reloadable pre-paid cards. Pre-paid cards such as those used for telephones and public transport are the most common e-money cards available in the country. Pre-paid cards issued by financial institutions are less common, although stored-value Visa and MasterCard cards are issued by banks. The izettle card payment service, compatible with both Visa and MasterCard cards, allows individuals and small businesses to accept card payments through an EMV device enabling mobile phones and tablets to be used as a POS terminal. Other payments Collection orders There are two types of boletos de pagamento: the boletos de proposta (proposal orders), which allow consumers to pay for goods and services offered to them, and the boletos de cobrança (collection orders). Boletos de proposta must be pre-authorised by the consumers, who are under no obligation to accept the goods and services offered to them. Boletos can be paid electronically, via internet banking, ATM or at the bank, with cash, card or cheque. Boletos consist of a two-part document: one part serves as a receipt after the payer has made payment through a bank; the other part is used as an interbank clearing document. Boletos contain all relevant invoice information and may be issued electronically or in a paper-based format and delivered via the postal service or private couriers. Boletos are widely used and payments can be made electronically or at any bank in. Recipients typically take them to a bank, where they pay cash or write a cheque to authorise payment. In this case, the bank truncates the document and clears it electronically. Boletos with a value below BRL 250,000 are cleared and settled through CIP-SILOC, and funds are available to the beneficiary (collecting company) on a T+1 basis. Those with a value equal to or above BRL 250,000 are cleared and settled bilaterally between banks through the STR. Banks send daily files to their corporate clients with details of all the boletos that have been paid. This allows companies to update their accounts receivable records. The DDA (Débito Direto Autorizado) system enables electronic boletos to be accessed and paid for via the internet, phone banking, ATMs or at bank branches. 16

17 Payment Systems Type The STR (Sistema de Transferencia de Reservas), s national real-time gross settlement (RTGS) system, is operated by the BCB. Funds transfers made via the STR are referred to as TEDs; transfers greater than BRL must be made as a TED. CIP (Câmara Interbancária de Pagamentos) is the private-sector operator of s interbank funds transfer system. CIP operates the high-value, same day settlement system, CIP-SITRAF (Sistema de Transferencias de Fundos) and the deferred net settlement system for interbank credit transfers, CIP-SILOC (Sistema de Liquidação Diferida das Transferências Interbancárias de Ordens de Crédito). CIP-SITRAF is a high-value interbank transfer system. Settlement is carried out using funds maintained by participants in the CIP settlement account held at the BCB. Payments are continuously monitored and matched between participants and subsequently cleared and settled in real time. Funds transfers made via CIP-SITRAF are also referred to as TEDs; transfers greater than BRL must be made as a TED. When a client initiates a TED, the client s bank (not the client) determines whether the funds transfer will be routed via the STR or CIP. CIP-SILOC is a low-value interbank transfer system. Settlement is carried out using funds maintained by participants in the CIP settlement account held at the BCB. CIP-SILOC settles low-value interbank obligations typically referred to as DOCs and boletos de pagamento. DOCs equal to or greater than BRL 5000 are not permitted. Transfers greater than BRL must be made as a TED. Boletos with a value equal to or above BRL 250,000 are cleared and settled bilaterally between banks through the STR. COMPE (Centralizadora da Compensação de Cheques e Outros Papéis) is a deferred net settlement system operated by the BCB. COMPE serves as the clearing house for cheques with a value below BRL 250,000. Cheques with a value equal to or greater than BRL 250,000 are settled bilaterally among banks, without netting, through the STR. All cheques are processed electronically. COMPE consists of a nationwide network of one national, 15 regional and ten local clearing houses. It conducts two clearing sessions per business day. At the end of each session, COMPE computes a single, nationwide multilateral net settlement position for each participant. Outstanding positions are subsequently settled in participants accounts at the BCB via STR transfers. TecBan (Tecnologia Bancária SA) operates more than 19,000 ATMs in more than 560 cities in. The Câmara TecBan (TecBan clearing house) operates as the clearing and settlement system for electronic payments associated with debit card transactions and withdrawals from the shared ATM network, Banco24Horas. The TecBan clearing house uses multilateral netting. The final settlement of positions takes place via STR transfers in participants accounts at the BCB. Participants The STR has 186 participants. Participation in the STR is mandatory for reserve account holders and entities that operate the other clearing houses. CIP-SITRAF has 100 participants. CIP-SILOC has 120 participants. COMPE has 130 participants. COMPE is mandatory for all demand deposit-taking institutions. TecBan has more than 40 participants. Transaction types processed The STR processes high-value and urgent financial and commercial payments (TEDs) with same-day value. As of 15 January 2016, there is no minimum value limit for TED fund transfers. Transfers equal to or greater than BRL must be processed as TEDs. In addition, the STR effects the final settlement of participants net balances originating from s other clearing houses. CIP-SITRAF processes high-value interbank payment orders (TEDs). As of 15 January 2016, there is no minimum value limit for TED fund transfers. Transfers equal to or greater than BRL must be processed as TEDs. There is currently a BRL 1 million value limit in the CIP-SITRAF system. 17

18 CIP-SILOC processes low-value interbank payment orders consisting of all DOCs and boletos de pagamento. COMPE processes all cheques. TecBan processes debit card transactions and withdrawals from the shared Banco24Horas ATM network. Operating hours The STR operates between 06:30 and 18:30 (Brasília time). CIP operates between 06:35 and 17:25 (Brasília time). Clearing cycle details STR 08:20 SILOC: settlement via the STR from prior-day DOC and boletos activity. 09:00 COMPE: first settlement via the STR from prior day cheques (greater than BRL ). 10:10 TecBan: first settlement via the STR from prior day activity. 16:10 SILOC: settlement of previous session s returned items. 17:00 COMPE: second settlement via the STR from prior-day cheques (less than BRL ). 17:10 TecBan: second settlement via the STR from current-day activity. 17:25 SITRAF: settlement via the STR from current-day TEDs. 17:45 COMPE: second settlement via the STR from prior-day cheques (less than BRL ). 17:30: cut-off time for customer payments. 07:30 17:00: funds transfers (TEDs) are processed and settled immediately on behalf of banks and their clients as long as there are sufficient balances in the banks accounts in the SITRAF environment (principal cycle). 17:15 17:25: instructions are sent to cover pending payments outstanding from the previous cycle and additional funds are sent to settle outstanding payments into the participant s BCB reserve account (complementary cycle). 17:25: CIP transfers any remaining balances to participants accounts at the BCB via the STR. CIP-SILOC 20:00 00:30 (T+1): first session. Banks transmit files to CIP for electronic clearing of DOCs and boletos (these transactions are settled in participants accounts at the BCB via the STR at 08:20 on T+1). 11:00 14:30: second session. Banks transmit files to CIP for electronic clearing of DOCs and boletos. (These transactions are settled in participants accounts at the BCB via the STR at 16:10 on T.) Currency centre holidays Jan, 27, 28 Feb, 14, 21 Apr, 1 May, 15 Jun, 7 Sep, 12 Oct, 2, 15 Nov, 25 Dec Jan, 12, 13 Feb, 30 Mar, 21 Apr, 1, 31 May, 7 Sep, 12 Oct, 2, 15 Nov, 25 Dec Source: 18:30: cut-off time for interbank payments. 18:30: close of the STR and posting of final balances. CIP-SITRAF 06:35 07:30: in the SITRAF environment participants deposit funds in their CIP settlement accounts at the BCB (pre-funding period). 18

19 Cash Management Domestic Notional pooling Notional pooling is not permitted in. Cash concentration Cash concentration, particularly zero balance accounts, is permitted between resident and non-resident accounts. Central bank reporting requirements apply. Cross-border sweeping is permitted in, but exchange control requirements can make such arrangements difficult to operate. Non-resident companies are not permitted to participate in cross border sweeping. Collections One of the most efficient ways for companies to collect receivables is to utilise banks that have large branch networks and use a direct collection system (cobrança bancária) through which clients can pay outstanding bills and invoices directly to the supplier s bank account. Companies typically use one or more banks for collections, depending on the geography of their entire sales area. Boletos can be paid at any bank in up until the due date. After the due date, the boleto must be paid at the issuing bank. There are a variety of collection options, depending on company and bank capabilities. Some of the most common include: Cobrança sem registro (without registration) the company prints the boletos and sends them to clients. The register numbers are not sent to the bank. Cobrança com registro (with registration) the company prints the boletos and sends them to clients. The register numbers are sent to the bank. Cobrança escritural com registro (with registration) the company transmits a file to the bank. The bank prints the boletos and sends them to clients on behalf of the company. The numbers are registered at the bank. Some companies outsource the protesto process to their banks. Protesto is the legal collection process that can be initiated when a client is delinquent and has not made payment by the boletos/invoice due date. Companies that receive post-dated cheques (cheques pré-datados) may use a bank cheque custody service (custódia de cheques). In this case, the bank maintains the inventory of post-dated cheques on behalf of the company and automatically deposits the cheques for clearing, settlement and credit to the collecting company s account on the due date. Post-dated cheques can also be discounted and used as a source of short-term financing (desconto de cheques). Cross-border Cross-border payment instructions are routed via SWIFT and settled through accounts held with correspondent banks abroad. Funds can also be transferred via the International Transfer of Reais (ITR) procedure. Rules governing the ITR are contained in the regulations for the exchange market and international commerce published by the BCB. Foreign trade transactions between and Argentina can be settled in both BRL and Argentinian pesos (ARS) through the Payment System in Local Currency (SML) system. This system, which eliminates the need to use USD to pay for bilateral trade transactions between the two countries, can process transactions of up to 360 days on trade of goods, including related services and other expenses. Lifting fees Fees may be applied to funds transfers between resident and non-resident accounts. Short-term investments Interest cannot be earned on current accounts or demand deposits held by residents or non-residents. Time deposits are available in local currency, with maturities ranging from 30 to 120 days. Deposits called fundos de investimentos financeiros (FIFs) are also available for terms of one, two or three months. Certificates of deposit (certificados de depósito bancário CDBs) are offered in BRL with fixed and floating rates for terms ranging between 30 and 360 days. Commercial paper is available. 19

20 Treasury bills (T-bills) are auctioned on a weekly basis by the National Treasury. T-bills are available online via the Tesouro Direto. The BCB issues central bank bills (Letras do banco central LBCs) on a daily basis. Money market funds are available. Custody and securities settlement 1 Depositories BM&FBOVESPA Central Securities Depository. Sistema Especial de Liquidação e Custodia (SELIC). Central de Custodia e de Liquidacao Financeira de Titulos (CETIP). The BM&FBOVESPA is a vertically integrated multiasset exchange that operates both listed and over-the-counter markets. It also acts as a central securities depository, clearing house and central counterparty, offering a comprehensive array of products and services. The BM&FBOVESPA manages four clearing houses. handles the issue, redemption, interest payments and custody of such securities. SELIC is also an electronic system (all securities are dematerialised) that processes the registration and settlement of transactions in those securities on a gross basis and in real time. CETIP provides registration, central securities depository, trading and settlement of assets and securities services. It is also Latin America s largest depositary of fixed income securities and s largest private asset clearing house. Central counterparty The BM&FBOVESPA. Settlement cycle T+3 for equities. T+0 or T+1 for bonds. SELIC is the central depository of securities that comprises the domestic federal public debt (domestic federal debt) issued by the National Treasury. SELIC 1 Data as at February

21 Electronic Banking Electronic banking is commonplace in and offered by all of the country s leading banks. There is no bankindependent electronic banking standard; each bank offers its own proprietary system for corporate banking purposes. Many large companies operate with value-added networks (VANs) and use EDI protocols to exchange electronic data with their banks and/or business partners. The majority of banks in are connected to one or more VANs. The country s larger banks offer internet-based electronic banking systems. Services available include balance and transaction reporting and payment initiation. Internet banking is offered by many of s banks and is popular among both retail users and companies. There were 51 million bank accounts with online access in had an estimated internet penetration rate of 57.6% at the end of Mobile banking is offered by many of the country s banks, providing services such as balance and transaction reporting and payment initiation. The number of mobile banking accounts increased from 11.7 million in 2013 to 25 million in Internet and mobile banking transactions accounted for 58.5% of all banking transactions in in the first six months of had million mobile subscribers at the end of 2015, a penetration rate of 125.6%. In the first six months of 2015, internet and mobile banking transactions accounted for 58.5% of all banking transactions. 21

22 Trade Finance Trading partners Import China 16.3%, USA 15.4%, Argentina 6.2%, Germany 6%, Nigeria 4.2%. Export China 18%, USA 12.1%, Argentina 6.3%, Netherlands 5.8%. Source: The World Factbook Washington, DC: Central Intelligence Agency, 2013 ( Imports Documents In order to import goods into, a commercial invoice (including a full description of the imported goods), bill of lading, pro-forma invoice (for imports requiring a licence) and, in certain cases, a certificate of origin are required. A certificate of origin is required for imports from (or originating from) countries subject to UN Security Council restrictions, quotas and sanitary control. Importers are required to be registered with the Secretariat of Foreign Trade (SECEX). Licences Most imports do not require import licences. Certain imports are subject to automatic licences, others to non-automatic licences. Products requiring licences are listed in s Integrated Foreign Trade System (SISCOMEX) portal. Licences are not required for imports from other Mercosur countries, with the exception of motor cars and sugar. Goods imported through the Manaus and Tabatinga free trade zones and imports covered by the LAIA agreement are subject to licences with quotas. Licences are typically valid for 90 days, but may be extended if the extension is justified by the importer. Taxes/tariffs and other fees is a member of the Mercado Común del Sur (Mercosur) regional common market. Mercosur comprises Argentina,, Paraguay, Uruguay and Venezuela. are usually subject to ad valorem tariffs of 0 20%. Rates of 35% may be applied on certain automotive products, 28% for certain dairy products, 26% for some textiles and 20% on toys. may maintain a list of up to 100 tariff codes on the list of Mercosur CET exceptions until 31 December The IPI industrial production tax on imported cars and vehicles is 37 55%. Vehicles from Mexico, other Mercosur countries or those with 65% locally sourced parts are exempt. There are temporary quotas on duty-free vehicle imports from Mexico, with a limit of USD 1.55 billion a year. The pact expired in March 2015, but the two governments have agreed a four-year extension (until 2019) to the quotas. In October 2015, the government cut import taxes on a number of capital goods and 15 computer and telecommunications goods that are manufactured in the to 2 % (from 14% and 16% respectively). The measure will remain in force until 30 June There are eight free trade zones in : Manaus, Tabatinga on the border with Colombia, Macapá/ Santana, Guajará-Mirim, Pacaraíma, Bonfim, Cruzeiro do Sul and Brasiléia/Epitaciolândia. Prohibited imports A negative list (of products that may not be imported) is in operation. It is prohibited to import certain commodities into, in order to protect public health, and for hygiene and/or industrial policy reasons. According to the Mercosur Common Code, imports into from outside the Mercosur common market 22

23 Exports Documents In order to export goods from, a commercial invoice (including a full description of the exported goods), bill of lading and export registration are required. Exporters are required to be registered with SECEX. Licences Every export must be registered on the SISCOMEX system before shipment. Prior authorisation from SECEX is required for exporting certain goods, e.g. animals, plants, tobacco, minerals, fuel and weapons. Certain items are subject to export quotas, including cars (Mexico), poultry, beef (Hilton quota), sugar (Europe) and milk (Colombia). Some exports covered by the Mercosur-Colombia and Mercosur-Israel agreements are also subject to export quotas. Taxes/tariffs and other fees An export duty of 9% is levied on raw hides, and a duty of 150% is levied on exports of cigarettes to Latin America and weapons and ammunition exported to Central and South America (excluding Argentina, Chile and Ecuador) and the Caribbean. Prohibited exports A negative list (of products that may not be exported) is in operation. Financing imports and exports Imports The external financing of imports for over 360 days is required to be registered with the BCB Financial Operations Registry. Financing is authorised if the BCB does not refuse registration within five days. Exports There are no financing requirements for exports. 23