As per information published by our Capital Markets team, Law No. 14286/2021 was sanctioned, which deals with the "Brazilian exchange market, foreign capital in the country and the provision of information to the Central Bank of Brazil".
In addition to the impacts already mentioned, the new law also affects intellectual property agreements, as it contains provisions related to the remittance of royalties abroad. Some noteworthy changes:
- Extinction of the obligation to register contracts with the Central Bank to authorise remittances abroad as payment for royalties;
- Extinction of the limitation on remittances between subsidiary and foreign parent company and revocation of the prohibition on remittances between subsidiary and foreign parent company.
On the other hand, some requirements relating to royalty payments have been retained, in particular:
- Maintenance of the need to register contracts with the National Institute of Industrial Property (INPI);
- Maintenance of limitations on the deductibility of royalties paid by a Brazilian company to a foreign licensor, under the terms of the tax legislation.
The new law will come into force on 30 December 2022 and revolutionises the regulation that had been in force for over 60 years and no longer made sense, as disguised profit remittances by way of royalties between parent and subsidiary occurred in the context of an import substitution economic policy.
It will certainly positively impact the business of companies that use foreign intellectual property assets in their business strategies. What remains now is to revolutionise the tax legislation related to royalties.
To find out more, contact our Intellectual Property team at: intellectualproperty@btlaw.