ADE COCAD No. 9/2017 is an important regulation in Brazil related to the disclosure of beneficial ownership information. Here are the key points about this regulation:

Purpose and Scope

ADE COCAD No. 9/2017 (Executive Declaratory Act – Registration Management General Coordination) was published on October 23, 2017, in Brazil’s Official Gazette. It establishes rules for reporting beneficial ownership information for both domestic entities and foreign entities with operations or assets in Brazil.

Key Requirements

1. Beneficial Owner Disclosure: Entities are required to provide information about their beneficial owners through the National Collector system.
2. Applicable Entities: This regulation applies to both Brazilian companies and foreign entities that have assets or operations in Brazil, including those with equity participation in Brazilian companies.
3. Definition of Beneficial Owner: The beneficial owner is considered to be the natural person who ultimately controls or significantly influences the entity.

Implementation Timeline

• For entities registered in the CNPJ (National Registry of Legal Entities) on or after July 1, 2017, the disclosure of beneficial ownership information began on that date.
• Entities registered before July 1, 2017, were required to provide this information when making any cadastral changes after that date, with a final deadline of December 31, 2018.

Penalties for Non-Compliance

Failure to comply with the beneficial ownership disclosure requirements can result in severe consequences:

1. Suspension of CNPJ: The entity’s registration in the CNPJ may be suspended.
2. Financial Restrictions: Non-compliant entities may be unable to execute bank transactions, make financial investments, or obtain loans.
3. International Transactions: The suspension could prevent the remittance of dividends to other countries or the receipt of funds through loans or capital injections from parent companies abroad.

Relationship to Other Regulations

ADE COCAD No. 9/2017 is part of a broader regulatory framework aimed at increasing transparency and combating tax evasion:

• It complements Normative Instruction RFB No. 1,634 of May 9, 2016, which initially created the obligation to report beneficial ownership information.
• This regulation aligns with international efforts to enhance transparency in financial transactions and ownership structures.

Confidentiality

While the beneficial ownership information is not protected under fiscal secrecy, public employees are bound by their functional obligation not to disclose this information unless summoned by court order.It’s important to note that ADE COCAD No. 9/2017 represents a significant step in Brazil’s efforts to increase transparency in business ownership and align with global standards for combating tax evasion and money laundering.

Country by Country reporting

While ADE COCAD No. 9/2017 and Country-by-Country (CbC) reporting are both part of Brazil’s efforts to increase tax transparency, they address different aspects:

1. Country-by-Country Reporting:
   • Introduced by Normative Instruction RFB 1681/2016 (IN 1681)
   • Requires multinational enterprise (MNE) groups to file annual reports with detailed financial and operational information for each jurisdiction they operate in
   • Applies to Brazilian entities that are ultimate parent entities of MNE groups or Brazilian subsidiaries of foreign MNE groups under certain conditions
   • Implemented as part of the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13
2. ADE COCAD No. 9/2017:
   • Focuses on beneficial ownership disclosure
   • Requires both domestic and foreign entities with operations or assets in Brazil to report information about their beneficial owners
   • Applies to a broader range of entities, not just MNEs
   • Part of Brazil’s efforts to combat tax evasion and money laundering

While these regulations serve different purposes, they are complementary in enhancing tax transparency:

• CbC reporting provides a global picture of an MNE’s operations, helping tax authorities identify potential transfer pricing risks.
• Beneficial ownership disclosure helps identify the individuals who ultimately control or significantly influence an entity, which is crucial for preventing tax evasion and other financial crimes.

Both regulations contribute to Brazil’s overall strategy to align with international standards for tax transparency and information exchange. They work together to provide tax authorities with a more comprehensive view of corporate structures and operations, enabling more effective tax enforcement and risk assessment.