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Foreign Investments in Brazil

Especial Regime. Resolution 2.689/2000Foreign investor that meets the requirements of Resolution 2.689/2000 from National Monetary Council - CMN shall be subjected to different tax rate:Specific foreign exchange regime;Registry before the National Monetary Council - CVM;Appointment of a representative;Appointment of a Bank..

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Foreign Investments in Brazil

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    1. Foreign Investments in Brazil

    2. Especial Regime Resolution 2.689/2000 Foreign investor that meets the requirements of Resolution 2.689/2000 from National Monetary Council - CMN shall be subjected to different tax rate: Specific foreign exchange regime; Registry before the National Monetary Council - CVM; Appointment of a representative; Appointment of a Bank.

    3. Especial Regime (Resolution 2.689) 1. To incorporate one or more Legal Representatives in Brazil The formalization of this agreement before the Brazilian Securities Commission (CVM) is done by sending the form attached to the Resolution 2689, dully filled in and signed by the non-resident investor and the legal representative. When the legal representative is an individual or a non-financial legal entity, the investor must appoint an authorized institution to operate through the Central Bank of Brazil as the co-responsible party for the compliance with the representatives obligations. 2. Select a Custodian in Brazil The non-resident investor, directly or through the legal representative, shall sign an agreement with a local custodian in Brazil which must be an institution or entity authorized by the Central Bank of Brazil or by the Brazilian Securities Commission to provide those services.

    4. Especial Regime (Resolution 2.689) 3. Request Registration in the CVM After filling and signing the form, the representative shall request to CVM the “CVM Operational Code” (or “CVM Registration Number”) of the non-resident investor. Such request shall be sent electronically, throughout the CVM web page on the internet. CVM shall reply the request within 24 hours from the time it has received all the necessary information. 4. Choose an Authorized Brazilian Bank to Operate in the Foreign Currency Exchange Market The investors shall also sign an agreement with a Brazilian Bank authorized to operate in foreign currency exchange market. This bank shall register such investor in the Brazilian Central Bank (BCB). For each currency exchange operation made by the non-resident investor in Brazil will create an Electronic Declaratory Registration (RDE), which shall also be on the sending registration of those resources to foreign countries.

    5. Especial Regime (Resolution 2.689) 5. Observe all Rules and Regulations established by the Institution where the transaction shall be made or registered Non-resident investor shall observe all specific rules and regulations of institutions where the operation shall be made or registered. It is worth highlighting that the operations of non-resident investors may only be carried out or registered in institutions authorized by CVM and/or BCB, depending on each case.

    6. Especial Regime (Resolution 2.689) Simplified registration of the non-resident investor. CVM Rule 419/2005 Non-resident investor must be a client of a foreign intermediary institution, in which the investor is duly registered under the applicable legislation of such country. such intermediary institution would take before the brokerage firm the obligation to present, whenever requested, all information required by the CVM Rules that deal with investor registration within the ambit of the securities market, duly authorized, as well as other information required by Brazilian authorities with inspection powers; the regulating capital market of the country of the foreign intermediary institution shall signed with CVM a mutual cooperation agreement that would allow the exchange of information from financial investors; The country in which the foreign intermediary institution is located should not be considered high risk as regards money laundering and terrorism financing, and should not be classified as non-cooperative by international organs, in relation to the fight against illicit actions of that nature.

    7. Especial Regime (Resolution 2.689) Income Tax Rate: 10% in stock funds, swaps, registered or not in stock market, and in future markets operations outside the stock market. 15% in all other cases, including financial transaction in fixed income, made in over-the-counter market or stock market.

    8. Especial Regime (Resolution 2.689) Exemption Capital gain for operations done in the stock market, commodities and futures exchange (except for joint operation) and operations with gold and liquid asset out of the market. Earned Income from Federal Government bonds (Law nº11.312): Funds with more than 98% in portfolio of Federal treasure public bonds; Exemption valid only for securities purchased after February 2006. Earned income from funds FIP, FII e FIEE (Law nº 11.312)

    9. Especial Regime (Resolution 2.689) Tax Haven Resolution 2.689/2000 shall not be applied for investors resident in tax heaven countries. (Normative Ruling nº 188). Treated as national investor.

    10. General Rule Non-resident investor subjected to the same tax rate as the resident investor, according to article 78 of Law 8.981/95: “Art. 78. Non-resident are subject to the same Income tax rules for resident in Brazil, according to: I – earnings from fixed income; II – net profits from transactions done in the stock, commodities, futures or similar exchanges; III – earnings from fixed and variable funds and investment club.”

    11. General Rules Income Tax Rate Fixed income capital gains: 22.5% for operations up to 180 days; 20% for operations from 181 days to 360 days; 17.5% for operations from 361 days to 720 days; and, 15% for operations above 720 days. Variable Income: 15%

    12. Foreign Direct Investment Rules to registry the foreign capital The registry of foreign investment shall be made within 30 days from the date of the event that originated such registration. Once the parties are registered in the SISBACEN, the request of registry of foreign capital shall be made by the company receiving the foreign direct investment and the non-resident investor through its representative in Brazil. The value of the foreign investment shall correspond to the amount declared in the accounting records of the legal entity.

    13. Foreign Direct Investment “Certificates” RDE-IED - Foreign Investors rights: Flowback Remittance of Dividend / Juros sobre o capital próprio Reinvestment Information included in the certificates: Foreign capital entered in Brazil (currency, assets or rights) Remittance to another country (repatriation of capital or profit) Reinvestment of earnings Change of capital percentage registered

    14. Tax Information Exchange Agreement

    15. Agreement between Brazil x EUA

    16. Agreement between Brazil x EUA

    17. Agreement between Brazil x EUA

    18. Agreement between Brazil x EUA

    19. Agreement between Brazil x EUA

    20. Agreement between Brazil x EUA

    21. Fiscal and legal Regulation Regarding Marital and Family Sucession

    22. FAMILY COMPANY SUCCESSION AND PROTECTION

    23. CORPORATE PLANNING

    24. FAMILY COMPANY CORPORATE ALTERNATIVES

    25. SUCESSION PLANNING ALTERNATIVES

    26. HOLDING TAX ASPECTS

    27. TRUST / FUNDAÇÃO ‘TRUST’: IS NOT REGULATED IN THE BRAZILIAN LEGISLATION; TRANSFERENCE TO THE TRUSTEE THE CUSTODY AND ADMINISTRATION OF PROPERTY OR RIGHTS IN FAVOR OF SETTLER AND/OR BENEFICIARIES (LETTER OF WISHES) ‘FOUNDATION’: HOLDS THE ASSETS; ACCEPTED BY THE BRAZILIAN LEGISLATION; DEFINITIVE TRANSFERENCE OF ASSETS OR RIGHTS BY THE FOUNDER TO THE FOUNDATION FOLLOWED BY A CONFIDENTIAL LETTER OF WISHES; THE FOUNDATION IS MANAGEMENT BY THE BOARD OF DIRECTORS

    28. Choaib, Paiva e Justo Advogados Associados Rua Padre João Manuel, 755 – 8º andar Cerqueira César – São Paulo – SP CEP 01411-001 Tel.: +55 11 3065-0006 Fax.: +55 11 3065-0001 www.choaibpaiva.com.br

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