Thinking of investing in Brazil? Then get used to two abbreviations that you will hear right from the start. Investors in Brazil must have federal tax identification numbers – CPF and CNPJ. The difference between the CPF number and the CNPJ number is easy to remember. The CPF is for individuals. The CNPJ is for companies.
However, this basic distinction is often misunderstood when non-resident individuals and companies seek to do business in Brazil. Here is a brief overview of the CPF and CNPJ numbers.
Understanding the CPF for Individuals
The CPF identifies individual taxpayers when dealing with the Brazilian Federal Revenue Bureau (the IRS equivalent in Brazil). CPF stands for Cadastro de Pessoas Físicas or Natural Persons Register. It is the virtual equivalent of the social security number in the United States.
Having a CPF is mandatory for all Brazilian citizens who seek to apply for a job, open a bank account, apply for a loan, obtain a driver’s license, or purchase or sell real estate. It is also mandatory for Brazilian citizens who live abroad if they own property or other assets in Brazil.
The CPF is not used only by Brazilian citizens. Because it is a taxpayer identification number, it is required for foreign investors who intend to open a business or enter into financial transactions, such as purchasing real estate. However, merely having a CPF does not make the foreign investor a resident of Brazil and does not create local tax liability beyond the tax on taxable income earned in Brazil.
Understanding the CNPJ for Businesses
The CPNJ identifies companies when dealing with the Brazilian Federal Revenue Bureau or Receita Federal. CNPJ stands for Cadastro Nacional da Pessoa Jurídica or the National Registry of Legal Entities. It is the virtual equivalent of an employer identification number in the United States.
All Brazilian companies must have a CPNJ number. All foreign companies owning certain assets in Brazil also must have a CNPJ number. Those assets include real estate, vehicles, vessels, aircraft, bank accounts, investments in Brazilian financial markets, and investments in Brazilian capital markets.
An important provision of Brazilian tax law is that foreign companies must have a CNPJ if they own shares in Brazilian companies. This includes quotas issued by Brazilian limited liability companies or limitadas.
When Both CPF and CNPJ Numbers Are Needed
Most of the confusion surrounding CPF and CNPJ numbers stems from questions about company formation. This is a situation when both a CPF and CNPJ may be needed. The shareholders each must have taxpayer identification numbers (CPF if a shareholder is an individual and CNPJ if a shareholder is a company). And the company that is being formed must obtain a CNPJ during the formation process.
Remember to consult your tax, legal or other business adviser when dealing with tax and other financial matters. Your lawyer can also help you obtain your CPF or CNPJ.