Incra Normative Instruction (IN) No. 88, published in the Official Federal Gazette on December 14, expressly revokes IN No. 76, of August 23, 2013, and although it is more precise in the use of certain concepts, does not in fact bring in many changes to its predecessor. It presents, however, some novelties, among which are:
1 - Concept of Brazilian legal entity equivalent to a foreign entity
IN expressly defines a Brazilian legal entity equivalent to a foreign entity as one that is organized under Brazilian law, with its headquarters in Brazil, and which has a majority interest held, in any manner, by foreign capital, and provided that the partner(s) is(are) individual(s) or legal entity(ies), respectively, residing in or having headquarters abroad.
In order for the Brazilian legal entity to be treated as a foreign legal entity, it is necessary for its foreign partner(s) to hold a majority of the capital stock, or that its(their) shareholding have the power to conduct the deliberations of the general meeting, to elect a majority of the directors and officers, to direct the corporate activities, and to guide the functioning of the corporate bodies.
2 - Chapter on null acts
The new IN includes a chapter that deals specifically with the nullity of rural property acquisitions or leases by foreigners performed without observing the provisions of Law No. 5,709/1971. Although such transactions are deemed to be void by law, Article 26 expressly states that such nullity will not be found if it affects a third party in good faith who has already fulfilled the conditions for adverse possession of the property.
The jurisdiction to decree (in administrative proceedings) or rule (in judicial proceedings) nullity of the recordings of acquisitions or leases of rural properties is that of the Office of Internal Affairs of the State Appellate Courts (CGJ/TJ) or the Courts of the Judicial District where the property is located. Incra will be charged with requesting that the Officer of Internal Affairs of the State Courts where the rural property is located declare invalid and cancel the respective recording or registration.
Also, under the new IN, purchases or leases of rural property by foreigners non-compliant with the provisions of Law No. 5,709/1971 can be regularized, by means of Incra’s review, through the opening of a proceeding, in which will be analyzed the plausibility and legality of bringing them into good standing.
3 - Inapplicability of restrictions to foreign individuals
IN accepts the provision set forth in article 12 of Law No. 5,709/1971, according to which the acquisitions and leases of rural areas below three modules of indefinite exploration involving foreign individuals are excluded from the restrictions established by said law.
4 - Responsibilities of the Real Estate Registry Officer
Under the wording of the previous IN, the Real Estate Registry Officer was only required to verify that the business documents involving the acquisition or lease of rural properties had the corresponding authorizations. With the new IN, when recording acts related to such legal business, the registrar must necessarily mention the corresponding authorizations of Incra, lest it result in violation of article 15 of Law 5,709/1971 and article 19 of Decree 74,965/1974, which deal with civil liability for damages caused to the contractual parties, without prejudice to criminal liability for malfeasance or fraudulent misrepresentation.
5 - Appeal against denial
In case of rejection, the applicant may file an administrative appeal addressed to Incra’s Regional Superintendent, which, if he does not reconsider the decision within a maximum of five days, will refer it to the Incra’s Regional Decision Committee (CDR), which will have a maximum period of 30 days for a decision. Once the appeal has been rejected, the applicant may, within a maximum of 15 days, resort to the General Coordination Office of Rural Property Registers, which must decide it within 30 days. The previous IN did not provide for any appeal against denial.
Therefore, the requirements to be met remain the same to obtain, at the end of the procedure, the authorization of Incra for the acquisition and lease of rural property by foreign individuals residing in Brazil, foreign legal entities authorized to operate in Brazil, and Brazilian legal entities treated as equivalent to foreign entities.