Brazil Market Entry Guide
Table of contents
Ten practical issues
Market entry options
Initial considerations - whether to set-up permanently?
Option 1: appointing an agent or distributor
Option 2: Setting up a Brazilian subsidiary
Option 3: Registering a Brazilian branch
Option 4: Acquiring a Brazilian business
Option 5: Entering into a joint venture
Table: comparative summary of market entry options
Restrictions on foreign investment
Administrators of Brazilian private limited companies
Registration with the Regional Council of Engineering and Architecture (CREA)
Cultural aspects of doing business in Brazil
Brazil has grown in economic and political importance over the last 10
years, and has become an essential part of any multinational’s growth plans
as well as an increasingly lucrative market for many smaller companies.
Three key factors responsible for the success and potential of the Brazilian
market are its abundance of natural resources, the size of its internal
market, and the economic and political stability that Brazil now enjoys.
1. Natural resources. Brazil is a country of continental proportions,
spanning tropical and temperate zones, with more available arable land
than any other country. It has become the world’s leading exporter of many
farm products, including beef, poultry, soy, coffee and sugar. Brazil also has
some of the world’s largest reserves of minerals, considerable oil reserves
and hydrological and weather conditions that allow the significant
generation of electricity from renewable sources.
2. Internal market. Brazil has the fifth largest population in the world and
has become the world’s seventh biggest economy, with a larger GDP per
head than India or China. Economic and social reforms have reduced
poverty and expanded the middle class to roughly half the population,
increasing the number of consumers and first time buyers of cars, homes,
domestic appliances and technology, and growing demand for better
healthcare, education and other services.
3. Economic and political stability. Brazil has been a committed multiparty
democracy since the end of the last military dictatorship in 1985.
Inflation has been tamed and successive governments have maintained
consistent macroeconomic policies whilst reducing poverty and tackling
inequality. These fundamentals allowed Brazil to maintain solid growth
throughout the global financial crisis and made it the world’s third most
attractive destination for foreign direct investment in 2013, behind only
the US and China.
This guide aims to demystify the process of doing business in Brazil,
by providing a simple overview into those areas we are most
commonly asked about by foreign companies either considering
entering the Brazilian market for the first time or wishing to expand
their Brazilian operations. This guide is not, however, intended as a
substitute for legal advice and should not be relied upon as such.
Office Managing Partner
CMS Cameron McKenna
Consultores em Direito Estrangeiro
1 September 2014, Rio de Janeiro
While the rest of this guide looks at certain issues in more depth, this short list sets out briefly a number of
the key issues that investors should be aware of before deciding to do business in Brazil.
1. The ‘custo Brasil’
This Portuguese term literally means the ‘Brazil cost’, and is
used to refer generically to the extra costs that come with
doing business in Brazil: such as those stemming from
bureaucracy, under-developed infrastructure, high labour costs
or inefficiency. The very fact that such a phrase exists is
something to bear in mind in seeking to establish a presence
in the country: with an awareness of key issues (and perhaps
more patience than would usually be required), it is possible
to minimise the effect of the custo Brasil on your company.
2. Residency requirement for directors
For limitadas, the most common form of Brazilian subsidiary,
all directors (‘administrators’) must be resident in Brazil.
Companies must therefore obtain a residency visa for any
non-resident they wish to be a director (see page 20) before
establishing a subsidiary, or appoint a local administrator, either
in the interim or on an on-going basis. CMS lawyers have acted
as administrators for a number of foreign companies
establishing subsidiaries here.
3. Bureaucracy and corruption
Red tape affects many aspects of doing business in Brazil
including setting up a company (see item 10 below), buying
and selling real estate, entering into contracts, competing in
public tenders and enforcing contracts. Unfortunately, where
there is excessive bureaucracy, corruption is often not far
behind. The key here is to understand that things will take
longer to get done in Brazil and to set realistic deadlines, as
well as making sure that suitable compliance procedures are
implemented right from day one.
4. Currency and exchange controls
The Brazilian Real is a volatile currency, and cannot be
transferred outside Brazil, while it is not possible to hold
foreign currency accounts within Brazil. Funds being sent into
or out of the country – including foreign investment, and the
paying of dividends to foreign investors – need to be registered
with the Brazilian Central Bank. This can be done electronically,
though any failure to register correctly can lead to delays.
5. Enforcement of contracts
Resolving disputes through the Brazilian court system can be
extremely time-consuming: the system and procedures are
complex and subject to delays, a problem compounded by the
possibility of lengthy appeals. One way of avoiding this is to
submit disputes to arbitration. Although the courts will
generally recognise arbitral proceedings and awards, arbitration
clauses must be very carefully drafted to ensure their
6. Governing law
Unlike in many countries, in Brazil the parties may only choose
the governing law of the contract if the contract expressly
submits disputes to arbitration.
Brazil has an extremely complex system of inter-related tax
regimes: as well as federal taxes, some taxes differ by state and
even by city (see pages 15-16 for more details). The taxes
applicable to foreign investors are also subject to frequent
change, and while Brazil has double taxation treaties with a
number of countries, there are a number of major economies
with which it does not, including Germany, the US and (other
than for air and sea transport) the UK. Indeed, tax structuring
can be crucial to the viability and competitiveness of Brazilian
8. Appointing a local agent
The appointment of a local agent in Brazil is regulated by
specific legislation, which imposes certain mandatory terms
which can result in penalties on termination. Due to the scale
of Brazil, appointing one agent with exclusivity for the whole
country might not always be the best option. For more details,
see page 7.
9. Employment liabilities
Brazil has a relatively litigious culture, which coupled with
strong unions, stringent employment laws and a judiciary
inclined to protect employees in disputes, means that
companies should take care in dealing with their employment
relationships. It should also be noted that Brazilian employment
law can sometimes apply in situations where you might not
expect it to and, as such, this should also be considered where
expatriate employees, on non-Brazilian employment or
consultancy arrangements, work in Brazil.
10. Time taken to set up a company
The World Bank ranks Brazil as 123rd out of 183 countries for
the ease of starting a business, and puts the total number of
calendar days required to complete the processes required to
establish a company at 108 (for 2013). To put this in context,
these processes take a fortnight or less in over 80 other
countries. This extended timescale must be borne in mind,
and preparations to establish a company started as early as
TEN PRACTICAL ISSUES
Initial consideration: whether or not to
establish a permanent presence
Once the decision is made to enter the Brazilian market, a
further decision needs to be taken on how best to approach
this. We consider below a number of options: appointing an
agent or distributor, setting up or acquiring a Brazilian
subsidiary, setting up a branch in Brazil, or entering into
a joint venture with a Brazilian partner.
The best choice will depend on factors such as the level of
commitment to the new market, the size of any investment,
time available, the business sector and local regulatory
requirements, legal and tax treatment, familiarity with Brazil
and investor risk profile.
An agency agreement with a local Brazilian representative may
be appropriate, for example, as a first step in testing the
market before making a more significant commitment.
Selecting an agent with good local knowledge and contacts
within the target market and sector can get things off to a
Brazil is a country that places great emphasis on personal
relationships and, accordingly, having people on the ground
can be important to a business’s success. For this reason alone,
many foreign investors prefer a more permanent form of
market entry, such as incorporating a subsidiary or entering
into a joint venture with an established local player.
Other reasons which may justify setting up permanently in
Brazil depend on the business sector. For investors wishing to
sell goods or services in the oil and gas sector, strict local
content regulations apply. Local content requirements are
also a factor in sectors that depend upon financing from the
Brazilian Development Bank (BNDES).
For businesses seeking to win public sector work, Brazilian
procurement rules often require foreign bidders to set up a
local subsidiary or enter a consortium with a local partner.
Procurement legislation also gives Brazilian bidders a margin
of preference over foreign bidders, which allows government
agencies to pay up to 25% more for Brazilian goods and
services. Establishing a permanent presence in Brazil should
enable foreign companies to compete fairly with local
A key point is that for each of the protectionist measures
described above, the shareholding of the Brazilian company is
irrelevant: meaning that foreign companies can take advantage
of the protections themselves by incorporating or acquiring a
stake in a Brazilian subsidiary or joint venture company.
MARKET ENTRY OPTIONS
6 | Brazil Market Entry Guide
Entering into an agency or a distribution agreement with a
Brazilian individual or corporate entity can be a useful first step
to test the local market before making a greater commitment if
the right opportunity arises. An agent would charge a
commission on sales of products or services and a distributor
would sell on products purchased from the principal. Care has
to be taken, as agency agreements are heavily regulated in
favour of the agent.
In both cases, there is no need to set up a Brazilian corporate
entity and local responsibilities can be undertaken by the local
party, so this option is quick and inexpensive to start. The local
agent should have existing business contacts in the market and
can therefore facilitate the introduction of new business
As the agent will have significant responsibilities, trust is
paramount. However, not all agents are reliable or perform as
expected. Good knowledge of the local agent or distributor is
important and due diligence should be carried out before
entering into any agreement. A number of recent corruption
allegations have involved the payment of bribes by Brazilian
There are specific laws relating to the agency agreement,
which should be considered. These laws tend to protect the
agent rather than the principal and impose certain mandatory
terms in agency agreements. Brazilian law will apply and
commissions are usually payable even where sales are not
introduced by the agent. These agreements can also be
difficult to terminate and, on termination, require a substantial
payment to the agent. Advice is essential on Brazilian
Under an agency agreement, the end customer should be
responsible for all import taxes on products purchased and
imported into Brazil and the principal will pay all taxes in its
country of incorporation. The agent will be responsible for
taxes levied on its commission.
If the principal provides services from outside Brazil, payments
from Brazilian clients to the foreign principal will be subject to
withholding income tax at rates between 15-35% depending
on the jurisdiction of the foreign principal.
For distribution agreements, the Brazilian distributor should be
responsible for all import taxes on products purchased and
imported into Brazil from the principal and the principal will
pay all taxes in its country of incorporation.
Option 1: Appointing an agent or distributor
The two most commonly used corporate vehicles in Brazil are
the private limited liability company (in Portuguese, “limitada”)
and the corporation (“sociedade anônima” or “SA”). Both are
limited liability companies meaning that, subject to certain
exceptions, the shareholders are only liable for the amount
of capital they have subscribed in the company.
Greater administration requirements apply when setting up a
subsidiary as compared with trading through an agent or
distributor. The subsidiary and shareholders need to register
with the federal tax authorities and Central Bank and the
subsidiary will need to obtain state and municipal registrations
and licences as well as registering with any applicable regulator.
A subsidiary’s activities are limited by its constitution and the
municipal licence. Furthermore, a limitada’s official name must
reflect its main activity.
Limitadas are by far the most commonly used vehicles for
subsidiaries (and corporate joint ventures) because they are
simpler and cheaper to operate. A limitada requires at least one
administrator (similar to a director), who must be a Brazilian
resident individual and at least two quota-holders, which may
be Brazilian or foreign resident individuals or corporate entities.
Capital is divided into quotas (similar to shares in other
jurisdictions) with a nominal value. There is generally no
minimum quota capital and no requirement to pay up within a
particular period. Where a wholly-owned subsidiary is required,
it is usual to allocate a nominal quota-holding to an affiliated
company, or to a related individual. Foreign quota-holders must
appoint an individual in Brazil to act as their legal representative
to (as a minimum) accept service of any legal or administrative
Corporations tend to be used for larger businesses and are
similar to limitadas, except that they:
–– have an executive board (“diretoria”) and a board
of directors (“conselho de administração”), instead
of an administrator, with the conselho de
administração being optional for private
corporations. The diretoria comprises at least two
Brazilian resident individuals and the conselho de
administração comprises three shareholders,1 who
are not required to be resident in Brazil;
–– have ‘shares’ instead of ‘quotas’; and
–– may offer securities to the public and
create different classes of capital.
In both corporate vehicles, the rights of the parties regarding
decision-making, distribution of profits, financing and other
important matters can be regulated by way of a shareholders’
(or quota-holders’) agreement and the company’s constitution.
International concepts such as tag-along and drag-along rights,
restrictive covenants and put and call options are all recognised.
Funds being invested into Brazil to finance a subsidiary need to
be registered with the Brazilian Central Bank as foreign direct
investment; when doing this it is necessary to state whether the
funds are going in as equity or debt. Under Brazilian law, there
is no time limit within which funds must be repatriated.
Corporate taxes will generally be charged on profits (or
presumed profits) in accordance with the following rates:
–– income tax: 15%-25%
–– social contribution on net profit: 9%
–– PIS contribution: 1.65%
–– COFINS contribution: 7.6%
Taxes are also charged on the provision of services (ISS:
0.6%-5%) and sale of goods (ICMS: 7%-25%). After Brazilian
taxes are paid, profits can be repatriated by way of dividends,
which are not taxed in Brazil under Brazilian law. Interest
payable on foreign loans is subject to thin capitalization rules
and withholding tax, the rate of which depends on the
jurisdiction to which interest is being paid.
1Either individual shareholders or individuals representing corporate shareholders.
Option 2: Setting up a subsidiary
8 | Brazil Market Entry Guide
Branch offices of foreign entities are given special treatment
under Brazilian law. They are not to be confused with
subsidiaries or similar entities with 100% foreign ownership,
which are regarded as Brazilian entities.
Branch offices of foreign entities are governed by the law of
its head office, save for employment and certain tax liabilities.
Branch offices of foreign entities need a Presidential decree
to operate. Given the difficulties involved in obtaining a
presidential decree to commence operations in Brazil,
branch offices of foreign entities are extremely rare.
Specialist tax advice would be required, given that this option
is rarely used.
Option 3: Setting up a branch office
Acquiring an existing local corporate entity (either a limitada or
a corporation) is usually preferred by foreign corporate entities
that do not have a widely known brand name in the country,
but would like to develop business on an existing, functional
Despite the usual due diligence exercise, there could be
unforeseen post-acquisition employment, contractual and
taxation liabilities. Brazil is a litigious society so such liabilities
are quite common. Particular attention should be taken with
respect to employment claims, as an employee has the right to
claim damages for a backdated period of five years from the
date of the claim.
In order to register the change in ownership in a limitada with
the commercial registry, the buyer will need the seller to
provide certificates of good standing from various government
bodies.2 These certificates have the added advantage of
reducing (but not eliminating) the risk of acquiring unknown
liabilities. Other certificates3 are also commonly requested from
Many Brazilian companies are family-owned and run, which
can make post-acquisition integration challenging where
purchasers attempt to implement group management
There is no stamp duty or similar on the sale/purchase of
shares. The seller is liable for tax on any capital gains. After the
acquisition is complete, the rules set out for Option 2 apply to
the acquired subsidiary. As in other jurisdictions, an acquisition
means inheriting the tax history of the company, so this needs
thorough investigation in advance. It is common practice in
Brazil to obtain certificates of good standing, demonstrating
that the company has fulfilled its tax and social security
2A certificate confirming there are no federal taxes due (Certidão Conjunta Negativa de Débitos Federal), a certificate confirming that social security
contributions are in order (Certidão Relativas ao INSS) and a certificate confirming that the employee indemnity fund is in order (Certidões Relativas ao
3It is normal to ask for certificates confirming that there are no tax debts dues to state or municipal authorities (Certidão Conjunta Negativa de Débitos
Estadual and Certidão Conjunta Negativa de Débitos de Municipal respectively) and a certificate confirming that there are no employee debts due (CNDT
– Débitos Trabalhistas).
Option 4: Acquisition
10 | Brazil Market Entry Guide
Using a joint venture is a good way to share the risk and cost
of entering into a new market as well as capitalizing on local
expertise. A joint venture may be incorporated (when a
corporate entity is formed to undertake the business) or
contractual. A contractual joint venture can use a traditional
joint venture contract or a consortium agreement and the
foreign investor may enter into such arrangement either
through a foreign or Brazilian incorporated company. Legal,
financial and tax advice will be required to select the optimum
structure for each project.
Incorporated joint ventures
The most widely used joint venture structure involves setting
up a Brazilian limitada (although a corporation can also be
used) with the profits, ownership and control being split
among the joint venture parties in accordance with their
respective quota-holdings and a quota-holders’ agreement.
Contractual joint ventures – consortium
The parties may alternatively choose to set up a consortium
which is a regulated contractual joint venture. Consortiums are
often used for the purpose of participating in Brazilian public
tenders and in some cases will be required by the tender rules.
The joint venture business in a consortium does not have a
separate identity from the consortium members. Liabilities for a
contractual joint venture are not ring fenced within a separate
joint venture company, although the parties could form special
purpose vehicles to participate in the consortium.
Key characteristics of consortium:
–– Regulated by Law No. 6.404/76.
–– Tender rules usually require a Brazilian company
to be the consortium leader.
–– No independent legal identity although it must
obtain a CNPJ tax registration number.
–– Insolvency of one member does not extend to
the others or the consortium.
–– Consortium agreement regulates the sharing of
expenses and revenues and is registered in the
commercial registry nearest to the consortium
–– No joint liability by law, but may be agreed in
the consortium agreement. Public procurement
rules may stipulate how liability is to be
Other contractual joint ventures
Parties who wish to enter into a contractual joint venture do
not need to do so by way of a consortium, unless there is a
specific requirement (such as under tender rules). Other types
of contractual arrangements, such as alliances and asset
sharing, can be used and are increasingly common.
Incorporated joint venture
The rules are the same as those applicable to subsidiaries.
Contractual joint ventures-consortium
The taxation treatment of consortium is complicated; each
member of the consortium is considered separately and taxed
on its profits resulting from its share in the revenues and
expenses as determined by the consortium agreement.
Other contractual joint ventures
Each member is taxed separately on its sales and/or profits in
accordance with usual tax rules.
Option 5: Joint venture
Agent Local subsidiary Contractual joint
Fast. Should benefit from local
partner’s market know-how and
Relatively slow. Takes 1 to 2
months to form company. Can
take longer to secure licences,
registrations, bank account etc.
Developing business from zero
will also take time.
Relatively fast as should benefit
from local partner’s existing
structure, market know-how
Slower than for contractual joint
venture as need to form company
or amend articles, secure licences,
open bank account etc. but
should benefit from local partner
market know-how and contacts.
Fast, but integration can take
SPEED OF MARKET ENTRY
LEVEL OF INVESTMENT / COMMITMENT REQUIRED
Low. Rely on agent’s existing
No minimum capital investment
but the set-up process is
Varies depending on the terms
agreed with JV partners.
Same as for local subsidiary. Will
also depend on JV terms agreed.
Potentially high. Need to pay
purchase price and could take on
existing liabilities (see below).
Not relevant. Can generate its own cash-flow.
Broad range of options for
additional finance: equity capital,
loans from shareholders, third
party investors, bank loans,
share offers (SAs only).
Cannot generate own cash-flow.
Each party needs to contribute to
meet operating costs and further
Same as for local subsidiary. Same as for local subsidiary.
Receive contractual revenues
subject to agent’s commissions.
Post-tax profits can be distributed
by dividend to shareholders (local
and foreign) tax free.
Regulated by contractual terms
and received separately by
Same as for local subsidiary. Same as for local subsidiary.
Little control over sales and
Total control over business. Regulated by joint venture
agreement, although assets
Regulated by joint venture
agreement and company
Total control over business.
COMPARATIVE SUMMARY OF MARKET ENTRY OPTIONS
Low, but important to monitor
Need at least one resident director
and external accountants.
Monthly tax compliance,
accounting and employment
Low, although responsibilities will
be allocated under joint venture
Same as for local subsidiary. Same as for local subsidiary.
DAY TO DAY ADMINISTRATION
LIABILITY AND RISK
Care needed to ensure agent does
not acquire employment rights.
Payment required for early
Liability limited to share/quota
capital. Certain employee and
tax liabilities can be passed on
to share/quota holders.
Liability or insolvency of one party
does not necessarily affect the
Same as for local subsidiary. Same as for local subsidiary.
Additionally, acquired company
will have all pre-acquisition
Protective rules in favour of local
agent. Brazilian law applies and
Brazilian courts will claim
General company law applies Special rules apply to consortiums.
Apart from this, parties relatively
free to agree terms.
Subject to local law, parties
relatively free to agree terms,
including the governing law of the
JV agreement and to submit
disputes to arbitration.
Subject to local law, parties
relatively free to agree terms of
acquisition agreement, including
the governing law and to submit
disputes to arbitration.
Foreign taxes payable. Brazilian
taxes are generally the
responsibility of the agent or
Brazilian taxes apply: complex and
often high total tax.
Parties taxed separately, with
Brazilian parties subject to
Brazilian tax. Withholding tax
applicable on supply of services
to Brazil from overseas.
Same as for local subsidiary. Same as for local subsidiary.
Payments usually due for early
termination of agency agreement.
No independent business so
Independent business created
so normal exit routes potentially
available: i.e. company sale, IPO
Termination subject to JV
agreement. Difficult to sell stake
as venture has no independent
Termination and sale or buy out
subject to JV agreement. Right of
first refusal, drag-along, tag-along
of partners are common.
Same as for local subsidiary.
1. Restrictions on foreign investment
Unlike in a number of other growth economies, there are no
general restrictions on foreign investors, requiring Brazilian
companies to be controlled by Brazilian nationals or making
partnerships with Brazilian companies mandatory. Instead,
there are specific rules that apply in certain cases and to
industries of strategic importance, including nuclear energy,
media and aviation, as well as to the ownership of rural or
border land and real estate.
As mentioned above, public procurement rules often require
the formation of a consortium with a local partner or the
establishment of a Brazilian subsidiary.
Brazil also has exchange controls which means that funds
entering or leaving Brazil need to be registered with the
Brazilian Central Bank and an exchange contract signed before
the funds are liberated. Whilst a little bureaucratic, this is not
usually a problem in practice.
2. Legal system, governing law and
Brazil is a civil law country with a comprehensive written
constitution and a system of codified laws which are passed
by federal, state and municipal authorities.
Laws change frequently, particularly in areas like taxation and
employment, which, when combined with a lack of binding
precedent, can make it difficult to get concrete answers to
The Brazilian court system also tends to be slow,4 which is one
of the reasons that international contracts involving Brazilian
companies are frequently subject to arbitration. The selection
by Brazilian counterparties of arbitration as the method of
dispute resolution is becoming increasingly common and is
supported by the Brazilian Arbitration Act 1996 and by Brazil’s
ratification of the New York Convention on the Recognition
and Enforcement of Foreign Arbitral Awards. Arbitration
allows the parties to select a foreign governing law, often
English or New York, which avoids some of the uncertainty
inherent in Brazilian contract law.
This method of dispute resolution also has a number of other
important advantages. In particular, it enables the parties to
appoint an arbitrator who understands the commercial context
of an agreement: which may not be the case with a court
appointed judge, as there is relatively little sector specialisation
within the Brazilian judicial system. It also makes it possible to
select where hearings are to take place, which does not need
to be in Brazil.
There are, of course, various strategic considerations that need
to be taken into account in drafting arbitration clauses so that
they provide the most advantageous dispute resolution
mechanism for the circumstances, but the widespread use of
these clauses in Brazil gives parties more flexibility.
4Brazil achieved a ranking of 121 out of 183 countries in the 2013 survey carried out by the World Bank on the ease of enforcement of contracts.
14 | Brazil Market Entry Guide
The tax system is complicated and consists of federal, state
and municipal taxes, 3 different corporate tax regimes, and
different sales tax rates and rules within each of Brazil’s 27
states. The two most important corporate tax regimes are the
estimated profit regime (in Portuguese, lucro presumido) and
the actual profit regime (lucro real).
Companies whose gross annual income in the preceding fiscal
year did not exceed R$78,000,000 may elect to be taxed either
on the basis of actual profit or estimated profit. Estimated
profit is calculated as a percentage of gross turnover. This
election can be made each year and the company may, if it
meets the eligibility criteria, elect a different tax treatment in
As a general rule of thumb, if a Brazilian company’s real profit
is equal to or higher than 32% for most services (or higher than
8% for manufacturing and sales activities and some specific
services) then the estimated profit system will be the best
option. The basis for calculation of the tax payable under the
estimated profit system can vary substantially, however, and
this must be considered in determining the optimal tax
Where tax is based on actual profit, taxable income is equal to
gross turnover less costs of sale, administrative and operational
expenses and other deductibles permitted by law (which are
substantially restricted in the cases of PIS and COFINS
contributions). Net operating losses can be offset against
taxable income, subject to certain limitations.
Corporate income taxes
Corporate income tax (“IRPJ”)
Social contribution on net income
Contribution for the social
integration programme (“PIS”)
Contribution for social security
—— Using actual profit, the IRPJ is levied at 15% on adjusted net income plus a surtax of
10% on annual taxable net income in excess of R$240,000.
—— Using estimated profit, the rates are the same but are levied on estimated profit,
which is calculated as a percentage of gross turnover ranging from 1.6% to 32%,
with the latter being the norm.
—— Taxed in a similar manner to IRPJ at a rate of 9%.
—— PIS is generally levied at 1.65% and applies to the importation of goods and to the
payment of services provided by non-residents. Export revenues are exempt.
—— The taxpayer may obtain a tax credit for PIS to be offset against sales of products.
—— COFINS is levied on most gross revenues, generally at 7.6%. It also applies to the
importation of goods and to the payment of services provided by non-residents.
Export revenues are exempt.
—— The taxpayer may obtain a tax credit for COFINS to be offset against sales of
Other federal taxes
Contribution for the intervention
in the economic domain (“CIDE”)
Financial transactions tax (“IOF”)
Import tax (“II”)
Excise tax (“IPI”)
PIS (see above) on imports
COFINS (see above) on imports
Withholding income tax
—— CIDE is levied at 10%, assessed on the value of payments made to a foreign
recipient, and is applicable to Brazilian companies paying royalties, fees or other
amounts to a foreign entity pursuant to a service agreement or other agreement for
the licensing or assignment of technology, trade names, patents and related rights.
—— It is also levied (at a fixed amount per cubic metre) on the import and sale of oil and
gas (and derived products), as well as ethanol. The taxpayer may obtain a tax credit
to be offset against sales of the same product.
—— Applicable to a variety of monetary, currency, credit, insurance, securities and
gold-backed transactions, including foreign currency exchange transactions made in
connection with offshore payments of loans, services and royalties.
—— The rate varies from 0% to 25%, with foreign currency exchange transactions (for
payment in a currency other than Brazilian Real) generally being taxed at 0.38%.
—— Made on an ad valorem basis at a rate depending on the imported product’s tax
—— Rates vary from 8% to 15% and are payable by manufacturers upon the sale of
goods to another manufacturer, wholesaler or retailer at a rate depending on the
product’s tax code.
—— The taxpayer may obtain a tax credit to be set off against sales of products.
—— Generally levied at a flat rate of 1.65% and under the actual profit regime, the
taxpayer may obtain a tax credit to be set off against sales of products.
—— Charged on the import of goods and payment of services provided by non-residents,
generally at a rate of 7.6%.
—— Under the actual profit regime, the taxpayer may obtain a tax credit to be set off
against sales of products.
—— Charged on interest on loans (generally at 15%), lease payments (generally at 15%),
royalties (generally at 15%), payments for technical and administrative services
(generally at 15%) and other service payments (generally at 25%) made to offshore
non-residents and subject to reductions established by tax treaties between
Brazil and the jurisdiction of the recipient.
16 | Brazil Market Entry Guide
State valued added tax (“ICMS”)
ICMS is collected by each of the Brazilian states on the sale,
supply or transportation of goods and certain services, as well
as on imports. Rates vary between 12% and 25% depending on
the state and the relevant taxable activity (sale, supply or
transportation). The taxpayer may obtain a tax credit to be
offset against sales of products.
Municipal service tax (“ISS”)
ISS is charged on certain services, including engineering,
construction and well drilling. The full list of applicable services
is attached as an exhibit to Law No. 116/2003 and the
applicable rates, not exceeding 5% for each service, are
determined by each municipality. Companies engaged in various
activities, including oil drilling, are taxed in the municipality
where the activity occurs.
4. Administrators of Brazilian private limited
Appointment and Dismissal
The most usual way to appoint an administrator (the officer
of a limitada, akin to a director) is by the articles of association
(in Portuguese, contrato social) which, together with any
amendments, must be registered with the Company Registry
(Junta Comercial) in the state of incorporation. Quota-holder
approval is required to do this, with the level of approval
depending on whether or not the administrator is also a
quota-holder.5 Dismissal of an administrator is a similar process
requiring an amendment to the articles of association and
A limitada shall have at least one administrator; there is no
maximum number. Administrators must be individuals who
reside permanently in Brazil: neither foreigners with temporary
visas nor corporate entities are permitted. These individuals
must be at least 18 years old, and not prevented from
exercising their duties if convicted of certain criminal offences.
Administrators are personally liable for any of their actions
carried out on behalf of the company which: are contrary to
the decisions of the quota-holders;7 are contrary to, or exceed,
the corporate purposes of the company; exceed their powers
as administrator; are illegal; or constitute fraud. The company
may indemnify the administrator against liability to the
company or third parties, except where such liability arises
through a breach of Brazilian law.
The administrators’ powers are set out in the articles of
association which may establish routine actions that can be
performed by one administrator individually, and provide that
certain strategic actions are subject to joint representation
(co-signature) with another administrator or require prior
approval by the majority of the quota-holders.
5. Shareholder liability
The liability of the quota-holders of a limitada is limited to the
amount invested in the company (or the amount invested plus
the unpaid portion of the corporate capital); except for
situations involving the following, when the corporate veil may
–– infringement of the law (which may include nonpayment
of taxes)8 or the company’s articles
of association/by-laws; or
–– bankruptcy due to poor management
(applicable only to cases involving consumer
and labour rights).9
The liability of the shareholders of a SA (a Brazilian corporation:
see page 8) is limited in the same way as for quota-holders of a
limitada, although the corporate veil will only be pierced (in the
situations referred to above) if it is also proved that the
shareholder in question actually agreed to or determined the
actions of the managers in question. The Brazilian corporation
therefore offers greater protection to shareholders from being
held personally liable than a limitada. This advantage may be
reduced, however, if the articles require certain actions to be
subject to shareholder approval and that approval is given.
5The appointment of a director who is also a quotaholder is subject to approval by a simple majority of quotaholders. The appointment of a director who is
not a quotaholder is subject to unanimous approval (if the quota capital has not been fully paid by the quotaholders), or to approval by 2/3 of the quota
capital (if the quota capital has been fully paid by quotaholders).
6For the dismissal of the quotaholding Administrator, the required quorum is 2/3 of the total quota capital if the articles of association is silent, or such
other quorum established by the articles of association, subject to a minimum quorum of 50% of the quota capital plus 1 quota. Dismissal of a nonquotaholding
Administrator is subject to approval by a simple majority (i.e. 50% of the quota capital plus 1 quota).
7This is not restricted to formal shareholder resolutions but is widely interpreted.
8There is considerable debate concerning the extent to which a ‘breach of law’ will allow the piercing of the corporate veil and it is clear that not every
failure to pay correct taxes amounts to a ‘breach of law’ in this sense.
9When employment-related payments or indemnification are awarded by Brazilian labour courts.
6. Employment law
Brazil is a heavily unionised country and the employment laws
are very rigid and formalistic. There is a culture of employees
suing their employers and labour courts tend to be protective
of employees. This is therefore an area where companies need
to proceed with caution and ensure they are well advised. In
particular, care needs to be taken in dismissing employees.10
The basic rules governing the relationships between employees
and employers are set out in the Brazilian Consolidated Labour
Laws (Consolidação das Leis do Trabalho or CLT), and in the
social security statutes, jurisprudence, collective bargaining
agreements and agreements developed by the International
Although written employment contracts are not always
required, it is sensible to use them whenever feasible, since the
burden of proof regarding the terms of employment is usually
placed upon the employer. Furthermore, although the vast
majority of employment contracts are standard form, bespoke
contracts are recommended for more senior staff or to deal
with probation periods, overtime compensation, confidentiality,
non-competition, bonuses and fringe benefits.
Employment agreements are generally for an indefinite term,11
but employees may be hired for up to two probationary
periods, totalling a maximum of ninety days, provided that
such term is agreed in writing in the employment contract. At
the end of the ninety-day term, the employment automatically
becomes indefinite unless terminated by either party.
Requirement to employ Brazilian staff
The CLT states that the employment of foreigners by a Brazilian
company is limited:
(a) to no more than a third of the total number of
employees in the company; and
(b) to no more than a third of the total payroll.12
10The employee has the right not to be dismissed ‘without cause’: the CLT lists the reasons ‘with cause’ which permit dismissal. Where an employee is
dismissed without cause, the company is fined an amount equivalent to 50% of all deposits made to the relevant employee’s Severance Indemnity Fund
(FGTS), of which 80% (40% of the deposits) is withdrawn by the employee, with the remainder going to the government. This can amount to a hefty fine
if the employee has worked for the company for a long time.
11Fixed term employment contracts are rare and allowed only in certain circumstances.
12For the purposes of this rule, foreigners who have lived in Brazil for more than 10 years and who are either married to a Brazilian or have a Brazilian child
are considered to be Brazilian, as are all Portuguese nationals.
18 | Brazil Market Entry Guide
13There is a prohibition on reducing the salary, unless permitted by union collective bargaining or convention.
14In the event the employee has been granted a salary increase, the Christmas bonus is calculated as if they had gained the increase at the start of the year.
15Such as overtime, Christmas bonus and holiday pay. Some benefits are included in this calculation while others are not.
16There is also a requirement to have at least one day off per week (which is typically at the weekend).
17Employees who work between 22:00 and 05:00 are required to be paid at least 20% more than the normal hourly rate for those hours.
18Certain unions have established 180 days of leave.
19This is known as the stability period. Union collective bargaining or conventions can extend this period.
20This is heavily regulated and accountants usually calculate the termination payment. If the employer is the terminating party and opts not to make a
payment in lieu of notice (often referred to as indemnifying the employee), the employee may opt between working for a 30-day notice period with
reduced hours or a 23-day notice period working full time.
Minimum monthly salary payable.13 For 2014 this was set at BRL 724.00. This gets reviewed
upwards each year. Different minimum salaries may apply depending on the function or
profession and the state in which the employee works.
This is equal to an additional month’s salary but is reduced in proportion to the months
worked during the year (including vacations).14
In addition to the normal monthly salary, an additional third of the employee’s monthly
remuneration is paid for any holiday period.
The employer must deposit 8% of the employee’s monthly salary (including any additional
remuneration and certain benefits)15 to the employee in a Severance Fund Account, kept with
the Caixa Economica Federal, a Brazilian state bank.
SUMMARY OF KEY MANDATORY MINIMUM EMPLOYMENT TERMS
Social security (INSS)
Daily working hours
Weekly working hours
Other time off
This is equivalent to approximately 25% of the monthly salary (including Christmas bonus and
holiday pay) and must be paid to the relevant Brazilian authorities.
Maximum of 8 hours.
Maximum of 44 hours.16
Additional income is payable if an employee works extra hours (more than 8 hours per day or
44 hours per week) or works at night.17
20 to 30 consecutive days annually to be taken in blocks of no less than 10 consecutive days.
120 days,18 paid by the employer and reimbursed by the Social Security Body. Additionally, the
employee is entitled to remain in employment for at least 5 months commencing on the birth
5 days, paid by the employer and commencing from the date on which the child is born
Employees who are asked to work during an election day have the right to 2 days off work.
Time is also allowed off for the death of a spouse or relative (2 days) or marriage (3 days).
There are also a large number of public holidays, which can vary depending on the city.
The employees have the right to go on strike in order to renegotiate their working conditions
with the employer.
30 days prior notice or payment in lieu of notice.20
There are many different categories of visas that can be issued to foreigners, but from our experience, the most important visas for
international companies are those set out below. Where a permanent or temporary visa is required (except for business or tourist
visas), the individual will have to register with the Federal Police shortly after arrival in Brazil and apply for a Foreigner’s Registration
—— The foreign national must be appointed as an administrator or director of a
new or existing Brazilian company, which must show that the equivalent of
at least BRL 600,000 in foreign currency has been invested into it as share
capital, by a foreign company or person that is not the applicant.
—— This is permanent provided that the foreign national remains a
—— Suitable for senior positions such as country managers and managers of the
Brazil office or subsidiary of an international group.
—— This visa is tied to the company that makes the visa application. Accordingly,
for groups of companies, it is sensible that the holding company makes the
application so that the individual can work for various companies in the
group without needing to seek further authorisation.
—— The foreign national must show that he or she has invested the equivalent
of at least BRL 150,000 in foreign currency as share capital into a new or
existing Brazilian company.
—— Additionally, it is necessary to prepare an investment plan, demonstrating
that it is in the social interest of Brazil for the investment to be made with
this being characterised by the creation of jobs and income in Brazil, the
increase in productivity, the assimilation of technology, and the investment
of resources into specific industry sectors.
—— The visa remains valid until the investor exits from the company.
—— Persons married to Brazilian nationals or who have a Brazilian child under
their care and economically dependent on them can apply for a permanent
20 | Brazil Market Entry Guide
21It may also be worth applying for a Tax Registration Number (CPF) with the federal tax authority (Receita Federal) since a CPF is essential in Brazil for many
activities, such as opening bank accounts and buying property.
Work Visa - 90 Days
Work Visa - 1 Year
—— Restrictive in terms of the activities that can be undertaken. No ‘work’ is
allowed which means that the individual cannot be remunerated from
within Brazil or enter into a contract with a Brazilian company or
organisation to provide services.
—— Allows entry to Brazil for 90 days, renewable for a further 90 days.
—— Suitable for business trips and short stays in the offices of a client or the
Brazil office of an international group. Not allowed to bring work
equipment, but can bring samples of materials.
—— Short term work visa for a foreign professional who is not employed by a
—— Better to request at the Brazilian Consulate rather than in Brazil (faster and
—— Not renewable and can be requested only once every 180 days.
—— Suitable for urgent or small projects and work assistance in Brazil.
—— Work permit for a foreign professional who is not employed by a Brazilian
firm and who enters the country in order to work under a technology
—— Valid for up to one year and renewable for a further one year (i.e. a
maximum of two years).
—— Suitable for engineers and project managers who need to work in Brazil on
a temporary, medium term basis to service a client.
Work Visa –
No —— Work visa for foreign professional who is to be employed by a Brazilian firm.
—— Valid for up to two years.
—— Possible to convert to a permanent visa by application to the Ministry of
Justice, provided that the foreigner has been carrying out the same activity
in Brazil for a period of two years and the application is made at least thirty
days prior to the expiry of the visa.
—— Proof of qualifications and professional experience is required. The Brazilian
firm applying for the visa will arrange this by getting declarations, diplomas
and certificates from the institutions and companies where the foreign
national studied and/or worked.
—— Normal employment tax and social security contributions payable by
—— Suitable for longer term projects with a Brazilian company or where there is
the intention to apply for a permanent visa.
8. Registration with the Regional Council
of Engineering and Architecture (CREA)
Those carrying out construction or similar projects in Brazil will
have to be aware of the registration requirements relating to
CREA. The engineer legally in charge of a construction project
in Brazil is called the responsavel tecnico (“RT”). The RT,
whether Brazilian or foreign, must be registered with the local
CREA for the relevant worksite. For foreigners, such registration
requires a temporary or permanent work visa, as well as the
validation of their graduate diploma by the local CREA. There is
an additional cost involved in this, but if the documentation
provided is acceptable to the relevant CREA, this can be
obtained relatively quickly. In principle, if such registration is
not obtained, the foreigner acting as RT, project manager or
engineer on a construction project will be considered illegal.
In practice, however, not all expatriate project managers
assume the role of RT, or project engineer, but appoint a local
CREA-registered engineer for this purpose and supervise in
consultation with the CREA-registered RT. As the RT will be
ultimately responsible for the works, however, they will insist
on retaining some control over the project.
If a foreigner is not to be engaged as an engineer or project
manager (so as to avoid the requirement for CREA registration),
it may be difficult to justify his application for a Technical
Services Visa and would be necessary to consider alternative
types of visa.
In an effort to improve the country’s image in the international
business community, align local laws with international
treaties and to encourage foreign investment, Brazil’s first
comprehensive anti-bribery and corruption legislation
applicable to corporate entities, Law No. 12.846, was enacted
in January 2014. This new law contains the following offences
for which corporate entities can now be liable:
—— Active bribery - promising, offering or giving,
directly or indirectly, any unjust advantage to
a public official.
—— I llegal sponsoring – financing, paying for or
sponsoring any offences set out in the new law.
—— Concealment – any activities to conceal any
illegal activities or interests.
—— Public procurement – bid rigging, impeding or
frustrating a due administrative process,
committing fraud in a bid submission or seeking
to obtain any undue advantage.
—— Obstructing investigations.
Sanctions include large financial penalties, unlimited corporate
liability, confiscation of assets illegally obtained, barring from
participating in public bids and in extreme cases, the courts can
issue a winding-up order. The law applies in respect of offences
committed by Brazilian corporate entities, irrespective of
whether the offence is committed in Brazil or aboard, as well
as any offences committed by foreign companies in Brazil.
The Criminal Code
This applies to individuals only and sanctions include
imprisonment of up to 12 years and fines. Offences include
active bribery, passive bribery (requesting or receiving bribes),
active bribery in international business transactions and seeking
to influence public officials (Brazilian or foreign).
Extra-territorial reach and importance of compliance
While international companies may already be subject to the
extra-territorial reach of the US Foreign Corrupt Practices Act
1977, UK Bribery Act 2010 and similar laws, the fact that Brazil
has now introduced similar rules (including a leniency regime)
highlights the importance of having suitable compliance
procedures in place and ensuring that anti-bribery measures
are being strictly implemented.
22 | Brazil Market Entry Guide
10. Intellectual property
As one of the original signatories to the Paris Convention, Brazil
has robust intellectual property protection, which is currently
reflected in the Industrial Property Law of 1996. Generally
viewed as being TRIPs22 compliant, this law covers trademarks,
geographical indications, patents, utility models and industrial
While some 150,000 trademark applications are filed each year
in Brazil, with the vast majority now being filed online, it must
be remembered that the trademark system is not multi-class
and Brazil does not adhere to the Madrid Protocol.23 With a life
span of ten years, renewable for successive ten year periods,
trademark designs are classified in accordance with the Vienna
Classification, and goods and services classified using the Nice
Classification of Goods.
Patents are valid for 20 years from the date of filing and utility
models for 15 years. Classification is made in accordance with
the International Patent Classification (IPC) and it currently
takes an average of eight years before a patent is granted.
Much of the delay in granting patents is because ANVISA (the
Brazilian Health Authority) must review any patents with a
pharmaceutical process or product. Foreign patents can be
filed through the Paris Convention or Patent Cooperation
Treaty, to which Brazil is a signatory. Applications for patents
are made with the Brazilian Patent and Trademark Office
Computer software is protected by the Software Law, 1998,
which protects the rights and interests of software owners for
a term of 50 years following creation and governs licensing
agreements in this area. To benefit from this protection, the
physical attributes of software need to be registered with the
Copyright and moral rights
While there is no single body before which copyright is
registered, it is protected by the Copyright Law of 1998. The
moral rights and economic rights of the author are protected
and rules as to who can and cannot reproduce a work are set
out. A copyrighted work enters the public domain 70 years
after the death of the author, and the 1998 law (currently
under review with the objective of strengthening protection) is
in line with the Berne Convention, to which Brazil is a
Registration of agreements with the INPI
Interestingly, the INPI also plays a role in recording certain
types of agreements and licences and, as such, it is obligatory
to record with the INPI contracts which license the use of
trademarks or patents, franchise agreements, any agreements
which transfer technology and those providing know-how. This
is crucial to allowing royalties to be remitted abroad and so
that certain tax deductions can be applied on these royalties.
22The Agreement on Trade-Related Aspects of Intellectual Property Rights is an international agreement administered by the World Trade Organization.
23While most of the world adopts this treaty, Brazil (along with most South American countries) does not. Under the treaty, by filing a single trademark
application with the World Intellectual Property Organisation, one can then nominate it to be filed in as many countries around the world as adhere to the
treaty, only paying each country’s internal filing fee.
24Since 2009 INPI has become a World Intellectual Property Organisation recognised International Searching and International Preliminary Examining
Like any nationality, Brazilian culture has some unique characteristics, and business relationships can be smoother
if time is taken to get acquainted with these before doing business here. With this in mind, set out below is a short
overview of key things to be aware of:
According to one international cultural expert, Brazil is “the
country that places the most importance on personal
relationships.” Consequently, Brazilians prefer face to face
meetings and business networking tends to be a slower
process than in some Northern European countries, as trust is
built-up gradually. Marketing can therefore take a great deal of
personal commitment, although once business relationships are
formed they tend to be long term.
Meetings are usually less formal than in Northern European
countries or the US, and it is not uncommon to start meetings
by talking about non-business matters. First names are also
used more readily than in continental Europe. Although the
dress code is generally quite relaxed, the safe approach is to
dress in the same way as for meetings in Northern Europe or
the US. Additionally, although Brazilians can be less punctual
than Europeans, they will still generally expect Europeans to be
Compliance with rules
A more flexible view on compliance with regulations is
sometimes encountered. This may be due in part to the
complexity and volume of local laws.25 This reinforces the need
to conduct thorough legal and financial due diligence before
entering into commercial transactions, and requires foreign
investors to be more practical and consider the relative risks
and benefits of different approaches.
International transactions are often conducted in English,
although being able to speak Portuguese is certainly
appreciated (and in certain circumstances essential). Those
Brazilians used to dealing internationally will generally be able
to speak good English, though this may not be true in smaller
companies, or for all employees.
Things can take longer to do in Brazil, particularly when dealing
with public and regulatory bodies, or registering documents
and contracts before the various public notaries and
commercial registries. There are also certain times of year when
everything slows down, such as Carnival and Easter. The key
here is to be both patient and persistent.
25There is even a popular expression which illustrates this, “para ingles ver”, which translates to “for the English to see”, and which was coined during the
auditing of British Railway companies in the 19th century to describe the process of making a business appear, on the surface, to look good.
CULTURAL ASPECTS OF DOING BUSINESS IN BRAZIL
24 | Brazil Market Entry Guide
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