Setting up a company in Brazil

In Brazil the most popular vehicle for investment is in the form of a private limited liability company (LTDA) or of a corporation (S/A), both requiring at least two partners.

Companies may be regarded as open or closed capital, depending on whether securities will be listed in the Brazilian Stock Exchange (of course a specific procedure before the Securities Commission is required for this).

Setting a company in Brazil, though, require extensive steps and can be time consuming. Thus, many outside investors often choose to acquire an already established firm to bypass some of these steps. While faster, it is, of course, important to keep in mind that proper due diligence is necessary, together with the correct registries in the Brazilian central bank. Acquiring the right target at the right price is crucial to guarantee a successful investment, saving both time and money (cost reduction, tax credits, NOLs, pre-established channels, etc).

The feared Brazilian tax system

It is said that Brazil’s tax system can be one of the most complex in the world, requiring several hours for proper compliance. The system, today, comprises of:

• 8 federal taxes (IR, CSLL, II, PIS, COFINS, IPI, IOF, ITR);
• 3 state taxes (ICMS, IPVA, ITCMD);
• 3 Municipal taxes (IPTU, ITBI and ISS)

Brazil currently does not tax, nor plans to implement, the constitutional “tax over great fortunes”, which would work as an additional levy for high net-worth individuals.

The standard corporate tax rate in Brazil is 34% and is levied only at federal level. There are no local income taxes to be paid. Personal income tax for individuals scales progressively until 27.5%, with little tax shielding or deductions allowed.

With the proper tools and assistance from local experts, navigating through Brazil’s tax system becomes much more feasible. Brazil is aware of that and has been investing in enhancing its system, even becoming a leader in digitalization of the tax compliance with its digitalized SPED program for income tax and e-invoicing for VAT controls.

Taxation is everywhere. The difference here is making the right decisions, with proper guidance.

A-Law Brazil Desk

Despite the attractiveness, Brazil – as any other emerging country – comes with its challenges. To name a few: tax, bureaucracy and language still prove to be of some difficulty for foreign parties when entering into the country’s economy. In Brazil, speaking the same language, good personal relations and creating empathy can have the same impact as offering a high bid during negotiations. Also, international companies and investors may be required to either have a local representative in Brazil or establish a subsidiary.

We can assist you to overcome such challenges through our in-house knowledge and experience, offering you the services of an expert lawyer in the team as your point of contact for Brazil. We can help you secure the right structure to make the best purchase or investment track possible.

You can count on A-Law for your trade and invetsment projects in Brazil.

For more information on the above or our services on Brazil, contact Attorney-At-Law Tulio Lira, Head Brazil Desk at T.lira@a-law.eu or fill in our online contact form.