Business in Brazil

This year, Brazil has elected the first market-driven president since the military regime, for keeping the promises to open up the Brazilian economy of investment and make the nation more ‘business-friendly‘.

According to strategists, the abundant global liquidity practised by banks around the world, coupled with a constructive economic agenda in Brazil, will create the best possible investment scenario, as Brazil will enjoy a period of exceptionally low-interest rates.

That is why the Brazilian economic market and digital commerce are even more ideal for international companies than they’ve been in the past.

In 2019, major companies like Novelis, Amazon and FIS are choosing to invest in Brazil. The reasons for investing in this country are numerous; some are based on the traditional advantages Brazil held and other ideas include new practices and enticements.

Another critical factor is that the Pension Reform creates a much more stable investment scenario than those in Argentina and Mexico.

There fore, investing in Brazil now allows corporations to take advantage of a growing economy that willhighly benefit a company in the near future.

The Company interested in hiring foreign labour, whether permanent or temporary, must apply for a work permit from the General Coordination of Immigration, an agency of the Ministry of Labor and Employment. The Coordination is responsible for analyzing the request within a period of up to 45 days and depending on the merits of the application, may grant or reject the request.

The foreigner will have a period of ninety (90) days from his / her entry into the country, to prove the General Immigration Coordination his / her registration with the PIS / PASEP and the CPF / MF, as well as with the Class Organ, when dealing with regulated activity and subject to professional supervision.

This phase must be done in advance so that the process can be seen in a timely manner. To this end, the application will be by completing the “Work Permit Application Form”, signed and forwarded by its legal representative, or attorney, accompanied by the following documents:

1). Applicant

• legal act governing the legal entity duly registered with the competent body or identity, in the case of an individual;
• act of election or appointment of its legal representative duly registered with the competent body;
• copy of the card of the National Register of Legal Entities - CNPJ, or the card of the Register of Individuals - CPF;
• power of attorney when the applicant is represented by proxy;
• original proof of payment of the individual immigration fee;
• Other documents provided for in Resolutions of the National Immigration Council.

2). Candidate

• copy of the passport page containing the foreigner's number, name, date of birth, nationality and photograph;
• Other documents provided for by Resolutions of the National Immigration Council.

Employment contract:

The documents will be presented, if possible, in digital media, by the world wide web, provided that the guarantees of security of their authenticity are preserved, according to the Law.

The documents provided for in this article, once presented and digitized, will compose the applicant's electronic register with the General Immigration Coordination, and their submission in subsequent new requests is not necessary, except in case of updating.

The notarization will not be required, except as provided by law.

Note: This visa is withdrawn by the foreign worker still in his home country, at the diplomatic representation, where it is possible to make demands for more documents, besides those already presented by the company to the MTE.

Rights:

When working in the country, foreigners enjoy the existing rights under Brazilian law. Under the Constitution, foreign employees will have the same rights as Brazilians, and may even file a labour claim in relation to the period they worked in the country.

Visa:

The permanent visa is given to those who are legal representatives of the company in the country, as stated in the articles of incorporation or who will occupy an administrative position. The company must receive a foreign investment of at least R$ 600 thousand reais for each foreigner that wants to bring or R$ 150 thousand reais (per professional).

For foreigners, one of the most beneficial opportunities is the ‘Brazillian Investor Visa Program’. It allows anyone who is in a partnership with a Brazilian company, as well as anyone interested in investing in a real estate business, Internet-based business, or interested in purchasing a government bond, the opportunity to gain permanent residence in Brazil.

Types of company

• Limited Liability Company (“Limitada” / “Ltda.”) To conduct commercial activities, Brazil has more than one form of the legal entity along with many other Latin American Countries. The most common legal entity structure in Brazil is the Sociedade LTDA. The SociedadeLimitada in Brazil has many alike features like Limited Liability Company in the U.S. or the UK. It is a legally separate entity and requires a minimum of two shareholders and has no minimum capital investment. It also allows for 100% foreign ownership.


• Limited Liability Corporation – S/A (“SociedadeAnônima” / “S.A.”) Limited Liability Corporations in Brazil are regulated by a specific law (“Lei das SAs”). Those Limited Liability Corporations are considered as the closest form to US subchapter C corps. The Corporations can issue two different classes of shares,namely voting and non-voting. The liability of shareholders’ is to make payment of the shares to which the shareholders have subscribed. It is important to note that the foreign shareholders need a legal representative of the company in Brazil. Limited Liability Corporation is the ideal type of entity for larger companies who are looking to raise funds from the public.


• SCP- Silent Partnership When two or more members take part in business, trade, financial operations and divide profits as an unincorporated organization are known as Silent partnerships. These type of partnerships are mostly used in reforestation projects, real estate and hotel pooling.Also, this type of legal structure has a specific aim defined that the company will last only until the object of operations has been reached.
• Consortium A consortium means the gathering of corporations of the other companies with the aim of performing a determined activity or operation. They are unincorporated entities, where two or more members take part in business, trade, financial operations or ventures, and share profits.
• Single Holder Limited Liability Entity (” Empresa Individual de ResponsabilidadeLimitada” / “EIRELI”) EIRELIs is the most commonly used legal entity by individual entrepreneurs. The paid-in capital should be of minimum 100 times than the current minimum wage. The responsibilities of each shareholderare limited to the amount of his or her shares. However, it should be noted that all shareholders are liable for the payment of the corporate capital. Only individuals can be a shareholder and each individual can incorporate only one EIRELI. However, only Brazilians or foreigners with a permanent residency are authorized to create an EIRELI.
• Branch Office of a Foreign Corporation It is difficult to establish a branch office in Brazil as it takes about 6 months and the legal structures are high in cost. In order to be established, the company needs to operate under the same name as the company had in its origin country and must have a fully responsible company legal representative. For this, the company must prove its legal existence, submit various copies of articles of incorporation, latest balance sheet copy, list of shareholders and a copy of the resolution to open a branch office in Brazil. It is essential to allocate a certain amount of capital to the branch.
• Incorporating a Brazilian Company To expand the operations and access the Brazilian markets shall be done through the incorporation of a local Brazilian company.

Taxation policy of Brazil

The main types of taxes levied in Brazil today are:

• Corporate Income Tax (IRPJ)

  Corporate Income Tax is specific to the companies with legal records, along with companies that are registered or unregistered, as well as state-owned companies like joint ventures, bankruptcy or Rural business.

  Normally,this type of tax is declared annually or quarterly.

  The rate is different according to the taxation model chosen to declare IRPJ. However, usually, 15% of all profits will be charged regardless of the model chosen. But if the amount the company has earned is higher than the value of each instalment multiplied by the number of months and is higher than USD 20,000, the company may suffer an additional 10% that must be paid along with the 15%. Usually, this only happens to companies that have been merged.

  Basically, companies, according to the type of taxable profit are classified into three types: Simple, Real Profit and Presumed Profit.

  Simple

  These are companies whose taxable profits are simple and, in this case, the tax is already discounted in the tax guide itself (municipal, state and federal). Thus, you do not need to fill in extensive data tabs for declaration.

  The amount of tax due, in these cases, varies depending upon the company's revenue.

  Presumed profit

  The companies that have estimated taxable profit committees under this category. They should refer to a government table of percent earnings estimates - depending on the segment in which the business operates.

  A 15% income tax rate is also levied.

  This data will serve as a tax rate for the calculation of the corporate income tax.

  Real profit

  Real profit follows the same rule as companies in the category of Presumed Profit. Taxes are levied at the rate of 15%.

• Social Contribution on Billing (COFINS)

  COFINS is a federal contribution that focuses on what the company invoices for the purpose of financing social security.

  Its calculation is monthly and may vary according to the regime defined by law: cumulative or non-cumulative - and its rate maybe 3% - for the cumulative regime - and 7.6% - for the non-cumulative regime.

• Contribution to the Social Integration Program (PIS)

  PIS is also a federal social contribution, whose purpose is to raise the necessary funds for the payment of the allowance, unemployment insurance and participation in the revenue of agencies and entities.

  Private companies are the taxpayers, and the tax will be on the company's monthly revenues. Your rate may vary between 0.65% and 1.65%.

• Tax on Circulation of Goods and Provision of Services (ICMS)

  Unlike the others, the ICMS is a state tax that will levy on transactions related to the movement of goods and some types of services. Thus, companies that perform commercial actions and have a movement of goods, as well as perform interstate or intercity transportation services and communications, will be subject to the levy of this tax.

  The rate varies by state (usually 17%), as it is a state tax. Thus, until the arrival of the product to the final consumer, the stages of circulation of the goods will be subject to this tax.

• Services Tax (ISS)

  ISS is a municipal tax on service provision. Thus, companies that provide services of any kind should contribute.

  The ISS tax rate varies by municipality. However, a minimum rate of 2% is imposed.

Conclusion

As per the report of World Bank ranking with regards to the ease of doing business, it can be concluded that Brazil is a relatively tough place to start a business as the country had ranked 120th out of the participating 183 countries in the survey to check the ease of doing businesses in different countries around the world. But that does not take away the fact that Brazil is a profitable country where businesses, if started well, can thrive and truly be able to earn its best potential.

As stated by Carl Farrel, the Chief Revenue Officer at data analytics powerhouse SAS, “Brazil is very resilient, it will weather the crisis and continue to prosper — it’s an economy that’s got lots of resources, people, and all the geographic connections that it needs.”