Doing Business in Brazil

Brazil is the largest country in Latin America - and the region’s largest economy. With the Atlantic Ocean on its eastern coast, and numerous neighbours along its western and border, including Uruguay, Paraguay, Argentina, Bolivia, and Peru, Brazil is becoming a significant presence on the international economic landscape. The Brazilian economy has historically been supported by a strong agricultural sector, and an abundance of natural resources, including iron ore and range of precious metals, but has been industrialising since the mid-20th century. Major exports in Brazil include soybeans, coffee, sugar, tobacco, poultry, and beef, while recent discoveries of fossil fuel deposits have also made it one of the world’s top oil and gas exporters. Important domestic sectors include manufacturing (petrochemicals, automobiles, cement, and paper), high-tech industries, service industries, transport, and communications. In the 21st century, government reforms made Brazil one of the world’s fastest-growing economies - today, it is the 9th-largest in the world by GDP. Brazil is a founding member of the UN, a member of the G20, and the Organization of Ibero-American states.       

Why invest in Brazil ?

Interested financiers will find a number of reasons to explore an investment venture in Brazil:

  • Investment environment: Brazil’s economy is diverse and leads the region in terms of opportunities across a spectrum of sectors, including agriculture, industry and manufacturing. With the OECD predicting a rise in economic growth (to 2% in 2019), a range of special tax incentives are available to stimulate investment in certain market sectors, and areas of the country.
  • International gateway: On the west coast of the Atlantic Ocean, Brazil represents an international gateway to South America - and beyond. Bordering numerous countries, Brazil offers access to a market of over 900 million potential consumers - taking in the rest of Latin America and North America.
  • Transport & communication: Businesses in Brazil are served by a highly developed transport infrastructure, with 67 airports, 46 ports, over 29,000 railways, and 1.6 million km of roads. Brazil’s telecommunication network takes in over 125 million mobile lines, and 42 million fixed lines.
  • Skilled workforce: Brazilian businesses can draw from a large pool of skilled and semi-skilled employees. School-level education and apprenticeship programmes are government subsidised, and over 16 million Brazilians have a higher education qualification in a STEM field.
  • Innovation and research: Brazil’s science and technology landscape is benefiting from long-term investments - and promoting a range of commercial sectors, in particular energy, agriculture, IT, and biotechnology.

Foreign Direct Investment in Brazil

The Constitution states that foreign investment should be of national interest for the citizens of Brazil.  Subsequently federal and state governments are open towards foreign investment that provides economic development, for example, providing wealth and job opportunities.  Foreign and local investors are treaty equally, and are both eligible for investment incentives.

There is additional incentive for industrial exporting companies. The Recof-Sped is aimed at industrial exporting companies and allows the suspension of taxes in the importation or the domestic acquisition of goods to be used in manufacturing products, parts or components intended for exportation or the local market.

Previously, only assembling companies had the right to apply for the Recof. However, Recof-Sped expanded its benefits also to the industries of transformation, processing, packaging and repackaging. Thus, for instance, companies in the food, chemical or pharma segments may now benefit from Recof-Sped. The special regime provides for suspension of Import Tax (II), Excise Tax (IPI) and the Contributions to PIS / PASEP and COFINS in the acquisition of goods/inputs in domestic and foreign markets. 

Company Registrations and Establishing an Entity in Brazil

A company in Brazil is required to have a legal entity established in order to process a payroll.

The most common forms of entity are the corporation (sociedade por aҫӧes, commonly known as a S.A) and the private limited company (sociedade por quotas de responsabilidade limitada, commonly known as a limitada). Both may be wholly owned by private investors.

  • The following registrations are required:
  • Contract with the specific governmental agency
  • CNPJ

Registration number with the city hall

The timescale for completion of this process varies a lot depending on the city of incorporation but it will be a minimum of 75 days.

Business Banking in Brazil

It is mandatory to make payments to both employees and the authorities from an in-country bank account.  Generally, banks are open to the public from 10:00AM to 4:00PM, and closed on Saturdays.

The Supreme Court has decided that the Brazilian IRS has the right to access confidential bank information of both legal entities and individuals independently of justice authorisation. The RFB can extend control over financial transactions. The RFB will receive information on monthly transactions that exceed R$6,000.00 for legal entities and R$2,000.00 for individuals.

Working Days in Brazil

The working days in Brazil are Monday to Friday. The working day for commercial offices is usually eight hours, typically from 8:30AM or 9:00AM to 5:50PM or 6:00PM. Lunch breaks range from one hour to one and a half hours.

Basic Facts about Brazil

General Information: -

Brazil is South America's largest and most populous country, situated on the western coast of the Atlantic and sharing an extensive land border with all but two of its continental neighbours.  Home to a variety of prehistoric and indigenous civilisations, Brazil was first colonised by Europeans in the 1500s. After a turbulent history, and a variety of governing powers, including the United Kingdom and Portugal, Brazil eventually emerged in the late 19th century as an independent republic. In the modern era, Brazil became a significant economic and political  presence on the world stage, joining the UN, the G20, and the Organisation of American States - amongst many other international organisations. Brazil’s climate is varied, ranging from equatorial to temperate while seasonal patterns include sweltering, hot summer and torrential rainy seasons. Covered by vast swathes of Amazon rainforest, Brazil’s biodiversity is high, while the country itself hosts a variety of natural landscapes, including mountains, forests, dense urban centres, and  long stretches of beach coastline. 

Population: 198,7 million (UN, 2012)

Capital: Brasilia Largest City: Sao Paulo

GDP (2012): USD 2,253 trillion

Main Industries: Natural resources: Iron ore, manganese, bauxite, nickel, uranium, gemstones, oil, wood, and aluminium. Brazil has 14% of the world's renewable fresh water.

Main Language: Portuguese

Monetary Unit: 1 Real = 100 Centavos

Internet Domain: .br

International Dialling Code: +55

Hello Olá

Good morning Bom dia

Good evening Boa noite

Do you speak English? Fala inglês?

Good bye Adeus

Thank you Obrigado (if you are male) Obrigada (if you are female)

See you later Até logo

Dates are usually written in the day, month and year sequence. For example, 1 July 2016 or 1/7/16.

Numbers are written with a period to denote thousands and a comma to denote fractions. For example, R$ 3.000,50 (three thousand reais and fifty centavos).

Income Tax & Social Security in Brazil

The tax year runs from 1st January to 31st December.

All companies are required to register with tax/social security authorities and obtain CPNJ (federal tax ID number). The incorporation process takes from three to four months to be completed.

There is no requirement for a third party to be licensed in order to make any tax and/or social security filings on the behalf of a client.

Further information can be found via the following governmental websites:

  • Government Pension – http://www.previdencisocial.gov.br
  • Labour Laws – http://portal.mte.gov.br/portal-mte
  • Income Tax – http://www.receita.fazenda.gov.br 

Income Tax in Brazil

Residents who reside in Brazil or who are abroad but are a dependent of someone who must submit an Individual Tax Return (DIRPF) must apply for a reference number from the age of 14 years old.

The Brazilian IRS published the Normative Instruction 1,619, approving the multiplatform program to be used for filling the Individual Income Tax Return, Final Declaration of Inheritance and Departure Income Tax Returns, related to fiscal year 2016, calendar year 2015 (IRPF2016).

The tax returns generated by IRPF2016 must be submitted within March 1st and 29th of April 2016, by Internet, through Receitanet Java transmission program, available for download at RFB website.

According to Normative Instruction 1,613, individuals must submit the Annual Income Tax Return, if they were resident in Brazil during the 2015 calendar year and:

  1. had a taxable income which sum was more than R$ 28,123.91;
  2. had received exempt income, non-taxable or withheld at source, a sum which was higher than R$ 40,000;
  3. had capital gain upon the sale of rights or assets, subject to taxation, or performed transactions at stock exchanges or commodities & futures exchange markets;
  4. regarding rural activity:
  5. had gross income higher than R$ 140,619.55;
  6. intend to compensate, in calendar year 2015 or following, losses from previous calendar years or from calendar year 2015;
  7. had, on December 31st, the possession or property of rights or assets, including bare land, valued at more than R$ 300,000.00;
  8. became tax resident in Brazil during 2015 and remained resident on December 31st; orhad applied to the exemption of income tax upon the capital gain earned upon the sale of real estate, which the sales product will be invested on the acquisition of another residential real estate in the country, within 180 (one hundred and eighty) days counting from the date of purchase contract.

Monthly income tax contributions are paid on the 20th of the following month.

The penalty for late payment is 0.33% of the outstanding/due amount per day of delay, limited to 20%.

Social Security in Brazil

Monthly social security contributions are paid on the 20th of the following month.   The penalty for late payment is 0.33% of the outstanding/due amount per day of delay, limited to 20%.

Reporting Tax in Brazil

Monthly

CAGED (until 7th of the month) Gfip (Social Security 20th of the month; Severance Fund 7th of the month)

Yearly

RAIS (February 28th) DIRF (February 28th) All of the above mentioned documents do not require the client signature; they do, however, require a digital certificate (electronic signature). All filing is performed by the service provider unless the client has not allowed for a power of attorney of the digital certificate.

New Employees in Brazil

When an employee is hired, the Labour Ministry must be informed following the specific procedure (CAGED) in the following month. This procedure requires registering with the authorities until the 7th working day of the next month and within the 24 hours of contracting.

Expat new starts are required to provide the following documentation:

  • CPF
  • Work Visa
  • Copy of Passport
  • Contract
  • Local Bank Account

Leavers in Brazil

Payment for leavers must be made within 10 consecutive days of the employee’s last day. If it is a pre-determined contract, payment must be made by the next working day after the last day worked. Notification of leaver to authorities must be made i.e. CAGED, FGTS.

Payroll in Brazil 

Brazilian payroll involves withholding obligations on the part of employers, during each pay cycle - principally income tax and social security which are deducted at source and paid to authorities.  

Employees in Brazil are taxed at a progressive rate of 7.5-27.5%, depending on their salary amount. Residency status is relevant to income tax in Brazil: residents of Brazil are taxed on all worldwide income, while non-residents are taxed only on income sourced from within the country.

Brazil’s social security system includes pension funds, health and sickness insurance, and unemployment insurance. Monthly contributions to social security are due from both employees and employers:

  • Employees make social security contributions at rate of 7.6-11% of their gross monthly salary
  • Employers make social security contributions at a rate of around 36.3% of an employee's’ gross monthly salary (including an 8.5% contribution to the Brazilian severance fund). 

The full guide is available in PDF format for registered users.

Register for free