Brazil

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.

General Information

• Population: 215 million (World Bank, 2022)
• Capital: Brasilia
• Largest City: Sao Paulo
• GNI Per Capita: USD $ 8,140 (World Bank, 2022)
• Main Exports: Iron ore, crude petroleum, soybeans, coffee, cars, poultry meat and gold
• Main Language: Portuguese
• Monetary Unit: 1 Real = 100 Centavos
• Internet Domain: .br
• International Dialling Code: +55

How do I Say in Portuguese?

• 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

How do I write dates and numbers in Brazil?

Dates are usually written in the day, month and year sequence. For example, 1 July 2019 or 1/7/19.

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).

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 border, including Uruguay, Paraguay, Argentina, Bolivia, and Peru, Brazil is a significant presence on the Latin American and international economic landscapes.

The Brazilian economy has historically been supported by a strong agricultural sector and an abundance of natural resources including iron ore and a range of precious metals.

While agriculture remains important, Brazil has been industrialising since the mid-20th century: major exports 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: in 2019 it was the 9th-largest economy in the world by GDP with a growth rate of 1.14%.

Brazil is a founding member of the UN, a member of the G20, and the Organization of Ibero-American states. The World Bank ranked Brazil 124 on its Ease of Doing Business Survey 2019.

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 treated 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.

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. 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.

It is mandatory to make payments to both employees and the authorities from an in-country bank account owned by the customer. 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.

The company is required to have an established legal entity in order to process a payroll.

Brazilian law recognises several types of corporate entities that can be established for conducting business. Here are the primary corporate forms:

1. Sociedade Anônima (S.A. or Corporation): This is a corporation with capital stock divided into shares. There are two types: publicly-held corporations, which are authorized to trade their shares in the stock market, and closely-held corporations, which do not have publicly traded shares. They are regulated by Law No. 6,404/76 (Brazilian Corporations Law).

2. Sociedade Limitada (Ltda. or Limited Liability Company): This is a business entity that is owned by one or more individuals who hold transferable shares but whose personal liabilities are limited to the amount of capital invested. This is the most common type of corporate entity in Brazil and is governed by the Brazilian Civil Code.

3. Sociedade em Nome Coletivo (General Partnership): In this partnership, all partners have unlimited liability and are involved in the daily management of the business. It's less common due to the unlimited liability aspect.

4. Sociedade em Comandita Simples (Limited Partnership): This structure consists of one or more general partners with unlimited liability and one or more limited partners whose liability is restricted to the amount of their contributions.

5. Sociedade em Comandita por Ações (Partnership Limited by Shares): This is a less common form that combines aspects of a limited partnership and a corporation. It has both shareholding partners with limited liability and general partners with unlimited liability.

6. Sociedade em Conta de Participação (Silent Partnership): In this silent partnership, the business is administered by one partner only, and the liability of the silent partners is limited to the amount of their capital contribution. Silent partners do not have their names disclosed publicly.

7. Empresa Individual de Responsabilidade Limitada (EIRELI - Individual Limited Liability Company): An EIRELI is owned by one person only, and the owner has limited liability which is not linked to their personal assets, provided that the minimum capital requirement is met.

8. Microempresa (ME) and Empresa de Pequeno Porte (EPP - Small Business Entity): These are entities with reduced tax burdens, aimed at small businesses. They are classified according to their annual gross revenue and can opt to be taxed under the simplified tax regime known as Simples Nacional.

Of the several types of corporate entities contemplated by Brazilian law, the most used are the Limited Liability Company (sociedade limitada or “limitada”) and the Joint-stock Corporation (sociedade anônima or “S.A.”).

Each of these corporate forms has specific legal, tax, and accounting implications. The choice of entity is typically based on factors such as the intended size of the business, the number of investors, the level of acceptable personal liability, tax considerations, and the need for raising capital.

The Limited Liability may be formed by one or more individuals and/or companies. In the case of a foreign shareholder, the company is required to grant a power of attorney to a Brazilian resident to represent it in the country, with powers also to receive a summons. This power of attorney has to be legalized at the Brazilian Consulate. Non-resident quota holder must obtain a tax identification number from the Brazilian Internal Revenue Services (called CNPJ or CPF). No minimum capital requirements are imposed on Ltdas, but compliance with the thin capitalization rules is advisable to prevent potential challenge of interest deduction. Capital must be denominated in Brazilian currency.

The timescale for completion of this process varies a lot depending on the city of incorporation, but it would be fair to consider a period between 45-90 days.

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

Income Tax

Employers in Brazil are responsible for withholding and paying income taxes for employees, and contributing to social taxes on behalf of workers. Other taxes to fund unemployment programs and labor unions apply. In addition, Brazil’s labour law requires employers to uphold certain minimum wage, wage payment, and benefits regulations.

Returns and Remittances

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 No 2134 approving the multiplatform program to be used for filing the Individual Income Tax Return, Final Declaration of Inheritance and Departure Income Tax Returns, related to fiscal year 2023, calendar year 2022 (IRPF 2023).

The tax returns generated by IRPF 2020 must be submitted between 1 March and 30 May, 2023, via internet, through Receitanet Java transmission program, available for download at RFB website.

All employers must remit taxes withheld monthly and submit an annual return. Monthly income tax payments are paid on the 20th of the following month.

Income Tax (Employee Discount)

For the individuals who have a local labor contract in Brazil, the company is responsible for the calculation and payment of the related income tax (withholding), which is due on a monthly basis and based on a progressive tax table (rates vary from 0% to 27.5%, as shown below). For the foreign payments, the related income tax (named “carnê-leão”), which is due on a monthly basis and based on a progressive tax table (rates vary from 0% to 27.5%).

 IRRF (Income Tax): Progressive Table for Income Tax Withholding - Year 2024

Brazil has a comprehensive Social Security system run by National Institute of Social Security (INSS) under the Ministry of Social Welfare. The system contributes to workers’ pensions, education funds, workers’ compensation, unemployment insurance, and other welfare initiatives. Both employees and employers must make social security contributions, which vary based on industry and workplace risk.

Employers must file and submit withheld social security amounts and employer payments on a monthly and quarterly basis. 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%.

INSS (Social Security):

The Ordinance also sets the minimum and maximum contribution basis for 2023, which may not be less than BRL 1,302.00 or greater than BRL 7,507.49.

As a general rule, the employer contributions are:

• Employer contribution – 20% of the total payroll (monthly remuneration paid to all workers, including autonomous);
• RAT – (insurance against labor accidents) - varies from 0.5% to 6% of the total remuneration paid to employees, depending on the “level of risk” presented by the type of activity of the company.
• Education allowance - 2.5% of the total remuneration paid to employees.
• Contribution for governmental entities - varies from 0% to 5.2% levied on the total payroll amount.

Other employment-related taxes employers must consider in Brazil include the Guaranteed Fund for Length of Service – an unemployment insurance fund – and a labor union dues tax.

Guaranteed Fund for Length of Service (FGTS)

The FGTS is a fund created to protect workers who are fired without just cause. It consists of accounts opened in the name of employees, where employers must deposit an amount corresponding to a percentage of the employee's salary each month. The FGTS is managed by the Brazilian government through the Caixa Econômica Federal bank.

All employers are required to enroll in and contribute to a FGTS fund for each employee hired. The fund consists of an employee account located in the federal savings bank and owned by the employee. Withdrawals from the account are restricted to cases of termination without justifiable cause, purchase of house by the employee, and other situations stated in current legislation.

Employers must contribute an equivalent of 8% of employees’ salaries to FGTS accounts. This amount is paid by the employer and is not deducted from the employee's salary (FGTS payments are calculated based on all amounts paid to employees, including overtime, hazardous pay, night work, 13th month bonus, vacation pay, and other payments.).

Employees can access their FGTS funds under specific circumstances, such as involuntary job loss, retirement, severe illness, and when buying a first home.

FGTS Penalty: If an employee is terminated without cause, the employer must pay an additional 40% of the total sum in the employee’s FGTS account to the employee​

Labor Union Dues Tax

The Labor Union Dues Tax is a contribution that was traditionally paid by employees and employers to labor unions. It was designed to fund the activities of these unions, including labor negotiations and legal assistance.

The Brazilian Consolidation of Labor Laws legislation requires all employees to pay a union dues tax. The tax is regulated by the Ministry of Labor and payable to the individual unions. Every professional category in Brazil has a legally mandated union to which employers must remit the tax. Although employees are not required to become union members, they are still obligated to contribute.

For employees, it corresponds to a working day and must be discounted in March and collected in April.

In November 2017, a new labor legislation called Labor Reform was launched, changing this provision. According to the new legislation, employees’ contributions are no longer compulsory, meaning that the employee can decided whether they want to contribute with the union.

The penalty for late payments is 10% on principle for the first 30 days after they were due. The fine is increased by 2% for every succeeding 30 days.

Employers might also be required to contribute to the labor unions representing their industry, but the specifics can vary based on collective bargaining agreements and the policies of the respective labor unions.

Monthly

Yearly

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.

eSocial: It is a long awaited and important innovation by the Brazilian Revenue Service in terms of the amount of information consolidated in it and expectations for the extinction, in the long term, of accessory obligations today submitted by companies, such as GFIP, Dirf, Rais, Caged, etc.

If on one hand the consolidation of various accessory obligations into a single environment tends to reduce Brazilian tax bureaucracy, on the other hand it will provide the revenue services with a clear view of the rules of business used by companies that operate in Brazil, in areas such as hiring, management, payment and/or termination of labor contracts.

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

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.

During the period of notice, employees may take leave for up to two hours a day with pay. If the employer fails to give the required notice, the employee is entitled to be paid his or her regular salary for the period of required notice.

Discharge for a just cause does not require an advanced notice. Notification of leaver to authorities must be made i.e. CAGED, FGTS.

It is legally acceptable in Brazil to provide employees with online payslips.

Reports

Payroll reports must be kept for at least five years.

Brazil Payslip Example

Local language example:

Normal working hours should not exceed 8 hours per day and 44 hours per week. The 44-hour workweek applies to any employee, with exceptions such as bank clerks, telephone operators and so forth, who are subject to different workweeks pursuant to specific regulations. Time worked in excess of the above shall be considered as overtime.

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.

To work in Brazil, all business visitors must obtain a visa. The application should be made prior to travelling to Brazil. Applicants should make their request for a visa to the Brazil embassy within their country of origin or current residence. A visa may not be required by citizens of countries that have specific arrangements with Brazil.

 There are three standard types of visa for expatriate employees:

1. Business visa: The holder may enter Brazil at any time, but not stay for more than 90 consecutive days, and not more than 180 days in any given year. The holder cannot be a registered employee of the Brazil entity.
2. Temporary residence visa: Similar to the business visa, but allows greater flexibility and the holder may work in Brazil for up to two years. It is renewable providing certain conditions are met.
3. Permanent visa: This visa may be granted for those who will work in Brazil for an indefinite period. It is generally reserved for those with specialist skills that cannot be readily replaced in Brazil, for example senior management team members, highly skilled professionals etc.

Business Visa

• Complete the online visa application form.
• Gather required documents, including a passport valid for at least six months, a recent passport-sized photograph, proof of travel itinerary, business invitation letter from a company in Brazil, and proof of residence.
• Pay the visa fee.
• Submit the application and documents to the nearest Brazilian consulate or embassy.
• Attend an interview, if required.
• Wait for the visa to be processed and issued.

Temporary Residence Visa

Designed for individuals who intend to stay in Brazil for a longer duration for purposes such as work, study, research, or family reunion.

• Determine the appropriate category (e.g., work, study, family reunion) and the specific requirements for that category.
• Complete the online visa application form.
• Gather the required documents, which typically include a valid passport, recent photographs, police clearance certificate, health insurance, and additional documents related to the specific visa category (such as a work contract for work visas, academic enrollment for student visas).
• Pay the applicable visa fee.
• Submit the application and documents to the Brazilian consulate or embassy or, in some cases, to the Ministry of Justice in Brazil.
• Undergo health checks if required.
• Wait for the visa approval, and then register with the Federal Police in Brazil within 90 days of arrival to obtain the Foreigner Identity Card (RNE).

Permanent Visa

• Determine eligibility under various categories like marriage to a Brazilian citizen, retirement, family reunion, or as an investor.
• Complete the relevant visa application form.
• Gather necessary documents, including a valid passport, birth certificate, marriage certificate (if applicable), proof of income or investment, police clearance, and other specific documents based on the visa category.
• Pay the required visa fee.
• Submit the application along with the documents to the Brazilian consulate or embassy, or directly in Brazil if already in the country under a different visa status.
• Attend an interview, if necessary.
• Once the visa is granted, register with the Federal Police in Brazil for the Foreigner Identity Card (RNE).

Monthly salaries may not be lower than the minimum wage established by applicable law. At present, the “minimum wage” is equivalent to R$ 1,100.00 (approximately US$ 200.00). Some specific activities have minimum wage amounts agreed with the respective Unions, but may not be lower than the national minimum wage.

Holiday Accruals

After a 12-month period, employees are entitled to 30 days of remunerated annual rest as vacation, which shall be taken within the subsequent 12 months. Additionally, the employees’ compensation is increased by 1/3 of his/her salary as determined in the Brazilian Constitution. In the event the legal period to take a vacation has already expired, then the employer must double pay the employee.

Maternity Leave

Female employees are entitled to 120 days of absence for maternity leave. This period can be extended by two weeks, if requested by a doctor. According to recent legislation, the employer can grant two additional months to the employee and deduct the cost from the corporate tax.

Upon notifying her employer about the pregnancy, the employee cannot be dismissed without cause until five months after delivery.

Paternity Leave

Male employees are entitled to 5 days of leave after the childbirth. According to recent legislation, the employer can grant 15 additional days to the employee and deduct the cost from the corporate tax.

Sick Leave

The employer should pay the first 15 days of sickness; all additional days will be paid by government pension. In case of work accidents, the first the employee shall have tenure of at least one year after his/her return.

Paid weekly rest

In Brazil, "Paid Weekly Rest" refers to the right of employees to have at least one day off per week, which is typically granted on Sundays. This day is paid, and the payment for this rest period is included as part of the employee's regular salary. The labor laws in Brazil ensure that workers have adequate time to rest and recuperate from their work week, contributing to overall well-being and work-life balance.

National Service

Brazilian law requires all male citizens to register for military service in the year they turn 18 years old. The period of active service typically lasts for 12 months, but the duration can vary depending on the needs of the military and the specific branch an individual is assigned to.

As of January 2024, the minimum wage in Brazil has been revised to R$1,412.00 per month.

This adjustment is anticipated to benefit a significant number of workers and is expected to have various economic impacts, including increased government tax revenue due to heightened consumption.

There are multiple statutory holiday schedules within Brazil. Below are the statutory national holidays in Brazil for 2024.

Please note that some holidays are regional and may not be observed nationwide. Also, "Ponto facultativos" are optional holidays where it's up to the employer to give a day off.

Expenses

Typical benefits provided in country include the following:

• Medical Coverage: the benefit shall be extended to all employees and executives.
• Meal Allowance: the benefit must be granted to all employees and shall not be considered as part of the beneficiary´s compensation, if the company were registered in the Workers Meals Program (PAT).
• Transportation Voucher: the Company should cost the employees’ expenses with commute. The beneficiary should cost his/her expenses with the amount equivalent to 6% of his base salary and the Company should pay the exceeding amount.

• Bonus: as a general rule, according to the Brazilian labor legislation, a bonus is a discretionary benefit and does not need to follow rules in relation to the beneficiaries, value (fixed or variable) and periodicity. However, depending on the manner and the frequency of the payments, this benefit might be considered as part of the employees´ compensation, hence subjected to payroll taxes and labor charges.

The specific bonuses’ format might trigger the following implications: (i) fixed payments should be basis for payroll taxation (INSS, FGTS and IRRF), 13th salary, vacation, overtime, night shift premium and prior notice; (ii) variable amount paid recurrently should also be basis for all the payroll and labor charges, as well as weekly paid rest; and (iii) variable amount paid about once or twice a year should be basis only for 13th salary, as well as payroll taxation.

13th Salary

Equivalent to one month's salary, paid in two installments

FGTS - Fundo de Garantia do Tempo de Serviço

A a fund in Brazil designed to protect workers who are fired without just cause. Under this system, employers deposit 8% of an employee's monthly salary into a government-held fund. The employee can access this fund under specific circumstances, such as retirement, the purchase of a first home, or in the event of a serious illness. The FGTS serves as a form of financial security for Brazilian workers, providing them with a safety net in certain life situations.

There are no key regulatory updates for Brazil in 2024.

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.