Market Entry Guide Brazil.
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- Introduction
- Modes of Setting up a Business in Brazil
- Procedures for Immigration
- Social Security System in Brazil
- Free Trade Zone and Exportation Processing Zones in Brazil
- Opening a Bank Account in Brazil
- Recruitment of Local Staff
- Taxation
- Appendix
Appendix I: Useful Links and Addresses
- Disclaimer
1 Introduction
Download PDF
- Introduction
- Modes of Setting up a Business in Brazil
- Procedures for Immigration
- Social Security System in Brazil
- Free Trade Zone and Exportation Processing Zones in Brazil
- Opening a Bank Account in Brazil
- Recruitment of Local Staff
- Taxation
- Appendix
Appendix I: Useful Links and Addresses - Disclaimer
1 Introduction
The Federative Republic of Brazil is the largest economy in Latin America and one of the largest countries in the world in terms of area and population. After a period of stagnation, inflation and external debt that increased to new highs in the 1980s1, Brazil implemented the Real Plan in 1994. The main elements of the plan included the introduction of the real as new currency, the de-indexation of the economy, and the tightening of monetary policy. The Real Plan succeeded in its objective of ending decades of hyperinflation and macroeconomic uncertainty and opened a path to economic growth2
In 2008 Brazil's GDP reached USD 1,612.5 billion (EUR 1,102 billion)3, making it the world's eighth-largest economy. Brazil's GDP growth rate in 2008 was 5.1 percent4, a decrease of 0.5 percent compared with 2007. In spite of the global financial crisis, Brazil's Minister of Finance predicts growth of 1.0 percent for 2009 and 4.5 percent for 20105, suggesting that the country has weathered the financial crisis successfully. Brazil was one of the last countries to enter recession in the final quarter of 2008, and returned to positive GDP growth of 1.9 percent quarter over quarter in the second quarter of 20096. The recovery was driven by government spending, tax cuts on consumer goods and an aggressive monetary-easing cycle. The growth in the second quarter was led by the expansion of the manufacturing and service sectors (2.1 percent and 1.2 percent, respectively).
The main drivers of the Brazilian economy are automobiles, aviation, mining and petroleum, steel products, ethanol and biodiesel, and commodities such as coffee, soybeans, beef and sugar. In addition, Brazil is the world's leading producer of clean energy.7 It imports from and exports to over 200 nations around the globe. In 2008, Brazil's exports reached USD 197.9 billion (EUR 135.2 billion) and imports valued USD 173.2 billion (EUR 118.4 billion). Main export products are (iron) ores, crude oils, soybeans and soy products, meats, aircraft and automobiles. Brazil's main imports are, among others, crude oil, passenger cars, fuels, parts for motor vehicles and human and veterinarian medicines. Brazil's major trading partners include the United States, Argentina, China, Germany, Japan, Venezuela, Chile, Italy, Russia, Nigeria, South Korea and France.8
Brazil is a full member of the Southern Common Market (Mercosur), and therefore has preferential trade agreements with Bolivia, Chile, Colombia, Cuba, Ecuador, Mexico, Peru, and Venezuela. Brazil also has a number of bilateral preferential agreements with other LAIA members. A free trade agreement between Mercosur and Israel is not yet effective. As part of Mercosur, Brazil signed a partial scope agreement with India, concluded negotiations of a partial scope agreement with the South African Customs Union (not yet effective), and is negotiating preferential trade agreements with Egypt, the Gulf Cooperation Council (GCC), Jordan, Morocco, and Turkey. The negotiation of an association agreement between Mercosur and the European Union, including a bi-regional free trade agreement, remains on Mercosur’s agenda.9
Inbound foreign direct investment (FDI) in 2008 amounted to USD 43.9 billion (EUR 30 billion). The United States was the largest direct investor, accounting for approximately 16 percent of the total inbound FDI, followed by Luxembourg (14 percent), the Netherlands (11 percent) and Japan (9 percent). In 2008, 38.5 percent of the FDI flow went into the service sector, 31.9 percent into manufacturing and the remainder in agriculture, fishing and mining10.
Foreign capital in Brazil is governed by the Foreign Capital Act (Lei do Capital Estrangeiro) and is regulated by Decree N° 55762 / 1965. All foreign investments have to be registered with the Central Bank of Brazil within 30 days, as this is the basic requirement for the remittance of profits, repatriation of capital, and registration of reinvestment. Brazilian law gives the same protection and guarantees to foreign capital investments that it gives to investments made by Brazilian nationals. Special incentives are offered for investments in mining, fishing, tourism, shipbuilding, and reforestation and for projects undertaken in the northeast and Amazon regions11.
Participation of foreign capital is prohibited in the following activities:
the development of activities involving nuclear energy;
health services;
post office and telegraph services; and
the aerospace industry.
In the following sectors, foreign participation is limited by law:
the acquisition, operation and leasing of rural lands by foreigners residing in Brazil or by foreign-based corporate entities authorized to operate in Brazil requires congressional authorization;
acquisition of properties by foreigners in border areas is restricted in the interest of national security;
restrictions on the participation of foreign capital in financial institutions are mostly waived in the national interest;
the participation of foreign capital in public air transport services is limited to 20 percent; also, such companies must be managed by Brazilians; and
some restrictions apply to foreign ownership and management of newspapers, magazines and other periodicals, and of radio and television networks.
Depending on the geographical region and the economic sector, a foreign investor may qualify for tax benefits, financing and other concessions. These incentives can be requested individually or jointly, within the municipal, state or federal realms. Incentives are mainly available for FDIs in underdeveloped regions of the country. In addition, there is a tax reduction for certain imported capital goods.12 The government has identified five priority sectors and promotes foreign investment in said sectors with additional benefits. These sectors are semiconductors, pharmachemicals, software, biomass and bioenergy and capital goods.
Despite Brazil’s rather low ranking with regard to ease of doing business, and its poor performance with regard to starting a business compared with those of its peer countries, FDI flows to Brazil continue to increase.
2 Modes of Setting up a Business in Brazil
This section discusses the most common investment vehicles used by foreign investors, the procedures to be followed for establishing them and the regulations for each investment mode.
Table 1 shows the most common modes of setting up businesses by foreign investors in Brazil. There are two main types of companies that are used for most business operations in Brazil: the corporation (Sociedade Anônima or S/A) and the limited liability company (Sociedade Limitada or Ltda), commonly referred to as a Limitada. Setting up a Limitada is simpler and less expensive than incorporating a joint stock company and is therefore often recommended for initial establishment. The company can then be transformed into a corporation at a later stage. There is also an option to set up a branch in Brazil; however, the process is very bureaucratic, lengthy and, compared with the Limitada or Anônima, expensive. Therefore, a branch establishment is only recommended in special circumstances13.
There are two public registries for companies in Brazil, depending on the company type chosen: The Commercial Registry is intended for the filing of activities of business companies, effected at the State Board of Trade (Junta Comercial); here, individual businessmen, Limitadas and anônimas need to register. The Civil Registry registers Sociedades Simples. Many of the forms required by both registries can be obtained at Brazilian stationary shops.
Setting up a business as a foreign investor is not linked to a minimum capital requirement, with the exception of joint stock companies. However, to obtain a visa and work permit for Brazil, the investor will have to show a proof of investment equalling at least USD 50,000 (EUR 34,171).
Table 1: Different Modes of Setting up Business in Brazil
| MODES OF SETING UP A BUSINESS | DEFINITION |
|---|---|
| Joint Stock Company or Corporation (Sociedade Anônima - S/A) |
|
| Limited Liability Company (Sociedade por Quotas de responsibilidade limitada - Ltda) |
|
| Simple partnership (Sociedade Simple - S/S) |
|
| Individuals |
|
Source: Investing in Brazil
2.1 General Overview14
Incorporation of a company in Brazil requires registration with various governmental authorities on the state level (depending on the state of incorporation). The following registrations have to be made regardless of the form of company established.
2.1.1 The Commercial or Civil Registry
The articles of association or bylaws must be filed with the Commercial Registry (S/A, Ltda, individual) or the Civil Registry (simple partnership).
This action has to take place in the state where the company is headquartered.
After the registration, the companies become legal entities with a legal status separate from their owners, but are not yet allowed to operate.
In general, the following documentation needs to accompany the registration:
Three original counterparts of the articles of bylaws, signed by the partners and possibly by witnesses and an attorney
A power-of-attorney, granted by foreign shareholders or quota holders to an attorney resident in Brazil
Documentation proving the existence of a foreign entity holding shares or quotas
Certified copies of the identity and taxpayer cards of all shareholders, quota holders, directors, partners and managers
Completed forms containing data on the company and its shareholders, quota holders, directors, partners and managers
Receipt of payment of the application fees
For civil companies, a copy of the official publication of an extract of the company’s articles of association
All foreign documents must be translated by a sworn translator and legalised before the Brazilian consulate in jurisdiction.
2.1.2 The CNPJ – Brazilian Internal Revenue Service
After registration of the articles or bylaws, the company must register with the CNPJ at the office with jurisdiction over the tax domicile of the company in Brazil. This registration is necessary to open bank accounts and for purchases, but does not allow sales or invoicing activities.
The following documents need to be presented by a foreign entity when registering:
A copy of incorporation documents, a copy of the corporate resolution approving the issue of the power-of-attorney to a resident of Brazil, and
A declaration stating its controlling shareholders.
2.1.3 State and Municipal Taxpayers’ Registries
To become fully operational, companies need to register with the state and municipal registries. Companies that only render services do not need to register on state level.
Filing with the State Registry (treasury office) requires various documents, i.e., a copy of the registration with the CNPJ and a copy of the latest real estate tax bill for the property where the company is headquartered. Last, the company needs to register with the Municipal Taxpayers’ Registry, which is the entity responsible for granting business licences (alvará de funcionamento) and ensuring the company’s compliance with local regulations.
2.2 Joint Stock Company/Sociedade Anônima (S/A)
To set up a joint stock company or corporation, at least two partners or shareholders are required. Their responsibility is limited to the issued cost of subscribed or acquired capital. Before this type of company can be started, viability studies must be conducted to prove that the company can be successful. In case it is decided to list the company on the stock exchange (open company), the corporation has to be registered with the Securities Commission. For closed companies, this step is not required. However, both types need to be registered with the local Board of Trade (Junta Comercial).
Setting up a corporation is the most elaborate process. The requirements
are detailed below.
2.2.1 Legal Registration Process
Brazil partially facilitates the setting up of a business online. However, not all procedures can be completed via the Internet. On the website of the Receita Federal (the federal tax-collecting agency), an investor can download the Programa CNPJ, a program that allows him or her to fill in several forms electronically.
Four different entities are involved in the process of setting up a company, and some of the documentation is required by all of them, including the Social Security Number of Partners (CPF); the Identity Card of the partners (RG) and Proof of Property Tax Payment (IPTU).
2.2.1.1 Step 1 – Board of Trade (Junta Comercial)
Entity in charge: Junta Comercial (Board of Trade) of the state in which the business is established.
Required documentation and procedures:
The filing of the Articles of Association of an S/A must be accompanied by the following documents15.
- Articles of Incorporation or Minutes of the General Incorporation Meeting, listing the particulars of the subscribers and proof of payment of the entire capital stock
- Bank deposit slip (from Banco do Brasil S.A.) attesting to a deposit in cash of the equivalent to no less than ten percent (10%) of the paid up capital subscribed
- Bylaws signed by all subscribers
- Report on the subscribed capital, signed by the founders or by the Secretariat of the General Meeting, containing full name, nationality, marital status, profession, residence and domicile of subscribers, in addition to the number of subscribed shares and the amount paid
- Power-of-attorney of any foreign resident shareholder, signed before a Public Notary in the country of origin, stamped by the Brazilian Consulate, translated by a public sworn translator in Brazil and registered at the Public Notary Office
- Documentary proof of partners resident abroad
- Photocopies of identity cards of elected directors and board members
- Forms duly filled in with data on the company and its shareholders, accompanied by proof of payment of all charges due for filing
Request business-name search by means of the form Pedido de Busca (search request); this procedure requires payment of a tax; the exact tax amount can be obtained on request at the proper entity office
Three copies of the Constitution Writing, with all pages initialled by the partners and witnesses plus the signature of a lawyer and the Statute of the Public Limited Company
Two completed copies of the Ficha de Cadastro Modelo 1 (registry file card, Model 1), with data on the proposed enterprise
Two completed copies of the Ficha de Cadastro Modelo 2 (registry file card, Model 2) for each stockholder, manager, delegate and/or proxy
Completed form Requerimento Padrão da Junta (the brownbacked standard form required by the board of trade) plus the protocol (registration document)
Three completed copies of the form Comunicação de Enquadramento como Microempresa (a document that states the firm fits the micro-business category) or Empresa de Pequeno Porte (small business), whichever type fits the firm’s category
Certified copies of the CPF (Social Security Number issued for purposes of taxation) and RG (Registro Geral, Identity Card) of the partners and of all other persons who filled in the Registry File Card, Model 2
Certified copy of partners’ proof of residence
Certified copy of the IPTU (Imposto sobre Propriedade Predial e Territorial Urbana; property tax) of the company’s headquarters; the IPTU of a property is determined by the market value of the property, its location and the type of property (building, house, apartment or land)
Pay Registration Tax at the Caixa Economica by means of the GARE (State Tax Guide), code 370-0 and of the DARF, code 6621 (Federal Tax Guide). To find out about the amount to be paid, contact the Junta Comercial (Board of Trade)
2.2.1.2 Step 2 – Federal Revenue Service (Receita Federal)
Required documentation and procedures:
Two completed copies of the DBE (Basic Entry Document) to request registration with the CNPJ (National Registry for Legal Entities), which must be signed by the legal representative of the enterprise and certified by a notary; the document is issued automatically by the Programa CNPJ of the Federal Revenue Service
Completed FCPJ (registry file card for legal entities), the QSA (a document listing the names of partners or administrators) and the FCPJ (registry file card for legal entities) on a diskette of the Programa CNPJ, provided by the Federal Revenue Service
In the case of proxy-signed DBEs, a copy of the proxy document must be attached, either certified by a notary public or together with the original; in this case, the FCPJ must be filled in with the Social Security Number (CPF) of the person responsible for the firm
In the case of QSA, the 12 biggest shareholders with voting rights and all directors and administrators must be listed
Partners of foreign nationality or living abroad must present a certified copy or a copy and the original of the proxy document giving power of attorney to those who will represent them in Brazil; when such a document is issued abroad, the local Brazilian consulate must certify the legal domicile of the grantor, and the document must be translated by an official translator
Original or certified copy of the incorporative/deliberative act of the enterprise, duly registered with the proper office
Certified copy of the Social Security Number (CPF) and the Identity Card (RG) of the partners
Certified copy of the partners’ proof of residence
Certified copy of the IPTU (Property Tax) of the company’s headquarters
Proof that all partners have filed their income-tax declarations with the Revenue Service and proof that they have done so in the past five years
If they are exempt, they must submit a Declaration of Exemption, with their signatures certified by notary public
Pay tax at a bank, using the DARF form, code 6621 (Form applies for Federal Taxes)
2.2.1.3 Step 3 – Treasury Office (Secretaria da Fazenda)
Required documentation and procedures:
Five completed copies of the Declaração Cadastral - DECA (registry declaration)
Completed Declaração para Codificação de Atividade Econômica – DECAE (declaration for the codification of the type of business)
Completed codification sheet that comes with the DECAE
Fiscal Book, Model 6
Company Charter duly registered with the Junta Comercial (Board of Trade), the original document and a certified copy
CNPJ (legal-entity registry document), both the original and a copy
Certified copy of the Identity Card (RG) and the Social Security Number (CPF) of the partners
Certified copy of the partners’ proof of residence
Certified copy of the IPTU (property tax) of the firm’s headquarters or the lease/rental contract certified by a notary public
Secure an Alvará da Vigilância Sanitária (permit issued by the public health department), when the business activity involves retail of food products
Secure a permission from Cetesb (Environmental-Sanitation Technology Company), in the case of an industry
Pay tax at a bank, using the GARE-DR form, code 167-3 (Form applies for State Taxes)
2.2.1.4 Step 4 – City Administration
Required documentation and procedures:
Two copies of the Guia de Dados Cadastrais (registry-data form), to obtain the CCM (taxpayers register)
Original and copy of the CNPJ
Original and copy of the registered Company Charter
Certified copy of the partners’ CPF and RG
Certified copy of the firm’s IPTU (tax base year), both sides
Certified copy of the firm’s headquarters’ lease/rental contract, certified by a notary public
Fiscal Books, Model 51 and 57
When the CCM is granted, the city will issue a guide for payment of the installation, operation and location tax (TLIF)
When the documentation above has been secured, the firm should apply for the “Alvará de Funcionamento” (permit to start operating) at the proper City Administration office
2.3 Limited Liability Company/Limitada
A Limitada is organized through the Articles of Association and has limited liability partners. Since every partner has its responsibility limited to the value of their shares, all of them are jointly liable for the payment of the capital stock. There are only minor differences in the process of setting up a Limitada compared with a corporation.
2.3.1 Legal Registration Process
The establishment of a Limitada involves the same four entities as the establishment of a corporation and requires many of the same documents.
2.3.1.1 Step 1 – Board of Trade (Junta Comercial)
The process is almost identical to that for the establishment of a corporation. However, it is slightly less elaborate, as the documents required for filing the Articles of Association of a S/A are not necessary (e.g. information on board members, proof of paid-up capital, etc.).
2.3.1.2 Step 2 – Federal Revenue Service (Receita Federal)
Again, the processes are highly similar; given the different nature of the investment vehicle, however, certain filings are not required for Limitadas, such as an overview of the main shareholders with voting rights requested in the QSA filing for corporations.
2.3.1.3 Steps 3 and 4 – Treasury Office (Secretaria da Fazenda) and City Administration
The procedures and required documents are the same as in the case of the establishment of a corporation.
2.3.2 Regulations16
A Limitada must at least have two partners, who in most cases can be foreigners or nationals and both individuals or legal entities.
There are no minimum capital requirements, except for certain types of companies for which the law provides a minimum capital requirement.
As long as the capital is not fully paid up, the partners’ liability is limited to the company’s capital. Once the capital is fully paid up, liability is limited to each partner’s ownership interest.
The Limitada does not have to publish its accounts and other corporate documents, which makes this type of company less expensive than the corporation; also, the Limitada allows for a higher degree of confidentiality regarding company affairs.
However, it is noteworthy that the articles of association do have to be filed and can be obtained by others. The articles of association contain the company name, the period for which it is established, core activities, its principal place of conducting business, details on each partner and the amount of the quota capital, as well as information on which of the partners is managing the company (i.e. all partners, some partners or one of the partners).
The management of a Limitada must reside in Brazil.
2.4 Simple Partnership/Sociedade Simple (S/S)
2.4.1 Legal Registration Process
The establishment of a Simple Partnership is recommended for those entities whose object is the exercise of intellectual, scientific,
literary or artistic professions.
2.4.1.1 Step 1 - Notary office for the registry of legal entities (Cartório de Registro Civil de Pessoa Jurídica)
Required documentation and procedures:
Choose a name for the firm and request a name search; this procedure requires payment of a tax
Secure four copies of the Company Charter, with all pages initialled by the partners and witnesses, with signatures certified by a notary public
If the activity of the business requires the presence of a skilled professional (a lawyer, for example) the contract must be registered with the Conselho Regional da Categoria (the regional council of the profession in question, e.g. lawyers must register with the OAB
Brazilian Lawyers Organization) before they are registered with notary office for legal entities
Certified copies of the CPF and RG of the partners
Certified copy of partners’ proof of residence
Pay tax charged by the notary public office for going public
2.4.1.2 Step 2 - Federal Revenue Service (Receita Federal)
Required documentation and procedures:
The procedures and required documents are the same as in the case of the establishment of a Limitada19
2.4.1.3 Step 3 – City Administration
Required documentation and procedures:
The procedures and required documents are the same as in the case of the establishment of a Limitada or a Corporation; however, a registration on state level with the Treasury Office is not required for this type of company
2.5 Individual Businessman
2.5.1 Legal Registration Process
While involving the same government institutions, the process of registering as an individual differs to some extent from the previously described company types, mainly regarding the forms that need to be filled to register.
2.5.1.1 Step 1 - Board of Trade (Junta Comercial)
Required documentation and procedures:
Request business-name search with the form Pedido de Busca (search request)
Four completed copies of the Formulário de Firma Individual (Sole Proprietorship form)
Completed Requerimento Padrão da Junta (a standard form required by the board of trade), which is specific for individual businessman (blue cover), and the protocolo (a registration document)
Completed form Comunicação de Enquadramento como Microempresa (a formal notification that the company is categorized as a micro business) or the form Empresa de Pequeno Porte (small business), submitted in three copies (depending on the categorization of the business under the one type or the other)
Three completed copies of the Ficha de Cadastro Modelo 1 (a registry filing card)20
Two certified copies of the proprietor ’s CPF and RG (personal identity documents)
Proof of address (IPTU of business headquarters - both sides)
Proof of payment of taxes (GARE, code 370-0 and DARF, code 6621 – the amount to be paid can be ascertained from the Junta
Comercial)
2.5.1.2 Step 2 - Federal Revenue Service (Receita Federal)
Required documentation and procedures:
Two completed copies of the DBE (Basic Entry Document) to request registration in the CNPJ (National Registry of Legal Entities), signed by the legal representative of the business (signature must be certified by a notary public); the document is issued automatically by the Programa CNPJ of the Federal Revenue Service
Completed FCPJ (registry file card for legal entities) and the FC (complementary file card for legal entities) on a diskette of the Programa CNPJ, a program provided by the Revenue Service
In the case of proxy-signed DBEs, enclose copy of proxy document, either certified by a notary public or together with the original; in this case, the FCPJ should be filled in with the legal proprietor’s CPF;
The original or certified copy of the incorporative/deliberative act of the enterprise, duly registered with the proper office, must be presented
Certified copy of the partners’ CPF and RG
Certified copy of the partners’ proof of residence
Certified copy of the IPTU of the firm’s headquarters21
Proof that all partners have filed their income tax declarations with the Revenue Service and proof that they have done so in the last five years; in case they are exempt, they should submit a Declaration of Exemption, with their signatures certified by a notary public
Pay tax at a bank, using the DARF form, code 6621
2.5.1.3 Step 3 – Treasury Office (Secretaria da Fazenda)
Required documentation and procedures:
Five completed copies of the Declaração Cadastral - DECA (registry declaration)
Completed Declaração para Codificação de Atividade Econômica – DECAE (declaration for the codification of the business)
Completed codification sheet that comes with the DECAE
Certified copy of proprietor’s CIC (Individual taxpayer’s number, Cadastro Individual de Contribuintes) and RG
All documentation which has been registered with the Junta Comercial (Board of Trade)
Fiscal Books Model 1 (Industry) and Model 1A (Commerce)
Certified copy of the firm’s IPTU (current year), both sides
Certified copy of the lease/rental contract - which should have been registered in a notary public office, or proof of property ownership
Firm owner’s proof of residence (original document)
Proof of payment of the registration fee by way of the GARE-DR, code 67-3; the amount due can be ascertained at the Secretary’s
Office
2.5.1.4 Step 4 – City Administration
Required documentation and procedures:
Two completed copies of Guia de Dados Cadastrais (registrydata guide) in order to obtain the CCM (taxpayers register)
Original and copy of the CNPJ
Original and copy of the registered Company Charter
Certified copy of the proprietor’s CPF and RG
Certified copy of the firm’s IPTU (current year), both sides
Certified copy of the lease/rental contract, which should have been registered with a notary public
Fiscal Books, Models 51 and 57
Fill in the Declaração de Microempresa (a declaration that the firm fits into the micro-business category), if such is the case
When the CCM is granted, the City will issue a guide for payment of the location, installation and operation tax (TLIF)
When the documentation above has been secured, the firm should apply for the “Alvará de Funcionamento” (permit to start the business activity) at the proper City Administration Office
2.6 Average Time (in Days) Required for Setting up a Business
To start a business, the legal and bureaucratic hurdles that companies/entrepreneurs must overcome need to be identified. Registration is typically critical for accessing a range of market infrastructure, including finance, physical infrastructure (electricity, water, etc.) and contract enforcement; the greater the number of procedural requirements, the larger the scope for enforcing them unevenly.
According to the World Bank Doing Business 2010 report, it takes significantly more time to set up a business in Brazil than in other Latin American or BRIC countries. While the number of days has decreased by 32 since 2008, it still takes 120 days to set up a limited liability company. In fact, Brazil ranks 126 out of 183 observed economies for starting up a business. Its overall rank for ease of doing business is 129.17
Figure 1 shows the average time taken for starting a business in different countries.
Figure 1: Time Required to Start Businesses in Various Countries (2010)
Source: World Bank 2010
Note: OECD = Organization for Economic Cooperation and Development
3 Procedures for Immigration
Foreigners may or may not need a visa to enter Brazil, dependent on the country their passport is issued in and the purpose of their stay. A visa is not necessary in the following cases18:
People from countries having signed visa waiver agreements with Brazil can enter the country without a visa, if their visit does not exceed 90 days and qualifies as tourist or business trip. A business trip only qualifies as such if the traveller does not receive any payment from a Brazilian company. Luxembourg has signed a visa waiver agreement with Brazil.
Bearers of a diplomatic passport issued in select countries do not need a visa. Luxembourg qualifies for this exemption.
Holders of official or service passports issued in select countries do not need a visa and can, like bearers of diplomatic passports, stay in Brazil for an indefinite period of time.
To be eligible for permanent residency in Brazil, one of the following cases has to apply:
Family reunion (e.g. with Brazilian spouse, parent, et al.)
Retirement residence transfer
Work as a manager or director of a religious or social assistance organization
Personal investment in Brazil; in this case the visa applicant is required to invest a minimum of USD 50,000 (EUR 34,170) in starting up a new business or in an existing business
Intra-company transferee to work as manager, director, or executive
Person of extraordinary ability in the sciences, technological, research, or academic fields, with a job offer at a Brazilian research, scientific, or academic organization
If the foreigner stays for more than five years with the same local employer, the visa loses its link with the local company. Consequently, the individual may apply for a permanent visa in Brazil, with no immigration restrictions.
3.1 Visa Requirements
Table 2 lists the visa categories according to the different purposes of visit in Brazil.
Table 1: Purpose of Visit and Visa Category in Brazil
| PURPOSE OF VISITE | VISA CATEGORY |
|---|---|
| Transit: Foreigners passing through Brazil when travelling between two countries may exit the transit area of the airport. Allows stays up to ten days. | Transit |
| Tourism: Recreational visits of up to 90 days; validity can be up to five years, depending on reciprocity. Strictly prohibits commercial activities of any sort. | Transit |
| Cultural trip or study mission: Visa intended for researchers or lecturers, among others. Valid for up to two years, renewable for another two years. | Temporary I |
| Business trip: For professionals who come to Brazil for business without the intention to immigrate. Allows stays of up to ninety days per year, however, its validity can be up to five years, depending on reciprocity. Can be extended by the Federal Police Department prior to its maturity. Citizens of Luxembourg do not require a Business Visa. | Temporary II |
| Artists and sportsmen: For the professionals who come to Brazil to participate in related events and without employment in the country. Valid for 90 days and may be extended by the Federal Police Department before maturity. Work permit is required. | Temporary III |
| Student: For students in regular (primary, secondary, tertiary, graduate and others). Paid work is prohibited under penalty. Validity up to one year, extendable for a similar period to the end of the course. | Temporary IV |
| Work: For foreigners coming to Brazil to perform activities with a Brazil-based company. A work permit is required. The visa can be issued with validity of up to two years and is renewable for the same period; it can be transformed into a permanent visa. | Temporary V |
| Journalist: Correspondents of newspapers, magazines, radio, television and foreign news agencies, whose remuneration comes from outside Brazil and not from a Brazilian company. The visa is valid for a maximum of four years, renewable for an equal period. | Temporary VI |
| Religious mission: Applies to those travelling with religious or missionary assignments or members of a religious congregation or religious order. The visa is granted for up to one year extendable for an equal period and can be made permanent. | Temporary VII |
| Permanent: For those wishing to settle permanently in Brazil. Note that some visas require authorization from the Ministry of Labour and Employment, in accordance with the regulations of the National Immigration Council. | Permanent |
| Courtesy: Given to foreign domestic workers employed by heads and officials of diplomatic and consular missions accredited by the Government of Brazil. | Courtesy |
| Official: To officials of international organizations on official business and employees of embassies and consulates that do not have diplomatic status, as well as their spouses and children under 21 years. Valid for two years or the period of the mission, depending on reciprocity | Official |
| Diplomatic: For diplomats and officials with diplomatic status and heads of offices of international organizations, as well as their spouses and children under 21 years. | Diplomatic |
Source: Ministry of Justice
Documents Required for Visa Applications19
- Passport valid for at least six months
- Two versions of the visa application form, filled in and signed by the applicant
- Two passport-sized photographs
- Fee for Work Visa – Temporary V: EUR 125
- Other documents that each category of visa may require (e.g. certificate of good conduct issued by local police or letter from employer detailing the rationale for the trip)
Visa Issuance Authority
Brazilian Embassy or Consulate; depending on visa category, approval from the Brazilian Ministry of Labour and Employment is required.
Note
Any person holding a Visa to Brazil, with the exception of Tourist and Business Visas, must register with the Federal police within 30 days of arrival in Brazil.
3.2 Procedures for Work Permits
Brazil requires foreigners involved in commercial activities of any kind to hold a work permit. Depending on the type of visa, various conditions may apply. Also, by law, two-thirds of all employees must be Brazilian nationals, earning two-thirds of the total payroll. Excluded from the calculation are directors who are not employees of the company and specialists that are not available in Brazil.20
3.2.1 Types of Work Permits and Visas issued in Brazil
Foreign Professor, researcher or scientist
Foreign Professional Trainee
Foreign citizen under an internship
Foreign crewmember of a foreign fishing ship
Foreign Investor – Individual, Proof of employment of local workmanship
Foreign citizen contracted to render technical assistance and/or technology transfer services
Foreign Administrator, Manager, Director or Executive with management power
Foreign citizen working in a position with concomitant managing powers, within the same group or economic conglomerate
Foreign citizen representing a foreign financial institution
Foreign citizen with an employment contract
Foreign artist(s) and sports person(s)
Foreign citizen working on board of a foreign tourism ship
Foreign citizen working on board of a foreign embarkation or platform
3.2.2 Procedures21
Brazil differentiates between temporary and permanent visas. Depending on the applicant’s occupation in Brazil, he or she may choose one of the options or may be required to opt for one of them. The necessary documents to be submitted by the applicant are dependent on the type of visa/permit.
The Brazilian Ministry of Labour and Employment publishes a detailed procedure guide regarding the concession of work permits to foreigners, which can be found here: Procedure Guide. Below, two common types of work permits are laid out:
Foreign Citizen contracted to Render Technical Assistance and/ or Technology Transfer Services
(Regulates the concession of a work permit to a foreign citizen under a technology transfer contract and/or a contract to render technical assistance services based on a cooperation or convention agreement and without employment in Brazil)
Type of visa: Temporary. Three types of visas are foreseen: normal (1), express (2) and emergency situation (3)
Validity of visa: Up to one extendable year for type 1; or up to ninety extendable days for type 2; or up to thirty non-extendable days for type 3. The normal type (type 1) is related to other cases involving contracts for technical services and/or technology transfer. The express type (type 2) is related to the rendering of technical assistance for a short period of time, up to ninety days, and with fewer documentation requirements. The emergency situation type (type 3) is related to unforeseen situations that pose an imminent threat to life, the environment, the national patrimony or that have resulted in the interruption of production or services. In this case, applications are free from the formalities foreseen in NR 61/04 and the visas can be requested directly from the local Brazilian consular authorities.
Objective: To allow the rendering of technical services and/ or technology transfer for foreign firms that are established in the national territory. It does not apply to foreign citizens that enter Brazil in order to fill administrative, financial or management positions for the firm that is established in Brazil. Foreign citizens entering the country under the protection of this resolution cannot substitute national workers. The foreign citizen cannot be an employee of the Brazilian firm.
Type of permit: Individual
Applicant: Legal entity established in Brazil
Obligatory documentation:
- Documents common to Visa Types 1 and 2
- Work Permit Application Form
- Applicant and Candidate Form– He/she must also submit any type of remuneration received abroad to the Brazilian Revenue Service and according to the “Applicant and Candidate Form”
- Legal entity documentation (contract or consolidated corporate statutes and respective alterations) as registered with the Commercial Board or Public Civil Registry. All pages of copies must be pages authenticated by the notary
- Document on the election or appointment of the legal representative of the applicant institution as registered with the Commercial Board or Public Civil Registry or, in the case of a Public Institution, as published in the Official Gazette (DOU)
- Copy of the National Legal Entity Registration Card (CNPJ) - (if the application is made by an individual he/she is exempt from this requirement)
- Officially delegated power of attorney, or with a notarized authenticated signature in the case of a private application, if the applicant is represented by an attorney; copies must be authenticated by the notary
- Signed document where the applicant takes full responsibility for all medical expenses incurred by the foreign citizen or his/ her dependants during the stay in Brazil
- Signed document whereby the applicant firm takes responsibility for the repatriation of the foreign citizen as well as his/ her dependants after the end of the stay
- Information on all of the locations and addresses where the foreigner will render his/her services
- Legible non-notarized copy of the passport identification page(s) (containing the number, name, date of birth, nationality and the photograph)
- GRU – State Revenue Collection Guide including proof of payment of individual immigration tax, 16, 93 Brazil Real, for each foreign citizen
- Proof of the foreign citizen’s professional experience, during a minimum of three years, in the same activity as the one he/ she is contracted for
Specific Documentation required for Type 1:
- Notarized copy of one of the following documents: (1) Document issued by the National Revenue Service in the case of a sale or acquisition of equipment including technical assistance; (2) Document proving a technical cooperation agreement between firms in the same economic group including proof of association; (3) Document of a transaction in foreign currency between the Central Bank of Brazil and the legal foreign entity; or (4) Contract, agreement or convention related to the rendering of technical assistance services; Proof of the legal authority of the legal representative of the foreign firm that signed the contract, agreement or convention, through the presentation of the document that has empowered him/her according to the legislation of the country of origin.
- Detailed training plan according to the contract, agreement or convention containing information on the foreign citizen’s professional qualifications; the scope of the training; the number of Brazilians that will be trained; the form and execution of the training; the location of the training; the duration of the training; the results expected from the training.
Foreign Investor – Individual (Regulates the concession of a work permit to an individual foreign investor who has the objective of being granted a permanent visa)
Objective: To allow a foreign citizen to settle in Brazil in order to invest his/her own resources originating from a foreign source (minimum of USD 50,000) in productive activities. If the investment is less than USD 50,000 but is accompanied by an investment project with the objective of creating at least ten new jobs, a request for a visa can be made to the National Immigration Council which may, in certain exceptions, grant the concession of the visa.
Applicant: Legal entity in Brazil (the firm that is receiving the investment).
Obligatory Documentation:
- Work Permit Application Form
- Applicant and Candidate Form
- Legal entity documentation (contract or consolidated corporate statutes and respective alterations) as registered with the Commercial Board or Public Civil Registry. Copies must have all pages authenticated by the notary; the invested foreign capital must be an integral part of the capital stock of the applicant firm
- Document on the election or appointment of the legal representative of the applicant institution as registered with the Commercial Board or Public Civil Registry
- Copy of the National Legal Entity Registration Card (CNPJ)
- Officially delegated power of attorney, or with a notarized authenticated signature in the case of a private application and if the applicant is represented by an attorney; copies must be authenticated by the notary
- Officially delegated power of attorney when the investor represents him/herself
- GRU – State Revenue Collection Guide including proof of payment of individual immigration tax, 16.93 Brazil Real, for the foreign citizen and each of his/her dependants
- Legible non-notarized copy of the foreign passport’s identification page(s) (containing the number, name, date of birth, nationality and the photograph)
- Electronic Registration Declaration of Direct Foreign Investment in Brazil (RDE-IED) – Consolidated Investment Statement (pages MRDE614, MRDE614E, MRDE614A, MRDE612C, MRDE614B and DE614C), obtained at the Information System of the Central Bank of Brazil, Banco Central (SISBACEN); or a currency exchange contract issued by the bank receiving the amount for the direct investment in Brazil – ownership of Brazilian firms – with codes: 70188 and 70205, as proof of the investment, in foreign currency equalling or higher than USD 50,000. In case of doubt contact the Central Bank of Brazil
- Proof of declaration of the last fiscal Revenue Declaration for tax purposes
Note: Applications that do not comply with the requirements (lack of documents or flawed processes) within 30 days from the date of availability of the information at the above-mentioned electronic address will be dismissed and archived.
3.3 Important Documents in Brazil22
When the expatriate arrives in Brazil, some documents are necessary for maintaining daily activities, e.g. opening a bank account.
Identity Card (RNE). Within 30 days of arrival in Brazil, the expatriate must request the Alien Registration Card (RNE) from the Federal Police. This card is an essential document and generally required for obtaining other documents.
Taxpayer Card (CPF). This card is provided by the Federal Revenue Service; the RNE is required when applying for the CPF. This document is also necessary to open bank accounts, rent houses, sign contracts and for other daily activities.
Work Card (Carteira de Trabalho). All workers are required to have a “Carteira de Trabalho e Previdência Social” (“Working and Social Security Document”). It is illegal to work without this document, which can be obtained from the closest regional office of the Ministry of Labour.
3.4 Availability of Commercial Real Estate
The acquisition of real estate in Brazil’s urban areas is open to foreigners, with the exception of coastal land, which is owned by the Federal Government. No local partner is needed. However, certain restrictions exist regarding the purchase of rural lands and the acquisitions by foreigners of properties in border areas. Purchase of such lands requires authorization from the General Secretariat of the National Security Council. In addition, real estate which is owned by the Federal Government and characterized as essential for national security may not be acquired by foreigners without the prior permission of the President of the Republic.23
Most foreign companies establish their offices in Rio de Janeiro or Sao Paulo, Brazil’s most expensive cities in terms of real estate leases. The vacancy rate for real estate was 7.4 percent in Sao Paulo and 6.9 percent in Rio de Janeiro during the first quarter of 2009.
3.4.1 Procedure for Real Estate Acquisition24
Foreigners and Brazilians have almost equal rights when it comes to the leasing or acquisition of real estate.
The following steps have to be carried out by foreign-invested companies to acquire real estate in Brazil:
To buy a property CPF (Cadastro das Pessoas Físicas) is required
There are numerous business establishments and licenced individuals who offer services of apartment rental brokers or for sale property listings; to avoid scams, it is recommended that investors choose a member of CRECI, the Professional Organization regulating career Property Managers and Real Estate brokers, as an agent.
Use of a local lawyer is not necessary, but recommended
Once a property is purchased, it has to be registered with the Registro Imobiliário, the statute of Real Estate Property, in order to claim possession of the property; this usually takes place at Cartório do Registro de Imóveis located in the same jurisdiction as the property, but can also be conducted at any location by an authorized official
3.4.2 Related Regulations
Constitution of Federal Republic of Brazil Article 5, Item XXII
3.5 Average Rent for Office Space in Brazil
Sao Paulo has the highest average monthly lease values in Brazil, amounting to BRL 85.24 (EUR 32.18) per square metre. The main office areas are the city centre, Itam, Faria Lima, Paulista, Berrini. Marginal Pinheiros, Jardins, Vila Olimpia, C. Santo Antonio, Barra Funda, Moema, Vila Mariana Paraíso, Alphaville, Marginal Tietê and Jabaquara.
Rio de Janeiro is a close second in terms of prices, with lease values averaging BRL 85.15 (EUR 32.15) per square metre. The city centre, Orla, Zona Sul, Cidade Nova, Barra da Tijuca and the industrial zones are the main office areas.25
3.6 Average Living Costs for Expatriates
According to Mercer’s 2009 Cost of Living survey, designed to help multinational companies and governments determine compensation allowance for their expatriate employees, the cost of living in Sao Paolo and Rio de Janeiro has decreased significantly since 2008. Sao Paulo is now ranked 72 (from 25) and Rio de Janeiro fell to 73 (from 31). In the same period, Luxembourg moved up 5 places and is now the world’s 38th most expensive city in which to live.26
The HSBC Bank International Expat Explorer Survey 2009 states that expats living in Brazil are paid less, on average, than their counterparts living in Asia.27 A USB report published in March 2009 mentions Rio de Janeiro as the world’s 48th, and Sao Paulo as the 42nd most expensive city.28
4 Social Insurance System in Brazil
Brazil revamped its social security system in 2003 to establish more long-term sustainability and to adjust to demographic transformation and society’s wishes for more solidarity in systems. 29 Brazilian social security benefits are available to nationals and to foreigners who are contributing to the social security system in the form of payments by the employer and the employee, or by the individual in the case of self-employed workers or business owners. The contributions are subject to a ceiling defined by law.
4.1 Social Security
Any employee on a Brazilian payroll is subject to social security contributions. The rates vary depending on the individual’s salary level. Social security tax is withheld at rates between 7.65 percent and 11.0 percent of monthly gross salary up to a capped maximum amount. The employer’s contribution is determined at the rate of around 28 percent of the gross salary, with no limitation on the amount of earnings subject to contributions.30 31 In addition, the employer is required to pay 8 percent of the employees’ gross salary in the severance fund (FGTS).
The extended Social Security Benefits include Retirement Benefits, Death Benefits, Disability Benefits, (Permanent Disability, Temporary Disability), Family Allowance, Medical Care as well as Maternity benefits. The responsible organisation is the National Social Security Institute (INSS), part of the Ministry of Social Security (Ministério da Previdência Social).
The role of the private sector is becoming stronger. Since 2004, Brazil’s insurance industry has registered annual growth rates of more than 12 percent. Brazil’s insurance and private pension industries are subject to comprehensive regulation. The National Private Insurance System (Sistema Nacional de Seguros Privados) is composed of the National Council for Private Insurance (Conselho Nacional de Seguros Privados), or CNSP, the Superin-tendence for Private Insurance (Superintendência de Seguros Privados), or SUSEP, the insurance companies and private pension entities duly authorized to conduct business in the Brazilian market, the reinsurance companies (including IRB), and registered insurance brokers. The National Monetary Council (CMN) determines guidelines for investment of the technical reserves of insurers and private pension entities.32
Table 3 shows the basic components of the social security system in Brazil, based on gross salary.
Table 3: Basic Social Security System in Brazil
| SOCIAL SECURITY | EMPLOYEE’S PAYMENT (%) | EMPLOYER’S PAYMENT (%) | AMOUNT TO BE DEPOSITED IN PERSONAL ACCOUNT (%) |
|---|---|---|---|
| Social Security: - National Pension Plan - Medical Insurance Plan |
7.65-11 (monthly cap of BRL 334.29 / EUR 133.67) |
29 (20% INSS; 9% CSLL) |
40 |
| Workmen’s compensation | 0 | 1-3 (depending on company’s risk of labour accidents) |
1.0-3.0 |
| Termination Indemnity: FGTS (Guarantee Fund for Time of Service) | 0 | 8.5 | 8.5 |
Sources: IGP Report, IBFD
Note: The payment base is the average monthly gross salary of the employee.
5 Free Trade Zone and Export Processing Zones in Brazil
In Brazil, there are two different concepts of tax-exempted areas: Free Trade Zones and Export Processing Zones. Both concepts are briefly introduced below.
5.1 Free Trade Zone (FTZ)
There is one Free Trade Zone, located in Manaus, the capital city of the Amazonas State in northern Brazil. Established in 1967, the zone is managed by the Manaus Free Trade Zone Superintendence (Suframa), a government agency under the Ministry for Development, Industry and Foreign Trade. It is responsible for economic development and investment promotion in the Western Amazonas region.33
The ZFM comprises three economic centres: commercial, industrial and agricultural. The zone is currently focused on manufacturing goods for the domestic market. There are various benefits associated with corporate establishment in the Manaus FTZ on federal, state and municipal level:34
Federal Government Incentives
Reduction of up to 88% of Import Tax (II) on the inputs for the industrialization;
exemption from Excise Tax (IPI);
reduction of 75% of income tax for legal entities, including additional projects classified as priority for regional development, calculated based on operating income by 2013; and
exemption from contribution to the PASEP and COFINS.
State Government Incentives
Value-added tax exemption - The State of Amazonas provides an exemption for VAT to eligible goods for consumption, industrialization or re-export by other Brazilian States to the Manaus FTZ;
value-added tax credit - The State of Amazonas grants VAT credit equal to the amount payable at the point of origin for goods manufactured in other Brazilian States as these goods enter the Manaus FTZ; and
value-added tax refund - VAT on eligible goods is refunded subject to certain conditions.
Municipal Government Incentives
Tax exemptions - Corporations established in the Manaus FTZ are exempt from paying applicable municipal Housing, Territorial and Urban Real Estate Tax, as well as from paying tax for waste disposal and conservation, for ten years.
5.2 Export Processing Zones (ZPEs)
The ZPEs are industrial areas intended for the establishment of companies that produce goods to be commercialised abroad with the aim of increasing exports and investments from export companies. Companies established in a ZPE may be eligible for exemption from some federal taxes (such as Import Tax, Excise Tax, PIS and COFINS and the contribution for the renovation of the merchant navy) for up to 20 years.35
ZPEs were created by a 1988 law, and although 17 of them had been approved, they have never become operational owing to disputes over their rules and other regulatory questions. In June 2008, the rules passed Brazil’s congress, but they could not take effect without the presidential decree signed by President Lula, which took place in April 2009.36 However, there are certain arguments indicating that ZPEs might bestow an illegal export subsidy.
6 Opening a Bank Account in Brazil
6.1 Overview of Retail Banking
Brazil’s banking sector is considered one of the most modern in the world. Numerous state-owned and private banks, both national and international, compete in the retail banking industry, as well as investment banks and other financial institutions.
The following table lists major general banks in Brazil.
Table 4: Major General Banks in Brazil by Assets
| BANK | WEBSITE |
|---|---|
| Banco do Brasil | http://www.bb.com.br |
| Banco Itaú | http://www.itau.com.br |
| Bradesco | http://www.bradesco.com.br |
| Banco Santander | http://www.santander.com.br |
| HSBC | http://www.hsbc.com.br |
| Banco Votorantim | http://www.bancovotorantim.com.br |
Source: Central Bank of Brazil
6.2 Procedures for Foreign Enterprises
Foreign enterprises that are registered in Brazil with the National Directory of Legal Entities, and have received their CNPJ number (federal taxpayer’s number) should not encounter obstacles when setting up an account in Brazil. However, the necessary forms and papers tend to be available only in Portuguese.
The following forms need to be filled in to open a business account with Banco do Brasil; some of the forms need to be accompanied by legal documentation37:
Registration of Legal Entities
- Identification (e.g. the Carteira de Trabalho (official notebook where all the information regarding one’s professional history is registered), proof of registration and registration status of the National Register of Legal Entities of the Ministry of Finance/Internal Revenue Service issued no more than 30 days earlier)
- Identification of Partners and Managers - Submit documents and information form for the registration of individuals like shareholders and directors of Company/Organization
- Relationships (attach proof of identity and CPF) - Legal representative
- Movable property, real estate and livestock (e.g. proof of property ownership, proof of payment of property tax or ITR for the last year, Certificate of Ownership, Registration and Licensing of Vehicles)
Company Information
Earnings Report
Registration of Individuals (partners/directors/guardians)
- Personal (e.g. Identity document, Social Security number).
- Address (provide proof of residence) – Utility bill or rent or lease statement, issued fewer than 90 days earlier.
- Professional details (e.g. salary slip provided by the company)
Authorization for waiver of registration information - SCR
Authorization for waiver of registration information - REFIS
6.3 Procedures for Foreigners
Opening a personal bank account in Brazil requires the following documents:
A valid identity document. In the case of a foreigner resident in Brazil, this will mean a foreigner’s identity card (Cédula de Identidade para Estrangeiro - CIE), which contains the aforementioned Registro National De Estrangeiro (RNE).
Individual Taxpayer’s number (Cadastro de Pessoa Física - CPF, also referred to as Cadastro Individual de Contribuintes – CIC), which can be obtained in any post office or branch of stateowned Banco do Brasil.
Proof of domicile (such as a utility bill in the name of the person opening the account).
In addition, banks may ask for proof of earnings/income, and may also request and verify personal and/or employer references, including valid telephone numbers.
Additional information requested may include credit card and/or store card numbers and/or income tax declaration, at the bank’s discretion.
Some banks currently allow accounts to be provisionally opened online, with subsequent presentation of the necessary documentation at the branch of choice.
7 Recruitment of Local Staff
Internet recruiting is becoming the most important recruitment channel and has replaced advertisements in print media to some extent. There are numerous job boards available online. Jobs advertised in the print media are often directed to the less skilled part of the population without Internet access. Also, many national and international recruitment and head hunter agencies operate in Brazil. Personal networking plays a major role in Brazil; often jobs are filled through referrals of current employees.
7.1 Major Recruitment Agencies and Websites
Table 5 lists the major recruitment agencies, national and international, in Brazil.
Table 5: Major Recruitment Agencies and Websites
| LEADING RECRUITMENT AGENCIES | WEBSITES |
|---|---|
| Abrahams Executive Search | http://abrahams.com.br |
| Case Consulting | http://www.caseconsulting.com.br |
| Fesa | http://www.fesa.com.br |
| Grupo Foco | http:// www.grupofoco.com.br |
| DRH Talent Search | http://www.drh-talent.com |
| Robert Half | http://roberthalf.com.br |
| RH Internacional (Randstad) | http://www.rhi.com.br |
| Manpower Brazil | http://www.manpower.com.br |
| Adecco | http://www.adecco.com.br |
| Heidrick & Struggle | http://www.heidrick.com |
| Korn/Ferry International | http://www.kornferry.com |
| Michael Page | http://www.michaelpage.com.br |
| Mercuri Urval | http://www.mercuriurval.com |
7.2 Brief Overview of Labour Laws
One of the most significant characteristics of the Brazilian labour system is the extent to which the details of labour/management relations are regulated. The concept of collective bargaining is also very strong in Brazil. Contractual labour relations in Brazil are governed by two legal entities: The Federal Constitution and the Consolidation of Labour Laws (CLT - Consolidação das Leis do Trabalho).
The Brazil Competitiveness Report 200938 names “overly rigid labour regulations” as one of the major shortcomings that undermine national competitiveness. In the World Economic Forum’s Global Competitive Index (GCI) 2008, Brazil performed poorly with regard to its labour market efficiency, ranking 91 out of 134 countries.
The inflexibility of the formal labour market in Brazil receives particularly strong criticism. It is characterised by extremely burdensome labour regulations involving important non-wage labour costs (37 percent of total salary, placing it at 123 out of 134 countries), rigid hiring and firing practices (ranked 112), and wage determination procedures (106). The system is seen as hindering labour mobility and trapping important human resources in low-productivity sectors, resulting in an increase of labour informality, especially among the less educated.
The large informal market has serious implications for overall national productivity and reduces the taxpayer base.
7.2.1 Constitution
In the Brazilian Constitution, the Social Rights (which include the Labour rights) are mentioned in articles 6 to 11. These constitutional rights are not negotiable under any circumstances. All Brazilian workers have the right to, for example, a severance pay (funded by employers, at 8% of monthly salary), a 13th annual salary, annual vacation (30 days, plus a cash bonus equal one-third of salary), and others.
7.2.2 Consolidation of Labour Laws (CLT)39
Title I - Introduction (Articles 1-12).
Title II - General Norms for Labour Protection (Articles 13 – 223). Over 200 articles with duties of the employers and rights of the employees. Failing to comply with any one of the articles is ground for a labour claim.
Title III - Specific Norms for some Groups and Categories (Articles 224 – 441). While the norms of Title II are applicable in any case, the norms of Title III apply to some groups, like women (arts. 372 - 401), minors (arts. 402 - 441) and nationals (arts. 352 - 371), and some professional categories, like teachers (arts. 317 - 324), musicians (232 - 233), bank clerks (224 - 226) and others. Further obligations are imposed to employers of these groups and categories.
Title IV - Individual Labour Contracts (Articles 442 – 510). This title details the labour contracts to be signed between each employee and his/her employer. Articles break down: general dispositions (arts. 442 - 456), remuneration (457 - 467), contract alterations (468 - 470), contract interruption (471 - 476), termination (477 - 486), notice of termination (487 - 491), tenure acquisition (492 - 500) and events of force majeure (501 - 504).
Title V - Organization of Unions (Articles 511 – 610).
Title VI - Collective Labour Contracts (Articles 611 – 625).
Title VII - Fiscalisation, Penalties and Fines (Articles 626 – 642). Art. 626 describes the bodies empowered to fiscalise the labour legislation. Today, the authority to impose administrative fines and other penalties is the Ministry of Labour.
Title VIII - Labour Justice (Articles 643 – 735).
Title IX - Labour Attorneys (Articles 736 – 762).
Title X - Labour Process (Articles 763 – 910). The law details the Labour Process, from the initial petition to the execution of the sentences.
Title XI - Final Dispositions (Articles 911 – 921).
7.3 Average Salary40
In Brazil, average monthly salary is expressed as a factor of minimum wage, which averaged BRL 373.08 (EUR 140.85) in 2007 (most recent available year). The nation-wide average monthly salary in 2007 equaled EUR 478.9. The average salary tends to increase with company size; the best paid jobs in 2007 were in the electricity and gas industry, followed by financial services.
Tables 6 to 8 provide an overview of the average or median salary according to company size in terms of employees, sector and job description.
Table 6: Average Monthly Salary by Number of Employees in Brazil (2007)
| JOB | AVERAGE MONTHLY SALARY (IN EUR) |
|---|---|
| 0 to 4 | 267.6 |
| 5 to 9 | 253.5 |
| 10 to 19 | 281.7 |
| 20 to 29 | 295.8 |
| 30 to 49 | 324.0 |
| 50 to 99 | 366.2 |
| 100 to 249 | 422.6 |
| 250 to 499 | 450.7 |
| 500 and more | 647.9 |
Source: Estatística do Cadastro Central de Empresas 2007
Table 7: Average Monthly Salary by Number of Employees in Brazil (2007)
| INDUSTRY SECTOR | AVERAGE SALARY (IN EUR) |
|---|---|
| Agriculture, livestock, forestry, fisheries and aquaculture | 295.8 |
| Extractive industries | 690.2 |
| Manufacturing industry | 521.1 |
| Electricity and gas | 1,464.8 |
| Water, sewer activities, waste management and decontamination | 535.2 |
| Construction | 366.2 |
| Trade, repair of motor vehicles and motorcycles | 295.8 |
| Transport, storage and mail | 464.8 |
| Accommodation and food | 225.4 |
| Information and communication | 859.2 |
| Financial services, insurance and related services | 1,267.7 |
| Real estate activities | 422.6 |
| Professional activities, scientific and technical | 647.9 |
| Administrative activities and complementary services | 281.7 |
| Public administration, defence and social security | 633.8 |
| Education | 633.8 |
| Human health and social services | 450.7 |
| Arts, culture, sport and recreation | 366.2 |
| Other service activities | 380.3 |
| Foreign organizations and institutions | 1,084.5 |
Source: Estatística do Cadastro Central de Empresas 2007
Table 8: Annual Median Salary by Job in Brazil (2009)
| JOB | MEDIAN SALARY (IN EUR) |
|---|---|
| Software Engineer/Developer | 20,689 |
| Project Manager, IT | 34,890 |
| Mechanical Engineer | 26,852 |
| IT Manager | 53,419 |
| Regional Sales Manager | 44,127 |
| Chief Executive Officer | 115,223 |
Source : Payscale, 2009
8 Taxation
Brazil has a three-tiered tax system. Apart from the federal taxing authority, there are 27 states and more than 5,000 municipalities with the power to collect taxes. Taxation may take the form of taxes, fees, betterment fees, other contributions, and compulsory loans.
8.1 Tax System in Brazil
Brazil is planning to overhaul its three-tiered tax system. The World Bank’s Doing Business in Brazil 2010 report ranks the country 150 out of 183 countries with respect to its tax system. The poor performance is owed to the time required to process tax payments. The complexity of the payment process applies to profit taxes as well as to indirect taxes charged on consumption. There are numerous laws at the different levels, levying various rates of tax, and subject to constant modification. For example, Brazil employs the concept of VAT on various levels—there is a federal excise tax (IPI), a state VAT on sales and services (ICMS) and a VAT for social contributions (PIS/COFINS).41
Figure 2 shows the annual tax payments per year in various countries and the hours necessary to process these payments.
Figure 2: Procedures and Time required to Pay Taxes in Various Countries (2010)
Source: World Bank 2010
Note: OECD = Organization for Economic Cooperation and Development
While the number of tax payments is low, the time required to pay taxes is exorbitant—more than 13 times the OECD average and almost seven times the Latin American average. It is especially time-consuming for companies to comply with the consumption taxes (1,374 hours per year on average). This shows the overall complexity of the Brazilian VAT system.
8.2 Tax Rates
Corporate Income Tax (IRPJ)
Brazil applies the same rules and regulations to foreign and local companies. The Income tax (Imposto de Renda – IR) is normally assessed on net profits of corporate entities at the rate of 15 percent, with the taxable income being equal to net profits adjusted for additions and deductions set forth in income tax legislation. The taxation rate is independent of the company’s industry or activity. The tax payment can occur either in monthly payments based on estimates or in an annual payment. In addition, a 10 percent supplementary tax is applicable to the portion of net profits exceeding BRL 20,000 (EUR 7,550) per month, thus raising the corporate income tax to 25 percent for many companies.42
Table 9 provides an overview of the taxes levied in Brazil.
Table 9: Tax Obligations in Brazil
| TAX OR MANDATORY CONTRIBUTION | PAYMENTS (NUMBER) | TIME (HOURS) | STATUTORY TAX RATE | TAX BASE |
|---|---|---|---|---|
| ICMS (similar to VAT) | 1 | 1,374 | 17.0% - 19.0% depending on state | value added (including taxes) |
| IPI (similar to VAT) | 1 | - | 20.0% | value added (including taxes) |
| PIS/COFINS (similar to VAT) | 1 | - | 9.3% | value added |
| Social security contributions (INSS) | 1 | 490 | 20.0% | gross salaries |
| Corporate income tax (IRPJ) | 1 | 736 | 15%+10% (surcharge applies on annual taxable income exceeding EUR 90,600) | taxable profits |
| Payroll tax | 1 | - | 8.8% | gross salaries |
| Severance contribution (FGTS) | 0 | - | 8.5% | gross salaries |
| Social contribution (CSLL) | 1 | - | 9.0% | taxable profits |
| Property tax (IPTU) | 1 | - | 2.5% | market value of property |
| Financial transactions tax (CPMF) | 1 | - | 0.4% | bank transactions |
| Tax on interest | 0 | - | 20.0% | interest income |
| Vehicle tax | 1 | - | 2.0% | market value of vehicle |
Source: World Bank - Doing Business in Brazil 2010
8.2.2 Value-Added Tax43
Brazil has two types of value-added tax:
ICMS (imposto sobre circulação de mercadorias e serviços) is a state sales tax. The standard rate is 17 percent (in São Paulo, Minas Gerais, and Paraná the standard rate is 18 percent and in Rio de Janeiro it is 19 percent).
Reduced ICMS rates of 7 percent and 12 percent are levied to inter-state supplies within Brazil, depending on the region and the product category.
ICMS-exempted items include books, newspapers, periodicals, and the paper consumed in the printing of such products, sale of fixed assets, fruits, vegetables, and farm and garden produce.
IPI (imposto sobre produtos industrializados) is the federal excise tax on manufactured products and imports; exports are exempt. Rates are dependent on the product classification based upon the international Harmonized Commodity Description and Coding System, administered by the World Customs Organization in Brussels, and can range from 0 percent to 330 percent, averaging 10 percent.
The 0 percent rate applies, for example, to live animals and animal products, plant products, chemical products, textile products, and shoes. Exemptions exist for supplies of vessels (except sporting or pleasure boats), exports, books, newspapers, periodicals, and paper consumed in the printing of such products, electric energy, petroleum products, fuel, and minerals belonging to the country.
In combination with other taxes levied on goods and services, the VATs represent a significant share of Brazil’s GDP. 44 The other taxes similar to VAT include the following.
ISS (imposto sobre serviços), a service tax; rates range from 2 percent to 5 percent, depending on the municipality and the type of service rendered. Examples of items exempted from ISS are exports of services, amounts intermediated in the bonds and securities market, the amount of bank deposits, the capital, interests, and default interests regarding credit operations performed by financial institutions.
COFINS (contribuição para o financiamento da seguridade social): a social contribution for social security financing; the standard rate is 7.6 percent.
PIS (programa de integração social), the employees’ profit participation program; the standard rate is 1.65 percent.
Exportation of goods and services, granted the payment in convertible currency, are exempted from COFINS/PIS, as are sales of fixed assets.
8.3 Tax Incentives
In recent years, incentive programes for foreign investors have been reduced. However, investments in certain regions, e.g. in less developed northern and north-eastern Brazil, and in certain sectors, e.g., IT and Research and Development, still qualify for incentives.
There is a tax relief programe in place for exporters earning at least 80 percent of their revenues abroad; qualifying firms are exempt from paying COFINS and PIS. On municipal level, a number of benefits are offered to foreign investors, such as tax exemptions, subsidies of rent expenses or site donations. This again depends on the city in which the investor plans to establish the business.
Table 10 lists federal laws that are of interest to foreign investors.
Table 10: Federal Laws
| INSTRUMENTS | DEFINITION | BENEFICIAIRES |
|---|---|---|
| Reduction of Import Tax (II) for machines not produced in Brazil | The rate of Import Duty may be reduced from 14% to 2% for the purchase of Capital Goods, IT and Telecommunications Goods not produced in Brazil. | Industrial companies and service providers |
| Waiving of Tax on Industrialized Products (IPI) for machines and equipment | The rate of Tax on Industrialized Products (IPI) for capital goods has been reduced to zero | Industrial companies, users of capital goods |
| REPORTO | Special Tax Rules - aims essentially to reduce tax on purchases of machines and equipment, by waiving IPI, COFINS, PIS/Pasep and import duties (in the case of equipment for which no similar national product exists). | Targeted at investment in ports |
| Accelerated depreciation for machines and equipment | Enables accelerated depreciation on capital goods purchased between October 1, 2004 and December 31, 2006, to be deducted from the Charge on Net Profit (CSLL), reducing the depreciation period of such goods from 10 to 4 years. For companies that operate 3 shifts, the period is 2 years. Thus the value of machines and equipment can be deducted from Income Tax in less than half the time. | |
| Early restitution of IR and PIS/COFINS | PIS and COFINS charges paid on the purchase of machines and equipment are credited each month, over a period of 2 years. Previously, they had been restored to companies that purchased such goods, in the form of tax credits, to be settled in 48 months. | |
| Special rules for purchases of Capital goods for Exporting Companies (RECAP) | This measure allows companies that make purchases of local or imported capital goods (new machines, instruments and equipment) to suspend payment of PIS and COFINS charges | Companies that export 80% or more of their annual sales by value, and shipyards. |
| Special rules for Taxation of Technology Services Export Platforms (REPES) | Waives PIS/PASEP and COFINS charges for purchases of local or imported goods or services, to be incorporated into the fixed assets of eligible companies. | |
| Incentives for Technological Innovation | fiscal incentives, e.g.: Income Tax and Charge on Net Profits (CSLL) rebates on R&D expenditures; Tax on Industrialized Products (IPI) rebates on the purchase of machines and equipment for R&D accelerated depreciation of such goods; accelerated amortization of intangible goods; withheld Income Tax rebates on remittances abroad stemming from technology transfer contracts; exemption from withheld Income Tax for remittances abroad for the filing and maintenance of trademarks, patents, and cultivars; or economic grants for the contracting of researchers, with MAs or PhDs, employed by companies to conduct research, development, and technological innovation activities. |
Corporate entities that carry out technological research and development for technological innovation. |
| Innovation Law | Organized with three approaches: fostering of a favorable environment for strategic partnerships between universities, technology institutes and companies; stimulus for participation of scientific and technological institutes in the innovation process; and stimulus for innovation within companies. | Companies that invest in technological innovation, especially micro and small companies. |
| Bio-security Law | Establishes safety standards and inspection mechanisms for the handling of genetically modified organisms (GMOs) and their derivatives, creates the National Bio-Security Council (CNBS), restructures the National Bio-Security Committee (CTNBio), and provides for a National Bio-security Council (PNB) | |
| Informatics Law | Enables IPI rebates for IT Goods, produced under the Basic Production Process, described in legislation (minimum set of operations at the manufacturing plant, characterizing effective manufacture of the product) | Makers of computers, automation and telecommunications equipment, microelectronics, software and technical services. |
| Sector Funds | With resources from the National Science and Technology Development Fund (FNDCT) (except Funttel), these instruments support research projects, development, and innovation in Brazil. There are 16 Sectoral Funds, 14 of which relate to specific sectors, and 2 that are crosscutting : | Governmental and private companies may participate in the technical and financial execution of projects supported by Sectoral Funds (in partnership with universities or research centres) |
| Cross-Cutting Actions of Sectoral Funds are strategic programs of the Ministry of Science and Technology (MCT) that orient the Federal Government’s Industrial, Technological and Foreign Trade Policies (PITCE) simultaneously using resources from a variety of Sectoral Funds. | CT – Aeronáutico, CT – Agronegócios, CT – Amazônia, CT – Aquaviários, CT – Biotecnologia, CT – Energy, CT – Espacial, CT – Hidro, CT – Info, CT – Infra, CT – Mineral, CT – Petro, CT – Health, CT – Transportes, CT - Verde Amarelo, Funttel |
Source: Brazil TradeNet
8.3 Double Tax Treaty45
Brazil and Luxembourg signed a convention for the avoidance of double taxation with respect to taxes on income and capital in 1979. The treaty came into effect in 1981.
The convention applies to the following taxes (in the case of Luxembourg):
- the individual income tax (l’impôt sur le revenu des personnes physiques)
- the company income tax (l’impôt sur le revenu des collectivités)
- the special tax on director’s fees (l’impôt spécial sur les tantièmes)
- the capital tax (l’impôt sur la fortune)
- the municipal trade tax on profits and working capital (l’impôt commercial communal d’après les bénéfices et le capital d’exploitation)
- the tax on payroll (l’impôt sur le total des salaires)
- the land tax (l’impôt foncier)
In the case of Brazil, the convention applies to:
- the federal income tax, excluding taxes on excess remittances and on activities of minor importance;
The Convention shall also apply to any identical or similar taxes imposed in the future in addition to, or in place of, the aforementioned taxes.
The following issues have been stated in the convention between Luxembourg and Brazil:
- Income derived by a resident of the contracting state from immovable property (including income from agriculture or forestry) situated in the other contracting state may be taxed in that other contracting state.
- The profit of an enterprise of a contracting state shall be taxable only in that state unless the enterprise carries on business in the other contracting state through a permanent establishment situated there. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other state, but only so much of them as are attributable to that permanent establishment.
- Where profits include items of income that are dealt with separately in other articles of this convention, the provisions of those articles shall not be affected by the provisions of this article.
- Profits of an enterprise of a contracting state from the operation of ships or aircraft in international traffic shall be taxable only in that state.
- Where an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and, in either case, conditions are made or imposed between the two enterprises in their commercial or financial relations that differ from those that would be made between independent enterprises, any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.
- Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. However, such dividends may be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but, the tax so charged shall not exceed 15 percent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 10 percent of the capital of the company paying the dividends, or 25 percent of the gross amount of the dividends in all other cases.
- Interest arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other state. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of the interest.
- Royalties arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other state. Gains from the alienation of immovable property referred to above may be taxed in the Contracting State in which the immovable property is situated.
- Income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be taxed only in that State, unless the payment of such services or activities is borne by a company being a resident of the other Contracting State or by a permanent establishment situated therein. In such a case, the income may be taxed in that other State.
- [...] salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived there from may be taxed in that other State.
- Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or of any council of a company which is a resident of the other Contracting State may be taxed in that other State.
- Income derived by entertainers, such as theatre, motion picture, radio or television artistes, and musicians, and by athletes, from their personal activities as such may be taxed in the Contracting State in which those activities are exercised.
- pensions and other similar remuneration up to an amount of USD 3,000 per year, arising in a Contracting State and paid to a resident of the other Contracting State, shall be taxed only in that State. The amount exceeding USD 3,000 may be taxed in the first-mentioned Contracting State.
- Remuneration, other than a pension, paid by a Contracting State, a political subdivision or a local authority thereof to an individual in respect of services rendered to that State, subdivision or authority shall be taxable only in that State.
- [...]
- Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of this Convention may be taxed in both Contracting States.
8.4 Repatriation of Profits46
In Brazil, profits are exempt from withheld income tax. There are generally no restrictions with regard to the distribution of profits and their remittance abroad. However, profit remittances must be registered through the RDE-IED Module, considering the stake held by the investor in the total shares or stock as a proportion of paid-up corporate capital in the company. Also, reinvestment of profits in Brazilian companies must be registered in said system as foreign capital. Therefore, the base for tax assessment on any future repatriation of capital is increased.
Repatriation of foreign capital registered with the Central Bank of Brazil to its country of origin requires no prior authorization. However, capital gains are subject to a 15 percent withholding of income tax.
Remittance of funds that are not registered in the RDE-IED System is restricted, as remittance of profits, repatriation of capital, and registration of reinvestment are all based on registered foreign investment.
9 Appendix
Appendix I: Useful Links and Addresses
| TYPE OF ORGANISATION | ADDRESS | CONTACTS | WEBSITE |
|---|---|---|---|
| MINISTRIES, AGENCIES aND SERVICES IN BRASIL | |||
| APEX – Brazilian Trade and Investment Promotion Agency | Setor Bancário Norte - SBN Quadra 2 - Lote 11 Ed. Apex-Brasil Brasília - DF / Brasil 70040-020 |
Tel: +55 61 3426 0202 | http://www.apexbrasil.com.br |
| SECOM Luxembourg/ Belgium - Brazilian Ministry of External Relations’ Trade Promotion Department |
Avenue Louise, 350 - Bte 6, 6ème étage B-1050 Brussels |
Email: secom.bruxelas@beon.be Tel: +32 2 640 2015 |
NA |
| Ministry of External Relations of Brazil | Ministério das Relações Exteriores Palácio Itamaraty - Esplanada dos Ministérios - Bloco H Brasília/DF - Brasil CEP: 70170-900 |
NA | http://www.mre.gov.br |
| Ministry of Development, Industry and Foreign Trade of Brazil | Esplanada dos Ministérios, Bloco “J” Brasília, DF, 70053-900 |
Tel: +55 61 2027 7000 | http://www.mdic.gov.br |
| Ministry of Finance of Brazil | Ouvidoria do Ministério da Fazenda SAS Quadra 6 - Bloco O - Ed. Órgãos Centrais - 7º andar CEP 70070-917 - Brasília/DF |
Tel: +55 61 3412 2000/ 3000 | http://www.fazenda.gov.br |
| Ministry of Labour and Employment of Brazil | Esplanada dos Ministérios Bloco F - CEP: 70059-900 Brasília - DF |
Tel: +55 61 3317 6000 | http://www.mte.gov.br |
| Ministry of Justice of Brazil | Esplanada dos Ministérios Bloco F - CEP: 70059-900 Brasília - DF |
Tel: +55 61 3317 6000 | http://www.mj.gov.br |
| Board of Trade – Company Register | SAUS Quadra 02 - lote 1/A Bairro: Asa Sul – Brasília - DF CEP: 70070-020 |
Tel: +55 61 2109-8800 | http://www.dnrc.gov.br |
| Embassy of Belgium in Brasil | SES Avenida das Nações Quadra 809 - Lote 32 70422 - 900 Brasilia |
Tel: +55 61 34431056 | http://www.diplomatie.be |
| Secretariat of the Federal Revenue of Brazil | Ouvidoria do Ministério da Fazenda SAS Quadra 6 - Bloco O - Ed. Órgãos Centrais - 7º andar CEP 70070-917 - Brasília/DF |
Tel: +55 61 3412 2000/ 3000 | http://www.receita.fazenda.gov.br |
| Ministry of Social Security | Esplanada dos Ministérios Bloco F - CEP: 70059-900 Brasília - DF |
Tel: +55 61 2021-5000 | http://www.mpas.gov.br |
10 Disclaimer
The Government of the Grand Duchy of Luxembourg declines all responsibility regarding the use of information featured in this document. The contents are provided for information purposes only. They contain information which is not necessarily complete, exhaustive, precise or up to date. In the event of discrepancies between the texts of this publication and the original documents, the original documents as officially published shall apply. This publication may refer to external sites over which the Government of the Grand Duchy of Luxembourg has no control and for which it declines all responsibility.
February 2010
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