Brazil, with its vast resources and growing economy, offers attractive opportunities for international entrepreneurs. However, starting a business in Brazil can be a complex procedure, with many bureaucratic and legal steps to navigate. With a population of over 210 million people and the world’s twelfth-largest economy, Brazil is an attractive market for international entrepreneurs. Yet, the country’s complex bureaucracy and legal requirements can make it challenging to start a business, especially for foreigners.
This comprehensive guide will help you understand the steps and requirements for starting a business in Brazil as a foreigner.
Legal steps required to incorporate to start a business in Brazil
Foreign entrepreneurs can start a business in Brazil by residing in the country with a permanent visa or maintaining residence in their home country. Here are the basic steps for each scenario:
With permanent residence in Brazil
- Obtain a permanent visa: To qualify for a permanent investor visa, the foreign entrepreneur must invest at least BRL 150,000 in the business and hire Brazilian employees. General rules for this type of visa can be found in Resolution Normative No. 84 of the National Immigration Council.
With residence in another country
- Obtain a tax registration number (CPF): Foreigners can be shareholders or partners in Brazilian companies without living in the country. To do so, they must obtain a tax registration number (Cadastro de Pessoa Física – CPF) from the Brazilian Federal Revenue Service.
- Register with the Central Bank of Brazil (Banco Central do Brasil – Bacen): This registration involves the Electronic Declaratory Registry (Registro Declaratório Eletrônico – RDE).
- Appoint a local legal representative: Foreign investors must appoint a legal representative living in Brazil with the power to represent them in legal matters.
- Comply with local tax regulations: If a foreigner enters Brazil with a temporary visa, they will only be considered a tax resident if they have an employment relationship, obtain a permanent visa (residence permit), or stay in the country for more than 183 days, consecutive or not, within a 12-month period.
Types of companies for foreign entrepreneurs
Foreign entrepreneurs can establish their businesses as Individual Limited Liability Companies (EIRELI) or Limited Liability Companies (Sociedade Limitada).
Attention:
In August 2021, the EIRELI modality was discontinued. I was replaced by the SLU modality.
The main difference between these two corporate regimes is that Eireli required proof of a minimum share capital of 100 minimum wages. SLU does not. Furthermore, those who had an Eireli could not open another business or participate in another enterprise that had the same format. SLU does not have this limitation.
In both cases, the entrepreneur must appoint a local legal representative to handle bureaucratic matters in Brazil. It’s important to note that foreign-owned businesses cannot opt for the Simples Nacional tax regime and must be registered under the Lucro Presumido tax regime.
Registering foreign documents
All foreign documents, along with their translations, must be registered with the Registry of Titles and Documents to be valid in Brazil. This registration is necessary for the documents to have legal effect in federal, state, and municipal institutions, as well as in courts and tribunals.
Restricted business activities for foreigners in Brazil
Certain business activities are restricted to foreigners in Brazil. Some of these include:
- Healthcare services;
- Cabotage and navigation;
- Journalism, radio broadcasting, and TV;
- Cable TV;
- Road cargo transportation;
- Mining.
Conducting market research in Brazil
Before starting a business in Brazil, it is essential to conduct thorough market research to understand the local market, competition, and potential customers. Many market research companies in Brazil can provide valuable insights into the country’s business landscape and help entrepreneurs make informed decisions.
Taxation and regulatory requirements in Brazil
Some common taxes contain the Corporate Income Tax (IRPJ), Social Contribution on Net Profits (CSLL), Social Integration Program (PIS), Contribution for the Financing of Social Security (COFINS), and Value Added Tax (ICMS).
These taxes, along with others, make up the Brazilian tax scenario. It is essential for businesses to understand and comply with all relevant tax regulations to avoid penalties and maintain good standing with tax authorities. It’s suggested to consult with a tax professional or advisor familiar with Brazilian tax laws to ensure compliance.
Tax Incentives and Tax Exemptions in Brazil
To promote economic growth and attract foreign investment, the Brazilian government offers various tax incentives and exemptions. These include incentives for companies operating in specific regions or initiatives, such as the Manaus Free Trade Zone (ZFM) and the Superintendency for the Development of the Northeast (SUDENE). It is crucial for foreign investors to research and identify the applicable tax incentives, as these can significantly reduce their tax burden and improve profitability.
Transfer Pricing and Double Taxation Treaties
Transfer pricing rules in Brazil regulate transactions between related parties and are designed to prevent tax evasion through the manipulation of prices. The country employs a unique set of transfer pricing methods, which differ from the OECD guidelines. For this reason, foreign investors must be cautious when structuring their operations and pricing policies in Brazil.
Brazil has entered into treaties with several countries to mitigate the risk of double taxation. These agreements allow for reduced withholding tax rates on dividends, interest, and royalties, as well as provisions to avoid double taxation on income. It is essential to understand the implications of these treaties to maximize tax efficiency.
Tax Compliance and Reporting
Tax compliance in Brazil can be complex due to the numerous taxes, frequent changes in legislation, and different filing requirements. Companies must submit multiple tax returns and declarations annually, with various deadlines and procedures. As a result, it is crucial to have a robust tax compliance strategy and ensure that all necessary filings are completed accurately and on time.
Conclusion
Starting a business in Brazil as a foreigner can be a complex approach, but it can also offer exciting opportunities for growth and success. Comprehendingthe legal, tax, and regulatory requirements, conducting thorough market research, and seeking professional advice are essential steps in successfully establishing a business in Brazil.
BrazilDesk
BrazilDesk is a leading call center and customer support service provider in Brazil, offering various digital services to international companies with customers in Brazil and Latin America. Our team of experts can help your business with customer support outsourcing. Contact us today to learn more about how we can assist you in starting and growing your business in Brazil.
If you’d like to know more from the view of a foreigner living in Brazil, you can check this video with some tips from The Brazilian Expat Youtube Channel (2022):
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