Employing in Brazil: What You Need to Know
Brazilian employment law appears complex and confusing when looking from outside view although in some ways there are many similarities to other countries. For example, tax rates and withholding for employees may vary widely, and there is no centralized administration of state and federal taxation. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Brazil.
Key Factors to Consider When Employing in Brazil
There are several key areas to be aware of within Brazil’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
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Contracts:
Employment Termination
| Information | Explanation |
|---|---|
| Severance / Redundancy Pay ? | In termination without cause for an indefinite term employment agreement, severance pay entitlements include:
The employee will also be entitled to withdraw the balance of the FGTS account. For fixed-term agreements being terminated without cause, the terminating party must pay damages in the amount of 50% of the compensation established for the remaining term of the agreement. |
| Termination of Employment ? | The legal notice period is a minimum of 30 days, or longer if the agreement states this specifically, up to a maximum of 90 days. Alternatively, the employer can provide payment in lieu of notice. However, if the dismissal is due to an “important reason” notice is not necessary. Brazil mostly follows the ‘employment-at-will’ model, meaning any party may terminate the employment agreement without cause upon providing sufficient notice and severance payment. However, Brazil law does prohibit discrimination, so In addition, employees may be protected. It is not necessary to mention any reason for termination, except if it is termination for cause. Termination for cause is for cases such as gross misconduct, and will affect whether the employee will be entitled to the normal notice period and severance entitlements. The following is listed as misconduct:
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Probation
| Information | Explanation |
|---|---|
| Probation Period ? | Probationary periods may be stipulated as a term in an open-ended employment contract, or take the form of a specific fixed-term contract for this purpose. The probation period must not exceed 90 days in total and the limitation of work contracts is only acceptable up to a period of two years. Even then the work agreement has to contain a clause which states why the limitation is necessary (in principle, Brazilian law dictates that work contracts should be unlimited). If a limited agreement is extended more than once it has to be transformed to an unlimited contract. |
Pension
| Information | Explanation |
|---|---|
| Pension Requirements ? | Both employers and employees must make contributions to fund the General Social Security Regime (Regime Geral de Previdência Social), which is managed by the Brazilian Social Security Institute (Instituto Nacional do Seguro Social) (INSS). These contributions are paid monthly and tax rates may vary substantially. Employers and workers must make compulsory contributions to the Brazilian Social Security Agency. The authority provides the insurances for workers for death, accident, disease allowance and imprisonment allowances. For pensions, each month employers must contribute the at least 8% of an employee’s total salary for FGTS purposes. Such a contribution is not deducted from the employee’s salary, as it is an obligation on the employer. For 2015, employees must pay the following monthly contributions:
If employees earn above the cap the 11% rate is calculated only on the fixed amount of BRL4,663.75, regardless of the actual salary. Therefore, the current cap of social security contributions is BRL513.00 (11% of BRL4,663.75). For other social security, such as injury compensation funds, Employers’ contribution is about 20% of gross salaries though may be more depending on the circumstances. For example, if the employees are subject to health hazardous working conditions, a further 1%-2% social security contribution is required. In total extra charges may raise the total rate to approximately 29%. All contributions must be paid to the appropriate government agencies during the following month. |
GEO Solutions or DIY Employment in Brazil?
Companies entering Brazil must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Brazil Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Brazilian entity established that can run payroll.
A DIY approach will be delayed until there is a properly incorporated company or branch ready to run payroll and can be a costly option if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.
Outsourcing Employment Through a GEO Employer of Record Service
Using Shield GEO Employer of Record Services in Brazil
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Brazil. For companies which intend to employ their staff directly through their incorporated Brazilian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Brazil.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Brazil.
The Shield GEO solution is an attractive alternative where:
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Brazil
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Brazil
– the company needs help with tax, employment, immigration and payroll compliance in Brazil
Shield GEO can contract directly with the company to employ and payroll their staff in Brazil. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.
Payroll
| Payroll | Brazil |
|---|---|
| Management Fee for Employer of Record Services / Monthly Payroll Costs | Please contact us for a quote |
| Notes | Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities. |
| Currency ? | Real (R$), BRL |
| Tax | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Income Tax Rates | Brazilian residents are tax on their worldwide income. This category includes citizens, naturalised foreigners, foreign nationals with a permanent or temporary visa and a local employment contract (starting from the date of arrival). Foreigners who hold a temporary visa, but do not have a local employment contract, are also considered to be residents for tax purposes after residing in the country for 183 days within any 12-month period. Non-residents are taxed only on income sourced in Brazil. |
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| Tax Returns Supplied | Yes |
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| Corporate Tax Requirements | Brazilian companies are allowed to file consolidated returns, but each company must file a separate return. Companies must file an annual income tax return for the previous calendar year by the last working day of June. Tax year in Brazil is a calendar year. |
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| Employers Social Security and statutory contributions |
Employers contribute 8% of wages to each employee’s salary account to the severance fund. They also have to contribute 20% of an employee’s wages to the public pension system (National Institute for Social Security or INSS) as well as a rate ranging from 1% to 3% for risk of the activity to the health or safety of the employee. There are also additional social security contributions (also known as “s” system contributions), which are approximately 5.8%. For certain business industries, the 20% INSS contribution has been replaced by a rate imposed on gross revenue. |
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| Employees Social Security and statutory contributions |
Social security contributions are imposed on employees at rates that range from 8% to 11% based on their remuneration. The maximum required monthly contribution is BRL 482.93. Contributions of self-employed individuals are calculated at a rate of 20% of their base salary, which is fixed by the government at a value that will depend on the date when the self-employed individual joined the social security system. The maximum monthly contribution for this category is BRL 878.05. |
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Payroll and Tax in Brazil
There are specific rules for payroll and taxation in Brazil, including registering with numerous tax agencies that govern the 16 most common types of taxation. The primary concerns for a foreign company that needs to comply with tax laws in Brazil are: individual income tax for employees in Brazil, social security costs, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns.
| Information | Explanation |
|---|---|
| Remote Payroll ? | A remote payroll in Brazil is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Brazil. One option for a non-resident company to payroll its employees (local and foreign) in Brazil is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf. |
| Local Payroll Administration ? | In some cases, a company will register their business in Brazil under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider. |
| Internal Payroll ? | Larger companies with a commitment to Brazil may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Brazilian payroll, and can fulfill all tax, withholding, and payroll requirements. This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Brazilian employment laws. |
| Fully Outsourced Payroll & Employment ? | Companies can outsource the employment and payroll of their staff in Brazil to a GEO, like Shield GEO. This is possible for both foreign workers and Brazilian nationals. This is the easiest, fastest and safest way to payroll staff in Brazil. Shield GEO manages all aspects of payroll for workers in Brazil, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client. Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips. Read more about outsourced payroll and employment through Shield GEO. |
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Setting up payroll in Brazil
| Information | Explanation |
|---|---|
| Currency ? | Real (R$), BRL |
Tax Figures
| Information | Explanation | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Corporate Income Tax ? | The rate of corporate income tax (IRPJ) is 15% of taxable company profits. There is also a surtax of 10% on annual income that exceeds BRL 240,000. Brazilian companies can choose to pay taxes based on their actual or presumed income. Under the “lucro real” method, the corporate tax is based on actual annual or quarterly taxable income. The “lucro presumido” method (available if certain requirements are satisfied) is based on a deemed taxable income or income estimated on a quarterly basis. |
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| Income Tax Rate ? |
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| Payroll Tax ? | See social security section below. |
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| Sales Tax ? | There is a multiple rate VAT system in Brazil, with tax imposed at the federal, state and municipal levels. Industrialised Products Tax (or IPI) is a federal excise tax, which is levied on the manufacture of goods and the import of goods into Brazil. The rate of IPI is 20% on average depending on the type of commodity. Merchandise and Services Circulation Tax (also known as ICMS) is a VAT imposed at the state level on the circulation and import of goods and the provision of interstate and intercity communication and transportation services. ICMS rate range from 4% to 25%. Exports are exempt from Value Added Tax. |
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| Withholding Tax ? | There is no withholding tax on dividends distributed to a nonresident that are paid from profits earned from the 1st January 1996. A 15% withholding tax is imposed on the interest paid to a nonresident, unless there is a tax treaty that reduces the rate (the same rate applies to royalty payments and technical service fees). This rate is increased to 25% if the recipient of interest is resident in a tax haven. There is also a 25% tax levied on the payments for technical services that do not involve the transfer of technology.
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| Other Tax ? | Small enterprises that qualify and have annual gross income that does not exceed BRL 3.6 million may elect to be taxed under a simplified regime (for purposes of corporate income tax, federal social contributions on gross income (PIS and COFINS), federal excise tax (IPI), state VAT on sales and services (ICMS), tax on services (ISS) and social security contributions). PIS/PASEP (social integration program) and COFINS (tax for social security financing) are federal taxes levied on gross revenue at rates of 0.65% (PIS) and 3% (COFINS), where a Brazilian entity pays corporate income tax under the deemed taxable income regime. When the corporate income tax is paid based on actual income, the PIS and COFINS rates are 1.65% and 7.6%, respectively. For the import of goods and services the PIS and COFINS are combined at a rate of 9.25% (or 10.25%). |
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| Time to prepare and Pay Taxes ? | 2038 Hours |
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| Time required to start a Business ? | 79.5 Days |
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Immigration and Work Permits in Brazil
Foreign workers are required to have the proper visas and work permits in Brazil, as established by immigration laws. Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Brazilian market. If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.
Have your own Company?
There are many different categories of visa that could be obtained to work in Brazil. The two major government agencies governing immigration in Brazil are: The National Immigration Council (“Conselho Nacional de Imigração”), which coordinates and supervises all immigration activities; and The General Coordination of Immigration (“Coordenação de Imigração do Ministério de Trabalho”) of the Ministry of Labor and Employment, which receives, reviews and approves all work permit applications for foreign workers.
The most commonly used working visa is the VITEM V temporary visa. It is usually issued to foreign nationals entering Brazil to provide technical assistance, research skills, or professional services as for a cooperation agreement or work contract. The VITEM V temporary visa requires approval of a work permit by the Ministry of Labor and Employment.
To be eligible for this visa applicants have to prove that they have:
– two years of relevant professional experience in the chosen field and at least nine years of education (school level); or
– a relevant university degree and one year of professional experience; or
– in case the candidate has a relevant post-graduate degree, no professional experience is required.
The process:
1. Brazilian employer submits all the potential employee’s documents (have to be translated into Portuguese) with the General Coordination of Immigration department
2. The approval is then be sent to the Ministry of Foreign Affairs, which will authorise the responsible Brazilian embassy or consulate in the country of residence of the prospective employee to start the work visa procedure.
3. The employee submits his documents to the local embassy.
According to the Procedure Guide issued by the Brazilian Ministry Of Labor, only legal entity established in Brazil can make an application for this visa. The documents required for this visa are:
For the company:
– “Work Permit Application Form”;
– “Applicant and Candidate Form”;
– documentation of the legal entity sponsoring the worker (company statutes or contractual alterations) registered with the Commercial Board or Public Civil Registry;
– document proving the appointment of the legal representative of the applicant
institution registered with the same registering agency;
– copy of the National Legal Entity Registration Card;
– signed document that the applicant takes full responsibility for all medical and hospital expenses of the prospective employee;
– GRU – State Revenue Collection Guide including proof of payment of individual immigration tax;
– proof that the employee’s remuneration is not less than the highest paid by the company for the same role;
– employment contract for the maximum period of two years (signed by both parties);
For the employee:
– information regarding all the addresses where employee will render their services;
– authorised copy of the passport;
– proof of education and compatible professional experience (reference letters, academic transcripts, CV, etc);
The Brazilian government also enforces a proportionality requirement under which the total sum of salaries paid to Brazilian employees must be more than twice the amount paid to foreign workers.
The duration of this visa is usually up to two years (subject to an extension, unless otherwise specified). The VITEM V visa could also be transformed into permanent working visa after the two-year period.
The visa fee is USD 290 for US citizens and USD 255 for UK citizens (if its validity exceeds 180 days). The fee varies depending on the country.
Use the Shield GEO Employer of Record Solution?
Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.
Types of visas in Brazil
| Category | Description of Visa |
|---|---|
| Permanent work visa (“Visto Permanente”) | This visa is usually issued to foreigner workers who are entitled to a permanent residence in Brazil (professional researchers or scientists, investors that invest more than US$ 50,000 per person or US$ 200,000 per company, manager or directors). As mentioned above, some holders of VITEM V visa are eligible to apply for permanent work visa after two years. Generally, passport, birth certificate and marriage certificate (if applicable) are required to apply for this visa. The visa fee is USD 360 for US citizens and USD 355 for UK citizens. |
| VITEM II (Business Trip) Visa | This visa is usually issued to foreign nationals traveling to Brazil for business purposes. However, with this type of visa, the foreign businessmen cannot receive any form of payment from the Brazilian company. They will typically remain on the foreign company payroll and render services on its behalf. This visa is valid for up to ten years, with a maximum length of stay of 90 days per year (could be renewed once depending on the foreign national’s nationality). Documents: The fee for the VITEM II visa is USD 160 for the US and USD 60 for most of the other countries. |
Setting up a company in Brazil
When setting up a company you may want to consider these factors:
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Business factors:
Such as:
- The industry and type of business
- Nationality of the headquarters/individual(s) and
- Presence of existing trade agreements or relationships
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Language:
Most authorities such as the Board of Trade have websites only in Portuguese and all processes must be done in Portuguese. There are no significant local dialects or other deviations from the official language, but a number of words and phrases differ from those used in Portugal. English is the foreign language most used by the business community.
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Location:
Location is generally determined by key business factors. Regulations concerning various aspects of business (e.g., indirect tax rates and incentives) vary from state to state. Special federal programs reward investments in the poorer North and Northeast regions. Discussions with state development agencies are recommended.
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Business licenses:
In addition to the business steps listed in this guide, the business may require additional permits, approvals, etc depending on sector and the location of the business. In general companies should consult with the local municipality (e.g. city hall) to determine and obtain any respective operation permits.
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Bureaucracy and Lack of Centralisation:
Although improvements have been made over recent years, some areas still lack connection with federal authorities, making centralised registering processes lacking in some parts. This means that registration processes and requirements may vary, and require additional legwork depending upon the region established. In general, these problems are compounded by bureaucratic issues.
Excessive delays and the multitudes of various documents required by different bodies can cause days spent on the registering process to begin numbering over 100 days. As a result, while Brazil has been seen as an attractive investment for many companies, starting a company in Brazil is a demanding process that requires extra focus, money and patience.
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Complex Tax System:
Brazil is known for charging a high tax burden for citizens and companies. There are numerous different kinds of taxes, such as this round-up of the 16 most common taxes in Brazil. To complicate matters further, they are governed at federal, state and municipal levels. As mentioned before, these systems are not always centralised and this will increase complexity of doing business in Brazil.
The Federative Republic of Brazil is Latin America’s largest economy. It counts for almost half of the entire South American continent, being only slightly smaller than the landmass of the USA, and borders nearly all South American countries except Chile and Ecuador. Brazil’s largest state is São Paulo, with roughly 42 million inhabitants, and the city is considered the financial capital of Brazil.
Population 202,000,000
Capital Brasilia
Official Language Portuguese
Time Zone UTC-5
Calling Code +55
Currency Real (R$) (International code: BRL)
USD$1 = approximately 3.28 BRL
Nominal GDP $2,247 trillion ($11,281 per capita)
Internet Domain .br
Despite economic growth slowing during recent year due to reduced demand for Brazilian exports in Europe and Asia and modest consumer demand from Brazil’s large middle class. By 2020, Brazil is still projected to be the fifth-largest consumer market in the world, ahead of France and the United Kingdom.
There are several market challenges to consider when doing business in Brazil. Doing business in Brazil requires intimate knowledge of the local environment, including both the direct as well as the indirect costs of doing business in Brazil (referred to as “Custo Brasil”). Such costs are often related to distribution, government procedures, employee benefits, environmental laws, and a complex tax structure. Logistics pose a particular challenge, given the lack of sufficient infrastructure to keep up with nearly a decade of economic expansion.
There are three types of business forms available to foreign companies in Brazil. Each of these business forms has distinct advantages and disadvantages, as well as a differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Brazil and the planned business activity.
A foreign company may establish itself in Brazil either through a branch, representative office or a subsidiary. Corporations are similar in form to both US and European corporations. Limitadas are similar in form to European limited liability companies (such as French SARLs and German GmbHs).
Subsidiary Company
Subsidiaries, which are Brazilian companies established under Brazilian law, represent a more straightforward approach to establishing a presence in Brazil. Although various types of companies exist under Brazilian law, the two most frequently used are the Limited Liability Company (Sociedade Limitada) and the Corporation (Sociedade por Ações – SA). A new type of company having a single member and known as the single-member or individual limited liability company (EIRELI) also became available for individuals since January 2012.[1]
A. Requirements/Restrictions
A Limitada requires at least two shareholders, also known as “quotaholders”, whether or not Brazilian resident individuals or corporate entities. The quotaholders may incorporate a Limitada by executing a “Contrato Social” (Articles of Association) and comply with registration requirements of the local applicable registry in which the registered office of the company is to be located (either the Commercial Registry – or Junta Comercial – for business companies, and the Registry for Corporate Entities – Registro de Pessoas Jurídicas- for non-business companies).[2]
The Limitada must be managed by at least one member resident in Brazil (whether quotaholder or not), appointed by the quotaholders in the Articles of Association or in a separate corporate document. Decisions are taken as set out in the Articles of Association.
The Limitada is required to produce annual accounts which must be approved by its quotaholders at an Annual Quotaholders’ Meeting. The Minutes as well as the company’s Articles of Association are required to be publicly filed at the Commercial Registry.
B. Advantages/Disadvantages
Limitada is the most common form of company in Brazil. It is also the simplest, most flexible and inexpensive type of company to operate, while the Sociedade Anônima (SA) is not as flexible and is considerably more expensive to operate.[3] A limitada is a useful corporate form for businesses with few owners and no intention to raise public funds.[4]
In the Limitada company form, members are liable only up to the value of the quotas for which they have subscribed. However, until the capital of the company is fully paid up, their liability extends to the entire capital of the company.[5]
While nonresidents can be members, there are a few additional obligations for them. A nonresident quota holder must still obtain a tax identification number from the Brazilian Internal Revenue Services (called CNPJ or CPF), and also grant a power of attorney to a Brazilian citizen or resident (likely an appointed accountant or lawyer).[6] Until the full capital is paid in, the quota holders are jointly and severally liable for the total capital subscribed.
The Limited Liability Companies with assets greater than BRL 240 million or turnover greater than BRL 300 million are called “large companies” and must follow the rules of the Corporations regarding to the preparation of their financial statements. Also, large companies shall have their financial statements audited by independent auditors.[7]
C. Registration Steps
In general, entities that perform business activities are considered ‘sociedades empresárias’. Regardless of the type of legal entity adopted or their type of activity (services, sales or manufacturing), sociedades empresárias must be registered with Trade Boards (‘Juntas Comerciais’), federal tax authorities, state tax authorities (depending on the activities to be performed), municipal tax authorities and the social security system.
If the subsidiary company later opens more branches elsewhere in Brazil, separate registrations are required for each branch established.
In Brazil, companies must be registered at the federal, municipal, and state levels. There is evidence of synchronization between these different levels, but it will depend on the particular region and some cases will require separate and independently performed registrations at each level. While generally areas conform to standards set out by federal law, requirements and procedures may vary from state to state. Registration can be time-consuming and bureaucratic process.
1. Appoint a Representative
A company requires at least one manager to be a permanent resident of Brazil (they do not have to be a citizen), who has express power to act on behalf of the company. The representative must have the power to deal with all matters, and receive legal and official documents, including judicial summonses, on behalf of the parent company. This must be formally decided upon before the company can apply for approval for a branch office.
Time: n/a
Cost: n/a
2. Check Company Name
It is not required for a company to reserve a name before incorporating in Brazil. However it is recommended to check first if the company name exists in the state(s) to avoid problems.
Most states provide this service online, and it generally takes one hour and is free. For a federal check, a “request for extension” must be submitted to the Board of Trade (Junta Commercial). It is recommended to have search for three potential names which can then all be proposed when registering the company.
Note: A company name must make reference to the core business of the company. For example, this means that the company name may not be simply “XYZ do Brasil Ltda”, but must be “XYZ do Brasil Information Technology Equipment Ltda”.
In Sao Paulo, the company name can be checked with JUCERJA at http://www.jucerja.rj.gov.br/.
Time: instant (online)
Cost: BRL 0 (if wanting a printed copy, a fee of BRL9 per state, or BRL10 for a Federal check)
3. Establish an Office
Similar to other steps, there is some convolution over the order and prerequisite requirements of registration steps. For offices, in some cases it is said a company address is needed to incorporate, suggesting the office should be established first, but in other cases the company must incorporate first to obtain a tax number before it is allowed to establish an office. Apparently a common practice is to initially register a virtual office on the Articles of Association, incorporate, and establish an office and change the address after incorporating.
There is no specific office registration process required at this point, and instead it will depend on finding and establishing a lease agreement, virtual office agreement, etc before filing the incorporation documents.
Time: n/a
Cost: n/a
4. Register Company at Board of Trade
After preparing and notarising incorporating documents, the first main step of incorporating a subsidiary is to register the incorporation documents at the federal level. This involves filing the company’s corporate documents (articles of association) with either the Board of Trade (Junta Comercial) or with the Registry of Civil Companies, depending on the company activities. This process will supply the business with an identification number (NIRE). In most cases, federal tax (CNPJ) and social security (INSS) registration can also be done within the Board of Trade, as these are also federal bodies.
The Board of Trade is the governmental body responsible for the registration of all business activities, and can usually handle a number of different registrations in one place. There is a Board of Trade for each of state and are governed by the National Department of Business Registration (DNRC), and the Brazilian Ministry of Development, Industry and Foreign Trade. Prices and terms of the registration at Junta Comercial vary from state to state. For this, the company will need to consult the Board of Trade of the state where the company is located.
For example, in the State of São Paulo the company can fill in the forms online at www.jucesp.fazenda.sp.gov.br, to be registered directly with the Board of Trade. In addition to the corporate documents, identification documents of the directors will be required. Nonresident directors may need to acquire a Brazilian personal tax number as well.
Special companies can be used that provide expedited filing and approval services. For example, in São Paulo you can register with either the Sindicato da Micro e Pequena Indústria de São Paulo (SIMPI) at www.simpi.com.br or Associação Comercial de São Paulo (ACSP) at www.jucespacsp.com.br to take advantage of expedited registration with the Board of Trade of the State of São Paulo. For this service, an extra charge of BRL50 is applicable, and registration will be finished within 24 hours.
As part of this process, the company should obtain a company number identification (NIRE), and can also usually process its registration for a tax number (CNPJ) and social security number (INSS) at the same time.
Time: 1-7 days (1 day for express service, 7 days otherwise)
Cost: BRL75 company registration fee (plus BRL50 expediting fee)
5. Publish Financial Statements
To maintain its operating authorisation, the branch and foreign company must publish financial statements in an Official Gazette (Diário Oficial ) and a widely circulated newspaper.
The Diario Oficial usually charges per letter or word, a fee which is determined at the time of publication.
Time: 1 day
Cost: Varies
6. Register for Federal Tax
A company must register as a taxpayer with the Federal Revenue Services (Receita Federal) in the National Register of Corporate Taxpayers (Cadastro Nacional da Pessoa Jurídica, CNPJ) and obtain a CNPJ Certificate. When placing the order with the CNPJ, you must specify the activities the company will be operating. This information will be used not only in taxation, but also in monitoring the activities of the company.[8]
In most major cities, the registration process for tax and social security has been synchronised across federal and state authorities. This means that, as mentioned above, it generally will be covered simultaneously with the previous step. For example, in São Paulo, federal registration of businesses to obtain a CNPJ number and registration with the state tax authorities is done simultaneously. However, it may be different in some states. It is mainly listed here as a separate “step” for clarity purposes.
State tax authorities may schedule an official inspection of the company’s local head office before approving its registration into the CNPJ.
Time: 1 day
Cost: No charge
7. Register for Social Security
The Brazilian government provides social security insurance (the INSS) to workers to cover circumstances such as unemployment and retirement. The scheme is funded by workers having contributions taken from part of their salaries.
In most cities, the registration process for tax and social security has been synchronised across federal and state authorities. This means that, as mentioned above, it generally will be covered simultaneously with the previous step. However, it may be different in some states. It is mainly listed here as a separate “step” for clarity purposes.
A company must register with INSS even if it has no employees. To do so the company representative must contact a Social Security Agency to request registration within 30 days from commencement of trading.
Time: 1 day
Cost: No charge
8. Approve Office Address
Depending on the company’s location, the office address must be approved by the municipality and the fire department. This may be required before being able to register for tax or business permits. There is little information available on this topic (at least in English). The company’s representative or attorney will need to contact the municipal office (generally the town hall) and the fire department directly, and apply for approvals.
As stated before, it may be required to appoint a temporary or virtual office before incorporating, then locate and establish a proper office then update the address.
Time: 1-7 days (estimate)
Cost: No known charges
9. Check and Apply for Municipal Business License/Permit
After obtaining a CNPJ, the company may need to apply for a business license (Alvará de Funcionamento) or operations permit (auto de licença de funcionamento) at the local municipality or regional administration office.
Historically a permit was required before the commencement of any business activities. However, since the application process can take a long time, and with introduction of new tax systems and the TFE (discussed later), the business can generally begin operating before officially receiving the permit.
Despite this, the process is still potentially convoluted. When and how this step is required in the overall process varies. For example in some the states, tax registration may be required before obtaining a business license, in others it may be the other way around, and in others the business license and tax registrations may be done simultaneously.
Generally the following documentation is required:
- Completed municipality’s application form for permit
- Company’s address (previously approved by the municipality and the fire department)
- Copy of the CNPJ
- Copy of the Articles of Association
Time: 90 days
Cost: No charge
10. Register for Municipal Tax(es)
Municipal tax registration is performed at the Municipal Taxpayers’ Registry (Secretaria Municipal de Finanças). Often when registering for federal tax, the municipal tax authorities are automatically notified, which suggests that in most cases this step can be performed automatically and simultaneously with the previous step.
An enrolment form CCM named the Cadastro de Contribuintes Mobiliários must be delivered to the municipality. In general the following documentation is requested:
- DUC form, in triplicate
- DCC form, one copy
- Proof of address of the holders, certified copy or original
- Certified copy of a document proving the right to use the business property, such as a leasing contract or deed of property
- Number of the tax accountant’s registration
- Proof of the ISS contributor to the service providers
- Articles of Incorporation, one copy
- Copy of the CNPJ
- Copy of the business license (alvará de funcionamento)
- ID and CPF of the holders
Although there is generally no ‘registration fee’, once the company has been registered it must pay an annual fee (taxa de fiscalização de estabelecimento taxa de fiscalização de estabelecimento, TFE) for the control and fiscalization of the compliance with municipal laws. The rate of the TFE is based on the company’s corporate purpose, which varies from BRL 141,82 to BRL 17.018,51.
In Sao Paulo, the municipal taxpayer enrollment is made through an electronic form that filled online on the website of the City Hall (www.prefeitura.sp.gov.br)
Note: Additional registrations or requirements may be mandatory for companies in the certain sectors: trade, industry and transport services intercity and interstate, communication services and energy. There may be some bureaucratic burdens or complexities: for example industrial and pharmaceutical companies are required to obtain a license from the CETESB before applying with the CNPJ, however the CETESB requires the company to obtain the CNPJ certificate first.
Time: 5 days
Cost: BRL 425 (e.g for retailing business in Sao Paulo, will vary on company’s activities and per state)
11. Register for State Tax(es)
State registration appears to be the final level of tax registration required. Although it is not clear and as with the previous steps it may be handled automatically in combination with the federal and/or municipal tax; some states may have an agreement with the Federal tax office (Receita Federal). However this may vary between state, and other factors. In addition to this complication, in some the states, state tax registration may be required before obtaining a business license, in others it may be the other way around, and in others the business license and state tax registration may be done simultaneously.
State registration is handled by the state Department of Finance (Secretaria Municipal de Finanças). The procedure varies from state to state, and may not be able to be done over the Internet.
There are various taxes in Brazil, and for state tax the major ones are ICMS and ISS.
ICMS is a state-based value-added tax levied on the import of products and certain transactions involving goods (including electricity), inter-municipal and inter-state transportation services and communication services. In general transactions between different states have a rate of 7% (when the purchaser is located in the states of the North, North-east and Center-west regions or in Espírito Santo state) or 12% (for purchases located in the Southeast and South regions). 18% is the standard rate in the state of São Paulo.
ISS (Imposto sobre Serviços) is a tax applied to services provided to a third party by a company or professional, and is paid by the service provider. The usual rate is around 5%.
There are many other forms of tax and consultation with the state tax and municipal authorities would be recommended.
Time: 1 day
Cost: No charge
12. Apply for digital certification for e-invoice
The company will need to request permission to print invoices and authenticate the tax books. This can be done in the municipality of each city (Secretaria da Fazenda Estadual), by filing a specific form known as the AIDF, along with Book No. 51 and Book No. 57. However, some companies such as those in industry and trade may also need to register with the State Department of Finance (Secretaria Municipal de Finanças).
The company will then need to order official receipts/invoices (notas fiscais) with its CNPJ numbers from authorised printing companies.
Once the tax apparatus is registered, the company can start operating legally.
Time: 2-5 days
Cost: No charge for registration, R$450-600 for invoices
13. Register Employees in Social Integration Program
The company must register with Brazilian Social Security (Programa de Integração Social, PIS), even before employing/if the company has no employees.
Time: 1 day (simultaneous with previous procedures)
Cost: No charge
14. Open Retirement/Unemployment Fund
The company must open a special fund to make its unemployment contribution payments to a retirement fund (Fundo de Garantia por Tempo de Serviço, FGTS), with the Federal Saving Bank (Caixa Economica Federal).
To open the account, the company’s representative or attorney-in-fact must go to any local branch of the federal savings bank (Caixa Economica Federal) with information including:
- A copy of the company’s taxpayer registry number (CNPJ certificate),
- The adhesion form issued by the bank,
- The list of employees,
- The company’s articles of association or bylaws.
When registering an employee, the employer must complete a PIS/PASEP registry form (documento de cadastramento do trabalhador, DCT), to be delivered to the nominated bank responsible for the FGTS account.
Time: 1 day, (simultaneous with previous procedures)
Cost: No charge
15. Notify the Ministry of Labor
The employer must inform the Ministry of Labor of any new hires or employees dismissals. Such information shall be given to the local department of the Ministry of Labor (Delegacia Regional do Trabalho) by the seventh day of the month subsequent to the month of the event, by a written notice sent by postal mail or the Internet.
In addition, the company must submit annually to the Ministry of Labor the “annual report of social information” (relação annual de informações sociais, RAIS), which contains information on company employees (eg. name, salary and date of hiring).
Time: 1 day, (simultaneous with previous procedure)
Cost: no charge
16. Registration with the Patronal Union and Employees Union
Companies are also required to register with an employees union.
These documents can generally be submitted to the unions through their websites. However, how to register may vary on the municipality and state, and the unions themselves. Each municipality and state has unions that represent the activities performed by the company.
Generally the documents required include:
- Company registration form, Federal Register of Corporate Taxpayers,
- Articles of association,
- List of employees
Once a year, employees and employers must contribute to their representative employee unions and employer associations an amount equivalent to one day’s salary (regardless of whether they are affiliated to the union or association). The first payment is due in the month of the company’s registration, though the time may vary for each union.
Time: 5 days (simultaneous with previous procedures)
Cost: no charge
17. Open Company Bank Account
There are several major national banks in Brazil, as well as various regional banks and a handful of international banks. The requirements and procedure to open an account of course vary. However, in general, to open of a company bank account, documents required include:
- Incorporation documents and registration certificate
- Power of attorney document if applicable
- CNPJ certificate
Time: 1 day
Cost: No charge (may require minimum deposit)
Branch Office
Branches are subject to prior approval being obtained from the Federal Executive Branch of Brazil and are most commonly used by foreign banks and airline companies. Due to the extremely complex procedure involved, the opening of a branch in Brazil is not generally recommended.
A. Requirements/Restrictions
The formation of a branch requires approval from the federal government and any amendments to the branch’s articles of incorporation must also be approved. The company must then develop its activities within twelve months of the authorisation. If not, the authorisation will automatically expire. Setting the business activities clearly in its articles of association is paramount – the government can cancel the authorisation if the company acts outside its established corporate purpose. The authorisations may be delegated such as through the ministry of development, industry and commerce.
The parent company must allocate capital to the branch office unless it is a company type such as an NGO. The branch must share the same shareholders as its parent company and adopt the same corporate structure.
B. Advantages/Disadvantages
The requirement for prior approval from the federal government by means of a presidential decree is a very lengthy process. In addition, as the federal government must also authorise any amendments to the branch’s articles of incorporation, this can delay things significantly. If the articles are not properly covering the intended business activities, there is theoretically a risk the branch will be shut down by the government for acting outside its established purpose.
Also, unlike a subsidiary, a branch is considered an extension of the foreign entity, as such the branch’s foreign parent company may have unlimited liability for the branch’s debts and obligations.
C. Registration Steps
In general, entities that perform business activities are considered ‘sociedades empresárias’. Regardless of the type of legal entity or type of activity (services, sales or manufacturing), sociedades empresárias must be registered with Trade Boards (‘Juntas Comerciais’), federal tax authorities, state tax authorities (depending on the activities to be performed), municipal tax authorities and the social security system
If the foreign parent later opens more branches elsewhere in Brazil, separate approvals and registrations are required for each branch established.
In Brazil, tax must be registered at the federal, municipal, and state levels. There is evidence of syncronisation between these different levels, but it will depend on the particular region and some cases will require separate and independently performed registrations at each level. While generally areas conform to standards set out by federal law, requirements and procedures may vary from state to state. Registration can be time-consuming and bureaucratic process.
1. Appoint a Representative
The branch office will require a representative who is a resident of Brazil who has express power to act on behalf of the company. The representative must have the power to deal with all matters, and receive legal and official documents, including judicial summonses, on behalf of the parent company. This must be formally decided upon before the company can apply for approval for a branch office.
Time: n/a
Cost: n/a
2. Check Company Name
It is not required for a company to reserve a name before doing business in Brazil. However it is recommended to check first if the company name exists in the state(s) to avoid problems.
Most states provide this service online, and it generally takes one hour and is free. For a federal check, a “request for extension” must be submitted to the Board of Trade (Junta Commercial). It is recommended to have search for three potential names which can then all be proposed when registering the company.
Note: A company name must make reference to the core business of the company. For example, this means that the company name may not be simply “XYZ do Brasil Ltda”, but must be “XYZ do Brasil Information Technology Equipment Ltda”.
In Sao Paulo, the company name can be checked with JUCERJA at http://www.jucerja.rj.gov.br/.
Time: instant (online)
Cost: BRL 0 (if wanting a printed copy, a fee of BRL9 per state, or BRL10 for a Federal check)
3. Establish an Office
Similar to other steps, there is some convolution over the order and prerequisite requirements of registration steps. For offices, in some cases it is said a company address is needed to incorporate, suggesting the office should be established first, but in other cases the company must incorporate first to obtain a tax number before it is allowed to establish an office. Apparently a common practice is to initially register a virtual office on the Articles of Association, incorporate, and establish an office and change the address after incorporating.
There is no specific office registration process required at this point, and instead will depend on finding and establishing a lease agreement, virtual office agreement, etc before filing the incorporation documents.
Time: n/a
Cost: n/a
4. Apply for Governmental Approval
In order to set up a branch in Brazil, foreign parent companies must first apply for governmental approval. This is usually done via the Federal Department of Trade Boards. If successful the company can receive a Presidential decree to give governmental approval for incorporation.
When applying the company should send documents including:
- Evidence of its regular incorporation in its country of origin
- The company’s articles of association or bylaws
- List of members of all administrative bodies
- The company decision which approves the opening of a branch in Brazil
- The company decision which defines the share capital in Brazilian currency which the parent company assigns to its Brazilian operations, unless the parent company is not a business company
- Proof that the company has appointed a representative in Brazil
- Latest financial statements.
Time: 30-90 days (estimate)
Cost: No known charge
5. File Company Documents with Department of Trade
Once approval has been given, the company must then file all documents with the Federal Department of Trade Boards and the tax authorities. This involves filing the company’s corporate documents (articles of association) with either the Board of Trade (Junta Comercial) or with the Registry of Civil Companies, depending on the company activities. While not explicitly specified, it is presumed that these documents will need to be notarised by the appropriate notary office of the home country. This process will supply the business with an identification number (NIRE). In most cases, federal tax (CNPJ) and social security (INSS) registration can also be done within the Board of Trade, as these are also federal bodies.
The Board of Trade is the governmental body responsible for the registration of all business activities, and can usually handle a number of different registrations in one place. There is a Board of Trade for each of state and are governed by the National Department of Business Registration (DNRC), and the Brazilian Ministry of Development, Industry and Foreign Trade. Prices and terms of the registration at Junta Comercial vary from state to state. For this, the company will need to consult the Board of Trade of the state where the company is located.
For example, in the State of São Paulo the company can fill in the forms online at www.jucesp.fazenda.sp.gov.br, to be registered directly with the Board of Trade. In addition to the corporate documents, identification documents of the directors will be required. Nonresident directors may need to acquire a Brazilian personal tax number as well.
Special companies can be used that provide expedited filing and approval services. For example, in São Paulo you can register with either the Sindicato da Micro e Pequena Indústria de São Paulo (SIMPI) at www.simpi.com.br or Associação Comercial de São Paulo (ACSP) at www.jucespacsp.com.br to take advantage of expedited registration with the Board of Trade of the State of São Paulo. For this service, an extra charge of BRL50 is applicable, and registration will be finished within 24 hours.
As part of this process, the company should obtain a company number identification (NIRE), and can also usually process its registration for a tax number (CNPJ) and social security number (INSS) at the same time.
Time: 1/7 days (1 day for express service, 7 days otherwise)
Cost: BRL75 company registration fee (plus BRL50 expediting fee)
6. Publish Financial Statements
To maintain its operating authorisation, the branch and foreign company must publish financial statements in an Official Gazette (Diário Oficial ) and a widely circulated newspaper. The Diario Oficial usually charges per letter or word, a fee which is determined at the time of publication.
Time: 1 day
Cost: Varies
7. Register for Federal Tax
In most cities, the registration process for tax and social security has been synchronised across federal and state authorities. This means that, as mentioned above, it generally will be covered simultaneously with the previous step. For example, in São Paulo, federal registration of businesses to obtain a CNPJ number and registration with the state tax authorities is done simultaneously. However, it may be different in some states. It is mainly listed here as a separate “step” for clarity purposes.
A company must register as a taxpayer with the Federal Revenue Services (Receita Federal) in the National Register of Corporate Taxpayers (Cadastro Nacional da Pessoa Jurídica, CNPJ) and obtain a CNPJ Certificate. When placing the order with the CNPJ, you must specify the activities the company will be operating. This information will be used not only in taxation, but also in monitoring the activities of the company.[9]
State tax authorities may schedule an official inspection of the company’s local head office before approving its registration into the CNPJ.
Time: 1 day
Cost: No charge
8. Register for Social Security
In most cities, the registration process for tax and social security has been synchronised across federal and state authorities. This means that, as mentioned above, it generally will be covered simultaneously with the previous step. However, it may be different in some states. It is mainly listed here as a separate “step” for clarity purposes. A company must register for social security (INSS) even if it has no employees.
Time: 1 day
Cost: No charge
9. Approve Office Address
Depending on the company’s location, the office address must be approved by the municipality and the fire department. This may be required before being able to register for tax or business permits.
There is little information available on this topic (at least in English). The company’s representative or attorney will need to contact the municipal office (generally the town hall) and the fire department directly, and apply for approvals.
As stated before, it may be required to appoint a temporary or virtual office before incorporating, then locate and establish a proper office then update the address.
Time: 1-7 days (estimate)
Cost: No known charges
10. Apply to Municipal Business License/Permit
After obtaining a CNPJ, you will need to apply for a business license (Alvará de Funcionamento) or operations permit (auto de licença de funcionamento) at the local municipality or regional administration office.
Historically a permit was required before the commencement of any business activities. However, since the application process can take a long time, and with introduction of new tax systems and the TFE (discussed later), the business can generally begin operating before officially receiving the permit. Despite this, the process is still potentially convoluted. When and how this step is required in the overall process varies. For example in some the states, tax registration may be required before obtaining a business license, in others it may be the other way around, and in others the business license and tax registrations may be done simultaneously.
Generally the following documentation is required:
- Completed municipality’s application form for permit
- Company’s address (previously approved by the municipality and the fire department)
- Copy of the CNPJ
- Copy of the Articles of Association
Time: 90 days
Cost: No charge
11. Register for Municipal Tax
Municipal tax registration is performed at the Municipal Taxpayers’ Registry (Secretaria Municipal de Finanças). Often when registering for federal tax, the municipal tax authorities are automatically notified, which suggests that in most cases this step can be performed automatically and simultaneously with the previous step.
An enrollment form CCM named the Cadastro de Contribuintes Mobiliários must be delivered to the municipality. In general the following documentation is requested:
- DUC form, in triplicate
- DCC form, one copy
- Proof of address of the holders, certified copy or original
- Certified copy of a document proving the right to use the business property, such as a leasing contract or deed of property
- Number of the tax accountant’s registration
- Proof of the ISS contributor to the service providers
- Articles of Incorporation, one copy
- Copy of the CNPJ
- Copy of the business license (alvará de funcionamento)
- ID and CPF of the holders
Although there is generally no ‘registration fee’, once the company has been registered it must pay an annual fee (taxa de fiscalização de estabelecimento taxa de fiscalização de estabelecimento, TFE) for the control and fiscal compliance with municipal laws. The rate of the TFE is based on the company’s corporate purpose, which varies from BRL 141,82 to BRL 17.018,51.
In Sao Paulo, the municipal taxpayer enrollment is made through an electronic form that filled online on the website of the City Hall (www.prefeitura.sp.gov.br)
Note: Additional registrations or requirements may be mandatory for companies in the certain sectors: trade, industry and transport services intercity and interstate, communication services and energy. There may be some bureaucratic burdens or complexities: for example industrial and pharmaceutical companies are required to obtain a license from the CETESB before applying with the CNPJ, however the CETESB requires the company to obtain the CNPJ certificate first.
Time: 5 days
Cost: BRL 425 (e.g for retailing business in Sao Paulo, will vary on company’s activities and per state)
12. Register for State Tax
State registration is the final level of tax registration required. As with the previous steps it may be handled automatically in combination with the federal and/or municipal tax; some states may have an agreement with the Receita Federal. However, this may vary between states. In addition to this complication, in some the states, state tax registration may be required before obtaining a business license, in others it may be the other way around, and in others the business license and state tax registration may be done simultaneously.
There are various taxes in Brazil, and for state tax the major ones are ICMS and ISS.
ICMS is a state-based value-added tax levied on the import of products and certain transactions involving goods (including electricity), inter-municipal and inter-state transportation services and communication services. In general transactions between different states have a rate of 7% (when the purchaser is located in the states of the North, North-east and Center-west regions or in Espírito Santo state) or 12% (for purchases located in the Southeast and South regions). 18% is the standard rate in the state of São Paulo.
ISS (Imposto sobre Serviços) is a tax applied to services provided to a third party by a company or professional, and is paid by the service provider. The rate is usually around 5%. However there are many other forms of tax and consultation with the state tax and municipal authorities would be recommended.
State registration is handled by the state Department of Finance (Secretaria Municipal de Finanças). The procedure varies from state to state, and may not be able to be done over the Internet.
Time: 1 day
Cost: No Charge
13. Apply for digital certification for e-invoice
The company will need to request permission to print invoices and authenticate the tax books. This can be done in the municipality of each city (Secretaria da Fazenda Estadual), by filing a specific form known as the AIDF, along with Book No. 51 and Book No. 57. However, some companies such as those in industry and trade may also need to register with the State Department of Finance (Secretaria Municipal de Finanças).
The company will then need to order official receipts/invoices (notas fiscais) with its CNPJ numbers from authorised printing companies. Once the tax apparatus is registered, the company can start operating legally.
Time: 2-5 days
Cost: No charge for registration, R$450-600 for invoices
14. Register Employees in Social Integration Program
The company must register with Brazilian Social Security (Programa de Integração Social, PIS), even before employing/if the company has no employees.
Time: 1 day (simultaneous with previous procedures)
Cost: No charge
15. Open Retirement/Unemployment Fund
The company must open a special fund to make its unemployment contribution payments to a retirement fund (Fundo de Garantia por Tempo de Serviço, FGTS), with the Federal Saving Bank (Caixa Economica Federal).
To open the account, the company’s representative or attorney-in-fact must go to any local branch of the federal savings bank (Caixa Economica Federal) with information including:
- A copy of the company’s taxpayer registry number (CNPJ certificate),
- The adhesion form issued by the bank,
- The list of employees,
- The company’s articles of association or bylaws.
When registering an employee, the employer must complete a PIS/PASEP registry form (documento de cadastramento do trabalhador, DCT), to be delivered to the nominated bank responsible for the FGTS account.
Time: 1 day, (simultaneous with previous procedures)
Cost: No charge
16. Notify the Ministry of Labor
The employer must inform the Ministry of Labor of any new hires or employees dismissals.
Such information shall be given to the local department of the Ministry of Labor (Delegacia Regional do Trabalho) by the seventh day of the month subsequent to the month of the event, by a written notice sent by postal mail or the Internet.
In addition, the company must submit annually to the Ministry of Labor the “annual report of social information” (relação annual de informações sociais, RAIS), which contains information on company employees (eg. name, salary and date of hiring).
Time: 1 day, (simultaneous with procedure 7)
Cost: no charge
17. Registration with the Patronal Union and Employees Union
If employing people the company branch is also required to register with an employees union. These documents can generally be submitted to the unions through their websites. However, how to register may vary on the municipality and state, and the unions themselves. Each municipality and state has unions that represent the activities performed by the company.
Generally the documents required include:
- Company registration form, Federal Register of Corporate Taxpayers,
- Articles of association,
- List of employees
Once a year, employees and employers must contribute to their representative employee unions and employer associations an amount equivalent to one day’s salary (regardless of whether they are affiliated to the union or association). The first payment is due in the month of the company’s registration, though the time may vary for each union.
Time: 5 days (simultaneous with previous procedures)
Cost: no charge
18. Open Company Bank Account
There are several major national banks in Brazil, as well as various regional banks and a handful of international banks. The requirements and procedure to open an account of course vary. However, in general, to open of a company bank account, documents required include:
- Incorporation documents and registration certificate
- Power of attorney document if applicable
- CNPJ certificate
Time: 1 day
Cost: No charge (may require minimum deposit)
Representative Office
A representative office allows a foreign company to carry out a limited range of activities. Representative offices are generally used to carry out market research, establish relationships and formalise agreements potential customers and partners.
Despite the limitation there appears to be little difference between a branch office and a
A. Requirements/Restrictions
Representative offices in Brazil of companies domiciled abroad are subject to Brazilian corporate taxation as independent entities.
B. Advantages/Disadvantages
A representative office is limited in the activities it can do and generally is prohibited from commercial taxable activities.
Like a branch, a representative office is not a separate legal entity and seen as an extension of its parent company. This means that the parent company is liable for debts and obligations of the representative office.
A Brazilian representative office of a foreign company is subject to Brazilian tax on its worldwide income. Losses incurred on foreign transactions may not be used to offset income generated in Brazil; however, a foreign tax credit is available for corporate taxes paid abroad.
C. Registration Steps
There is very little information available on the specifics of establishing a foreign representative office in Brazil. They do exist, as various companies have opened them. However there is no formal documentation on the registration process specific to branches. Rather, it is bundled with the process for a Branch, and despite the differences the steps appear to be the same, aside from additional taxes such as sales tax.
1. Appoint a Representative
The branch office will require a representative who is a resident of Brazil who has express power to act on behalf of the company. The representative must have the power to deal with all matters, and receive legal and official documents, including judicial summonses, on behalf of the parent company. This must be formally decided upon before the company can apply for approval for a branch office.
Time: n/a
Cost: n/a
2. Establish an Office
If the representative office is establishing a physical location, this will need to be designated before applying for government approval. A common practice is to initially register a temporary office with the law firm or accounting firm, or hiring a virtual office service and changing it later.
There is no specific office registration process required at this point, and instead will depend on finding and establishing a lease agreement, virtual office agreement, etc before filing the incorporation documents.
Time: n/a
Cost: n/a
3. Apply for Governmental Approval
In order to set up a representative office, as it is bundled with branch requirements, the foreign parent companies must first apply for governmental approval. This is usually done via the Federal Department of Trade Boards. If successful the company can receive a Presidential decree to give governmental approval for incorporation.
When applying the company should send documents including:
- Evidence of its regular incorporation in its country of origin
- The company’s articles of association or bylaws
- List of members of all administrative bodies
- The company decision which approves the opening of a branch in Brazil
- The company decision which defines the share capital in Brazilian currency which the parent company assigns to its Brazilian operations, unless the parent company is not a business company
- Proof that the company has appointed a representative in Brazil
- Latest financial statements.
Time: 30-90 days (estimate)
Cost: No known charge
4. File Company Documents with Department of Trade
Once approval has been given, the company must then file all documents with the Federal Department of Trade Boards and the tax authorities. This involves filing the company’s corporate documents (articles of association) with either the Board of Trade (Junta Comercial) or with the Registry of Civil Companies, depending on the company activities. While not explicitly specified, it is presumed that these documents will need to be notarised by the appropriate notary office of the home country. This process will supply the business with an identification number (NIRE). In most cases, federal tax (CNPJ) and social security (INSS) registration can also be done within the Board of Trade, as these are also federal bodies.
The Board of Trade is the governmental body responsible for the registration of all business activities, and can usually handle a number of different registrations in one place. There is a Board of Trade for each of state and are governed by the National Department of Business Registration (DNRC), and the Brazilian Ministry of Development, Industry and Foreign Trade. Prices and terms of the registration at Junta Comercial vary from state to state. For this, the company will need to consult the Board of Trade of the state where the company is located.
For example, in the State of São Paulo the company can fill in the forms online at www.jucesp.fazenda.sp.gov.br, to be registered directly with the Board of Trade. In addition to the corporate documents, identification documents of the directors will be required. Nonresident directors may need to acquire a Brazilian personal tax number as well.
Special companies can be used that provide expedited filing and approval services. For example, in São Paulo you can register with either the Sindicato da Micro e Pequena Indústria de São Paulo (SIMPI) at www.simpi.com.br or Associação Comercial de São Paulo (ACSP) at www.jucespacsp.com.br to take advantage of expedited registration with the Board of Trade of the State of São Paulo. For this service, an extra charge of BRL50 is applicable, and registration will be finished within 24 hours.
As part of this process, the company should obtain a company number identification (NIRE), and can also usually process its registration for a tax number (CNPJ) and social security number (INSS) at the same time.
Time: 1-7 days (1 day for express service, 7 days otherwise)
Cost: BRL75 company registration fee (plus BRL50 expediting fee)
5. Publish Financial Statements
To maintain its operating authorisation, the branch and foreign company must publish financial statements in an Official Gazette (Diário Oficial ) and a widely circulated newspaper. The Diario Oficial usually charges per letter or word, a fee which is determined at the time of publication.
Time: 1 day
Cost: Varies
6. Register for Federal Tax
In most cities, the registration process for tax and social security has been synchronised across federal and state authorities. This means that, as mentioned above, it generally will be covered simultaneously with the previous step. For example, in São Paulo, federal registration of businesses to obtain a corporate tax (CNPJ) number and registration with the state tax authorities is done simultaneously. However, it may be different in some states. It is mainly listed here as a separate “step” for clarity purposes.
A branch or subsidiary must register as a taxpayer with the Federal Revenue Services (Receita Federal) in the National Register of Corporate Taxpayers (Cadastro Nacional da Pessoa Jurídica, CNPJ) and obtain a CNPJ Certificate. Although a representative office does not engage in taxable activates in Brazil, a Brazilian representative office of a foreign company is subject to Brazilian tax on its worldwide income. Additionally, when registering with CNPJ, the company must specify the function of the office, information will be used not in monitoring the activities of the company.[10] Thus it is likely the representative office will still need to register for CNPJ.
State tax authorities may schedule an official inspection of the representative office before approving its CNPJ registration.
Time: 1 day
Cost: No charge
7. Register for Social Security
In most cities, the registration process for tax and social security has been synchronised across federal and state authorities. This means that, as mentioned above, it generally will be covered simultaneously with the previous step. However, it may be different in some states. It is mainly listed here as a separate “step” for clarity purposes. A company must register for social security (INSS) even if it has no employees.
Time: 1 day
Cost: No charge
8. Approve Office Address
Depending on the company’s location, the office address must be approved by the municipality and the fire department. This may be required before being able to register for tax or business permits.
There is little information available on this topic (at least in English). The company’s representative or attorney will need to contact the municipal office (generally the town hall) and the fire department directly, and apply for approvals.
As stated before, it may be required to appoint a temporary or virtual office before incorporating, then locate and establish a proper office then update the address.
Time: 1-7 days (estimate)
Cost: No known charges
9. Apply to Municipal Business License/Permit
After obtaining a CNPJ, you will need to apply for an business license (Alvará de Funcionamento) or operations permit (auto de licença de funcionamento) at the local municipality or regional administration office.
Historically a permit was required before the commencement of any business activities. However, since the application process can take a long time, and with introduction of new tax systems and the TFE (discussed later), the business can generally begin operating before officially receiving the permit. Despite this, the process is still potentially convoluted. When and how this step is required in the overall process varies. For example in some the states, tax registration may be required before obtaining a business license, in others it may be the other way around, and in others the business license and tax registrations may be done simultaneously.
Generally the following documentation is required:
- Completed municipality’s application form for permit
- Company’s address (previously approved by the municipality and the fire department)
- Copy of the CNPJ
- Copy of the Articles of Association
Time: 90 days
Cost: No charge
10. Register for Municipal Tax
Municipal tax registration is performed at the Municipal Taxpayers’ Registry (Secretaria Municipal de Finanças). Often when registering for federal tax, the municipal tax authorities are automatically notified, which suggests that in most cases this step can be performed automatically and simultaneously with the previous step.
Although a representative office does not engage in taxable activates in Brazil, a Brazilian representative office of a foreign company is subject to Brazilian tax on its worldwide income. Thus it is likely the representative office will still need to register for CNPJ.
An enrollment form CCM named the Cadastro de Contribuintes Mobiliários must be delivered to the municipality. In general the following documentation is requested:
- DUC form, in triplicate
- DCC form, one copy
- Proof of address of the holders, certified copy or original
- Certified copy of a document proving the right to use the business property, such as a leasing contract or deed of property
- Number of the tax accountant’s registration
- Proof of the ISS contributor to the service providers
- Articles of Incorporation, one copy
- Copy of the CNPJ
- Copy of the business license (alvará de funcionamento)
- ID and CPF of the holders
Although there is generally no ‘registration fee’, once the company has been registered it must pay an annual fee (taxa de fiscalização de estabelecimento taxa de fiscalização de estabelecimento, TFE) for the control and fiscalization of the compliance with municipal laws. The rate of the TFE is based on the company’s corporate purpose, which varies from BRL 141,82 to BRL 17.018,51.
In Sao Paulo, the municipal taxpayer enrollment is made through an electronic form that filled online on the website of the City Hall (www.prefeitura.sp.gov.br)
Note: Additional registrations or requirements may be mandatory for companies in the certain sectors: trade, industry and transport services intercity and interstate, communication services and energy. There may be some bureaucratic burdens or complexities: for example industrial and pharmaceutical companies are required to obtain a license from the CETESB before applying with the CNPJ, however the CETESB requires the company to obtain the CNPJ certificate first.
Time: 5 days
Cost: BRL 425 (e.g for retailing business in Sao Paulo, will vary on company’s activities and per state)
11. Register for State Tax
State registration is the final level of tax registration required. As with the previous steps it may be handled automatically in combination with the federal and/or municipal tax; and some states may have an agreement with the Receita Federal. However, this may vary between states. In addition to this complication, in some the states, state tax registration may be required before obtaining a business license, in others it may be the other way around, and in others the business license and state tax registration may be done simultaneously.
There are various taxes in Brazil, and for state tax the major ones are ICMS and ISS.
ICMS is a state-based value-added tax levied on the import of products and certain transactions involving goods, and ISS (Imposto sobre Serviços) is a tax applied to services provided to a third party by a company or professional, and is paid by the service provider. The rate is usually around 5%. As a representative office would be limited from doing any such activities it is not clear if registration is still required. However as mentioned before, a Brazilian representative office of a foreign company is subject to Brazilian tax on its worldwide income. Whether this would extend to state-based goods and services taxes is unclear, and consultation with the state tax and municipal authorities would be recommended. It is possible the state tax office would still want the company to register for bureaucratic and monitoring purposes.
State registration is handled by the state Department of Finance (Secretaria Municipal de Finanças). The procedure varies from state to state, and may not be able to be done over the Internet.
Time: 1 day
Cost: No Charge
12. Register Employees in Social Integration Program
The company must register with Brazilian Social Security (Programa de Integração Social, PIS), even before employing/if the company has no employees.
Time: 1 day (simultaneous with previous procedures)
Cost: No charge
13. Open Retirement/Unemployment Fund
The company must open a special fund to make its unemployment contribution payments to a retirement fund (Fundo de Garantia por Tempo de Serviço, FGTS), with the Federal Saving Bank (Caixa Economica Federal).
To open the account, the company’s representative or attorney-in-fact must go to any local branch of the federal savings bank (Caixa Economica Federal) with information including:
- A copy of the company’s taxpayer registry number (CNPJ certificate),
- The adhesion form issued by the bank,
- The list of employees,
- The company’s articles of association or bylaws.
When registering an employee, the employer must complete a PIS/PASEP registry form (documento de cadastramento do trabalhador, DCT), to be delivered to the nominated bank responsible for the FGTS account.
Time: 1 day, (simultaneous with previous procedures)
Cost: No charge
14. Notify the Ministry of Labor
The employer must inform the Ministry of Labor of any new hires or employees dismissals. Such information shall be given to the local department of the Ministry of Labor (Delegacia Regional do Trabalho) by the seventh day of the month subsequent to the month of the event, by a written notice sent by postal mail or the Internet.
In addition, the company must submit annually to the Ministry of Labor the “annual report of social information” (relação annual de informações sociais, RAIS), which contains information on company employees (eg. name, salary and date of hiring).
Time: 1 day, (simultaneous with procedure 7)
Cost: no charge
15. Registration with the Patronal Union and Employees Union
If employing people the company branch is also required to register with an employees union. These documents can generally be submitted to the unions through their websites. However, how to register may vary on the municipality and state, and the unions themselves. Each municipality and state has unions that represent the activities performed by the company.
Generally the documents required include:
- Company registration form, Federal Register of Corporate Taxpayers,
- Articles of association,
- List of employees
Once a year, employees and employers must contribute to their representative employee unions and employer associations an amount equivalent to one day’s salary (regardless of whether they are affiliated to the union or association). The first payment is due in the month of the company’s registration, though the time may vary for each union.
Time: 5 days (simultaneous with previous procedures)
Cost: no charge
16. Open Company Bank Account
There are several major national banks in Brazil, as well as various regional banks and a handful of international banks.
The requirements and procedure to open an account of course vary. However, in general, to open of a company bank account, documents required include:
- Incorporation documents and registration certificate
- Power of attorney document if applicable
- CNPJ certificate
Time: 1 day
Cost: No charge (may require minimum deposit)
Outsourcing Employment Through a GEO Employer of Record Service
Whether to incorporate in Brazil, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.
If the company intends to have staff in Brazil they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where
– the company is looking to setup an office quickly
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Brazil
– the company needs help with tax, employment, immigration and payroll compliance in Brazil
The complexity of employment regulations in Brazil makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.
Shield GEO provides a comprehensive service in Brazil allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Brazil.
Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Brazil. Read more about outsourced employment through Shield GEO.
Summary of Setup Steps
| Subsidiary Company |
Branch Office |
Representative Office |
Time |
Cost (BRL) |
|
| Appoint Representative | Yes | Yes | Yes | n/a | n/a |
| Check Company Name | Yes | Yes | Yes | instant | 0-19 |
| Establish an Office | Yes | Yes | Yes | n/a | n/a |
| Apply for Government Approval | – | Yes | Yes | 30-90 days | 0 |
| Register Company | Yes | Yes | Yes | 1-7 days | 75-125 |
| Publish Financial Statements | Yes | Yes | Yes | 1 day | Varies |
| Register for Federal Tax | Yes | Yes | Yes | 1 day | 0 |
| Register for Social Security | Yes | Yes | Yes | 1 day | 0 |
| Approve Office Address | Yes | Yes | Yes | 1-7 days | 0 |
| Apply for Business License(s) | Yes | Yes | Yes | 90 days | 0 |
| Register for Municipal Tax(es) | Yes | Yes | Yes | 5 days | 425 |
| Register for State Tax(es) | Yes | Yes | Yes | 1 day | 0 |
| Certify Invoices | Yes | Yes | – | 2-5 days | 450-600 |
| Register Employees in Social Integration Program | Yes | Yes | Yes | 1 day | 0 |
| Open Retirement/Unemployment Fund | Yes | Yes | Yes | 1 day | 0 |
| Notify Ministry of Labor | Yes | Yes | Yes | 1 day | 0 |
| Register with Unions | Yes | Yes | Yes | 5 days | 0 |
| Open Company Bank Account | Yes | Yes | Yes | 1 day | 0 |
|
TOTALS: *applications and processing times, not including internal document preparation, etc |
Subsidiary 116-131 days BRL 950-1100 |
Branch 146-221 days BRL 950-1100 |
Rep. Office 146-221 days BRL 200-500
|
Conclusion
The Limitada is the most common form of company in Brazil. It is also the simplest, most flexible and inexpensive type of company to operate. The opening of a branch in Brazil is not generally recommended due to the extremely complex procedure involved. There is no difference from a tax perspective between a foreign branch and a local subsidiary. Branches are only commonly used by foreign banks and airline companies. The representative office has similar issues to the branch, and is even rarer. It would seem only in special circumstances and otherwise restricted industries (such as banking and finance) would a company consider a representative office in Brazil.
APPENDIX: TERMINOLOGY
| English | Portuguese |
| Annual Report of Social Information | relação annual de informações sociais |
| Articles of Association | Artigos de Associação |
| Board of Trade | Junta Comercial |
| Brazilian Federael Internal Revenue Services | Receita Federal |
| Business license | Alvará de Funcionamento |
| corporate revenue tax | Imposto de Renda de Pessoa Jurídica, IRPJ |
| Corporation | Sociedade por Ações, SA |
| Federal and state tax | Secretaria da Receita Federal do Ministério da Fazenda, SRF/MF |
| Federal Official Gazette | Diário Oficial da União |
| Federal Savings Bank | Caixa Economica Federal |
| General Social Security Regime | Regime Geral de Previdência Social |
| Limited Liability Company | Sociedade Limitada |
| Ministry of Labor | Cadastro Geral de empregados e desempregados, CAGED |
| Municipal Taxpayers’ Registry | Secretaria Municipal de Finanças |
| National Institute of Social Security | Instituto Nacional do Seguro Social (INSS). |
| National Register of Corporate Taxpayers | Cadastro Nacional da Pessoa Jurídica, CNPJ |
| operations permit | Auto de licença de funcionamento |
| Retirement Fund | Fundo de Garantia por Tempo de Serviço, FGTS |
| social integration program | Programa de Integração Social, PIS |
| Social welfare | Previdência Social |
| state tax for goods and services. | Imposto sobre Operações relativas à Circulação de Mercadorias e Prestação de Serviços de Transporte Interestadual e Intermunicipal e de Comunicação, ICMS |
| tax applied to the services provided to a third party by a company or professional | Imposto sobre Serviços, ISS |
| TFE | Registry Taxa de Fiscalização de Estabelecimentos |
- Brazil Employer of Record Overview
Brazil
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