Doing business in Brazil

Brazil’s Economy & Business Environment 

Business Environment in Brazil 

Brazil's business environment is characterized by a complex tax system and regulatory challenges. The recent tax reform, approved in December 2023, aims to simplify the tax structure by introducing a dual Value-Added Tax (VAT) system. Additionally, new transfer pricing regulations have been enacted to reduce double taxation on multinational firms. 

Overall, Brazil's economy presents a mix of opportunities and challenges. While there are significant hurdles to overcome, ongoing reforms and a large consumer market offer potential for growth. 

International Investment Laws 

Brazil's primary law regulating foreign investment is the Foreign Direct Investment Law. This law governs the inflow and outflow of foreign capital and ensures that foreign investors receive the same treatment as domestic investors. 

The Brazilian Trade and Investment Promotion Agency (Apex-Brasil) plays a crucial role in attracting foreign investments by providing support and information to potential investors. Brazil offers various tax incentives to foreign investors, including reductions in import duties and tax exemptions for specific sectors. 

Regulatory Requirements & Brazilian Government 

Brazil's tax system is known for its complexity, as it involves a variety of federal, state, and local taxes. Recent reforms are aimed at simplifying this system. Companies are required to comply with environmental laws that regulate pollution, waste management, and the use of natural resources. Additionally, Brazil has strict labor laws that protect workers' rights, including regulations on working hours, minimum wage, and occupational health and safety. 

Entity Structures in Brazil 

Brazil offers several types of business entities, each with its own legal and operational characteristics.  

1. Sociedade Anônima - S.A.: The S.A. is a more complex structure, suitable for larger businesses and those planning to go public. Requires at least two shareholders. Shareholders' liability is limited to the value of their shares. There are Minimum capital requirements that apply, and the capital must be divided into shares. 
   
   
2. Sociedade Limitada – Ltda: The Ltda. is the most common type of business entity in Brazil. Requires at least two shareholders, who can be individuals or legal entities. No minimum capital requirement, but the capital must be fully subscribed and paid in.
   
   
3. Empresa Individual de Responsabilidade Limitada – EIRELI: The EIRELI allows a single individual to form a limited liability company. Owned by a single individual, who can be either a Brazilian or a foreigner. This structure requires a minimum capital equivalent to 100 times the monthly minimum wage in Brazil.
   
   
4. Sucursal de uma empresa estrangeira: A foreign company can establish a branch in Brazil, but this process is more complex and requires government authorization. The branch is an extension of the foreign parent company. No specific capital requirement, but the parent company must allocate sufficient funds to operate the branch. 

Banking & Financial System in Brazil 

Brazil's financial system faces challenges from economic volatility and external shocks. Brazil is home to some of the largest and most valuable banking brands in the region, including Itaú Unibanco, Banco do Brasil, Banco Bradesco, and Caixa Econômica Federal. 

Profit-Sharing (PTU) Requirements 

In Brazil, the Profit Sharing Program, known as Participação nos Lucros e Resultados (PLR), is a popular way for companies to incentivize employees by sharing a portion of the company's profits.  

Law 10,101/2000: This law governs the implementation of profit-sharing programs in Brazil. It requires that the program be established through a formal agreement between the company and its employees or their representatives. 

Technology & SAP Business One in Brazil 

Brazil's focus on technology and the adoption of solutions like SAP Business One are driving the digital transformation of its business landscape. If you have any specific questions or need more detailed information on a particular aspect, feel free to ask our experts! 

International Taxation, Compliance & Tax Incentives 

Corporate Income Tax (IRPJ): The corporate income tax rate in Brazil is 15% on annual taxable income. Additionally, there is a surcharge of 10% on annual taxable income exceeding R$240,000. 

Value-Added Tax (IVA): Brazil's VAT system is complex and includes several types of taxes: 

• ICMS (Tax on Circulation of Goods and Services): Levied by states on the circulation of goods, interstate and intermunicipal transportation, and communication services. 

• IPI (Tax on Industrialized Products): A federal tax on industrialized products, levied on manufacturers and importers. 

• ISS (Tax on Services): A municipal tax on services provided within the municipality. 

• PIS/COFINS (Social Contributions on Sales Revenue): Federal taxes on gross revenue, with rates varying depending on the type of product or service. 

Payroll Taxes 

1. INSS (Social Security Contribution): Employers contribute around 20% of an employee's salary to the social security system. Employees contribute between 7.5% and 14%, depending on their income bracket.
2. FGTS (Severance Indemnity Fund): Employers contribute 8% of an employee's salary to the FGTS, which provides severance payments in case of dismissal without just cause.
3. Other Contributions: Employers must also pay for work accident insurance (RAT) and other social assistance programs. 

Tax Incentives: Brazil offers various tax incentives to attract investment and stimulate economic growth: 

1. Investment Project Incentives: Approved projects may receive exemptions from duty, excise tax, and social contributions on imported equipment, as well as accelerated depreciation on nationally produced equipment.
2. Regional Incentives: Companies in specified regions, primarily the north and northeast, may receive income tax exemptions or reductions. 

1. Program for Investment Partnerships (PPI): Encourages public-private partnerships for infrastructure projects, offering various incentives and support. 

Importing & Exporting in Brazil 

Brazilian importers must register with the Foreign Trade Secretariat (SECEX) via the Integrated System for Foreign Trade (Siscomex). Depending on the product, additional documentation may be required.  

Brazil's main exports include soybeans, crude petroleum, iron ore, raw sugar, and corn. The primary export destinations are China, the United States, Argentina, the Netherlands, and Chile. 

Free Trade Agreements 

Brazil is currently involved in various trade agreements. One of them is the Mercosur-EU agreement, which is still awaiting ratification. Additionally, Brazil has an FTA with Egypt that has been in effect since 2017 and recently concluded a free trade agreement with Singapore in 2023. Brazil is also engaged in ongoing negotiations with countries such as Canada, South Korea, and India. Although there is no comprehensive FTA with the USA, Brazil and the USA collaborate through the Agreement on Trade and Economic Cooperation (ATEC) to strengthen their trade and investment relations. 

Visas for Foreign Investors in Brazil 

Foreign investors looking to establish themselves in Brazil can apply for the Investor Visa, also known as the VIPER (Visa Permanente para Investidores). This visa allows foreign nationals to gain permanent residency by making a qualifying investment in Brazil. 

Brazil Business Culture & Practical Tips

Building Relationships 

In Brazil, business is highly relationship-oriented. Establishing trust and rapport is crucial. Initial meetings often focus more on personal connections than discussing business matters.  

Brazilian Business Etiquette 

Greeting: Handshakes are common; for women, a light kiss on the cheek (or two) might occur after familiarity is established. 

Formality: Brazilians value a mix of formality and warmth. Usually, people are called by their first name without “Mr.” and “Ms.” even at their first meetings or round tables. 

Punctuality & Scheduling 

Punctuality: Being on time is polite but meetings may not always start on time. Allow for flexibility. 

Business Hours: Most offices operate from 9 AM to 6 PM with a break for lunch. 

Brazil Local Insights 

Holidays and Festivities: Be mindful of major holidays, like Carnaval, which can affect business operations. Visit on a day off: Parque do Povo, Sao Paulo Zoo, Ipiranga Museum, Art Gallery, a Soccer game (Morumbi or Allianza Park stadiums are close to downtown), Farol Santander Building, Terraço Italia, Unique Hotel rooftop, or Lunch at Pinheiros or Vila Madalena neighborhood for more alternative options. 

Information about Museums: You can check the TripAdvisor website to see all of them. Diverse Food Scene: Brazil hosts one of the largest Japanese descent communities outside Japan. Also, fusion cuisine and Brazilian barbecue are very popular as well. 

Weather: São Paulo has a subtropical climate, and although average temperatures are around 20 degrees Celsius (68°F) most of the year, in the winter months (July, August and September) they can reach 15 degrees Celsius. 

Transportation in Brazil 

São Paulo is notorious for its traffic. Plan your commute carefully and allow extra time. 

Ride-Sharing: Apps like Uber are popular among business travelers. It is advisable to choose a driver who has completed a decent number of trips and has a high rating. "Uber Black" is often the best option since it typically features well-maintained vehicles. 

Public Transport: For beginners, using buses, metros, or trains is not recommended. These modes of transport can be complicated for newcomers, and there is a higher risk of encountering pickpockets. 

Legal and Financial Considerations 

Bureaucracy in Brazil is known for its complex tax and legal systems, making it advisable to consult local experts or accountants. 

Exchange Rates: Currency exchange rates can fluctuate, so you should pay attention to them if you plan to budget in foreign currency. Using a prepaid card is recommended as a good option to avoid carrying banknotes; however, if you need physical banknotes, most shopping malls have exchange offices where you can safely access cash. 

Ways of Communication 

Directness: Brazilians are expressive and may use gestures while speaking. Discussions can be lively but are rarely confrontational. 

Emails: Maintain a professional yet friendly tone in emails. For quick communication, phone calls and WhatsApp are often preferred. 

Accommodations in Brazil 

These are some hotels near the financial district: Itaim Bibi, Vila Olimpia, Moema, Vila Nova Conceição, Jardins, and Jardin Paulistano are some of the best regions to stay for business meetings since most of the corporate headquarters are hosted around Faria Lima. 

Where to Have a Business Lunch? 

Figueira Rubaiyat (steakhouse, Maní (Brazilian modern food), Due Couchi - Italian food (Shopping Cidade Jardim), Fazenda Churrascada, Myk (Greek Food), Banzeiro (Brazilian/Amazon region modern cuisine), Imakay (Asian cuisine), Nakka (Japanese), Fogo de Chão (steakhouse), Barbacoa (steakhouse). 

If you are looking for an informal meeting with a relaxed drink, we recommend visiting Skye, Banana Café, Moeda (in the basement of Farol Santander), Terraço Itália, Tatu Bola, Boteco São Paulo, Subastor, Seen, Dhomus, Coco Bambu, Vaca Veia, and Candem House. 

Embassy & Consulate Information 

There are 71 diplomatic missions based in the city of Sao Paulo. You can see at https://embassies.net/brazil/sao-paulo