Why Brazil

International Tax

Brazilian resident companies are taxed on worldwide income. Non-resident companies are generally taxed in Brazil through a registered subsidiary, branch, or PE, based on income generated locally. Also, companies can be subject to withholding tax (IRRF) on income derived from a Brazilian source.

Brazil has four systems of corporate income taxation: Presumed Profit Method, Actual Profit Method, Arbitrated Profit Method, and SIMPLES (Simplified tax regime).

Brazilian taxpayers are subject to IRPJ and CSLL using an ‘actual profits’ method (i.e., APM - Lucro Real).

Tax structure

Corporate Income Tax: Corporations are subject to tax on worldwide income at a nominal rate of 15%, but the tax rate is 34% with surtax and social contribution.

Personal Income Taxation: Brazil has anti-avoidance rules and preferential tax regimes.

Federal VATs (PIS/COFINS): Generally, a combined rate of 3.65% (cumulative) or 9.25% (non-cumulative).

State VAT (ICMS): normally between 17% and 20%.

Municipal Service Tax (ISS): 2% to 5% (cumulative).

Technology

On the technological front, Brazil's key sectors in the digital economy include artificial intelligence (AI), cybersecurity, the Internet of Things (IoT), edge computing, cloud services, and digital government, especially as it relates to building a trustworthy and inclusive digital public infrastructure (DPI).

Cybersecurity: the cybersecurity market in Brazil is projected to reach US$3.34 billion in 2024 and US$ 5.46 billion by 2029, growing at a CAGR of 10.3%.

Human Capital

Employment trial period: In Brazil is 90 days, which can consist of two separate periods totaling 90 days. If an employee starts with a 45-day probation, it may be extended for an additional 45 days.

Types of Leave: Employees are eligible for seven paid national holidays and five religious or municipal holidays. They are also eligible for three days' paid leave upon marriage, two days' paid leave for a period of mourning, and fifteen days' paid leave (annually) for illness. Paternity leave (Licença Paternidade) is paid for five days, and maternity leave is paid for 120 days. For every 12 months of service provided to the company, the employee receives 30 days of paid vacation.

Entity Management

The entire process of incorporating a new entity in Brazil can take 60-90 days, excluding the time needed to open a bank account.

Brazil offers several legal structures for business operations. Some of the most common include:

• Sociedade Limitada (Ltda): This structure limits liability to company assets and is the most suitable option for small and medium enterprises.
• Sociedade Anônima (S.A.): This is a corporation with stricter regulatory requirements, suitable for larger enterprises and those intending to raise capital through public offerings.
• Individual Microentrepreneur (MEI): This designation simplifies the regulation for small businesses, allowing for reduced taxes and simplified compliance.

It is required for foreign companies to designate a legal representative (Representante Legal). This individual must be a Brazilian resident, serving as the point of contact for local authorities and ensuring compliance with Brazilian law.