Company Formation in Brazil

A short Guide on How to Incorporate and Operate a Business in Brazil.

Brazil’s growing economy and markets has made the country a potential destination for investments coming from abroad. However, although Brazil is very welcoming to foreigners, the desire to invest in Brazil should be accompanied by the caution of understanding at least the basics of the legal system of the country.

In order for foreign individuals or foreign companies to incorporate a business in Brazil, certain legal requirements must be met.

It is also recommended that the foreign investor has an overall understanding of the major implications of having operations in Brazil, such as tax, labor, regulatory, contractual and other implications.

Corporate Aspects

Initially, the foreign investor must determine which type of legal entity he/she/it wants to incorporate. The most common types of companies in Brazil used by foreign investors are the corporation (“sociedade anônima”) and the limited liability company (“sociedade limitada”) – both types of entities are subject to limited liability. Key factors to consider when determining the type of entity to be incorporated include the structure of equityholders, the form of capitalization and the industry or market in which the company will operate.

The formal requirements for the company formation in Brazil include:

• obtaining a federal tax ID for the foreign investor (CPF for individuals and CNPJ for legal entities);
• filing corporate documents, including bylaws, articles of incorporation or articles of association, with the relevant registry of commerce;
• determining an address in Brazil for the Brazilian entity’s head offices;
• determining the Brazilian entity’s corporate capital and the form in which it will be paid in;
• appointing an attorney-in-fact who resides in Brazil to represent the foreign investor for tax and corporate purposes;
• appointing at least one officer for the Brazilian entity. If the appointed officer does not reside in Brazil, he/she will need to appoint an attorney-in-fact who resides in Brazil;
• appointing an accountant or accounting firm; and
• obtaining a tax identification number with federal, state and/or municipal tax authorities for the Brazilian entity.

Foreign documents must be apostilled and translated into Portuguese by a sworn translator in order to be valid in Brazil. As the activities of apostilling and translation may be time consuming depending on the jurisdiction in which they take place, it is prudent to plan them ahead of the intended time for the incorporation of the company in Brazil.

Foreign investments in amounts greater than US$ 100,000.00 must be registered with the Brazilian Central Bank and updated as new investments are made.

Tax Aspects

Brazil has a complex tax system that involves federal taxes (e.g., income tax), state taxes (e.g., sales taxes and gift taxes) and municipal taxes (e.g., taxes on services). As part of planning a business in Brazil, the foreign investor must understand the taxes applicable to the different types of business and the activities he/she/it intends to carry out in the country. Adequately addressing the Brazilian entity’s taxation can be crucial in competitive markets. The Brazilian tax reform approved in 2023 also deserves attention, as different rules will apply throughout the upcoming years until the new tax regime is fully in force and has replaced the current tax regime.

Labor Aspects

Brazil has extensive labor laws and understanding the different forms of retaining workers is essential when preparing a business plan to operate in the country. Depending on how the workforce is retained, a formal employment relationship may be mandatory and, with it, certain charges, duties and obligations apply.

Regulatory Aspects

Certain business activities in Brazil are regulated and, in some cases, subject to the scrutiny of governmental authorities. Compliance with regulations may include minimal capital requirements, obtaining licenses and/or authorizations by governmental authorities and/or undertaking specific obligations. Regulated markets include financial markets, aviation, insurance, telecommunications, oil and gas, payment entities, online gambling, among other.

Contractual Aspects

Making sure your rights and obligations with suppliers, clients and other third parties are properly formalized is essential for business stability. Having efficient and enforceable contracts in place will likely prevent disputes and, should any disputes arise, provide greater chances of success.

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MMR – Mastrocola Marcondes Rocha Advogados is fully prepared to assist foreign investors in all steps involved in the incorporation and operation of a legal entity in Brazil. Our lawyers’ broad experience both in Brazil and abroad (our partners have been representing foreign clients for over 20 years) allows us to provide our foreign clients customized solutions for each of their particular needs, objectives and challenges.