Doing Business in Brazil: Four Things to Know
This is a guest blog by our Strategic Alliance Partner High Street Partners, Inc. HSP is a one-stop shop for international business setup needs.
If you’re considering international expansion to Brazil for your business, you’re in good company. With the world’s sixth-largest economy and a GDP expanding in the face of global economic troubles, the Latin American powerhouse is in the crosshairs some major international companies.
While Brazil is popular with investors, it is not a country that makes life easy for foreign companies. A longstanding culture of protectionism, slowly being addressed by recent legislation, still provides advantages to local businesses. Additionally, complex tax laws and compliance requirements can baffle even the most seasoned finance professionals.
The potential benefits, however, usually outweigh the risks – provided that you have the information you need to navigate this tricky business environment. Here are some key things to keep in mind when considering a move to Brazil:
- Research your tax options. Brazil has a notoriously complex tax system, including two different collection options for businesses: Actual (or Real) Profit is when a company is taxed based on actual profit earned, and Presumed Profit, where taxes are collected based on the gross revenue a company expects to make. Do your homework and determine which method will minimize your company’s tax burden.
- Keep complete records. Along with Brazil’s multiple forms of income tax come extensive paperwork requirements and other recordkeeping regulations. Though new rules have lightened the load by allowing electronic filing, it is still essential for businesses to keep proper, detailed records to avoid any issues with tax authorities.
- Avoid using contractors. By opting to use contractors instead of establishing a subsidiary in Brazil, you put your business at a disadvantage to those companies with a permanent presence. Brazilian law favors businesses with entities on the ground; operating through contractors can put you at risk. For example, if you import a product through a contractor into Brazil, your business loses ownership rights to that product. Consider setting up an entity to avoid any such concerns.
- Choose an entity type that makes sense. When you set up an entity in Brazil, you have the choice between establishing a limitada or an S/A. Study the difference between these two structures to decide what makes the most sense for your business. On a high level, the difference comes down to trading flexibility and ease of implementation (limitada) for more complex operations and limited liability (S/A).
Talk to us or our Strategic Alliance Partner High Street Partners (HSP) if you consider or are doing business in Brazil. Also read our feasibility study of doing business with Petrobras.
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