HSBC Global Connections - Brazil (Retrieved 15feb15)

2/15/2015
HSBCGlobalConnectionsHelpingbusinessesgrowinternationally
Brazil
Brazil is one of the most promising emerging markets in the world. Diversification in
its product exportation base and trading partners, internal economic stability, a large
work force and good social standards are helping to attract more and more global
investors. In addition, the forthcoming 2014 Soccer World Cup and 2016 Olympics
are generating a large number of infrastructure investment opportunities.
Executive summary
Welcome to our guide to doing business in Brazil. In this publication we hope to
provide you with an insight into the key aspects of undertaking business and
investing in Brazil and answer many of the questions overseas businesses and
entrepreneurs have when making their first venture into the Brazil market.
The guide also covers some practical issues that face business entities when
entering Brazil, such as human resources, employment law and banking.
Whilst the guide does have an emphasis on corporate entities, an overview of the
taxation obligations for individuals and its administration is also presented.
Brazil is one of the most promising emerging markets in the world. A high degree
of diversification in its product exportation base, a diversified list of trading
partners, internal economic stability, increasingly large workforce and good
social standards are helping to attract global investors. In addition to this, the
forthcoming 2014 Football World Cup and 2016 Summer Olympics are
generating a large number of infrastructure investment opportunities.
The Brazilian Government and Congress have made a concerted effort to improve
the economic stability of the country and have implemented changes in Brazils
tax legislation, governance and regulatory background. There are still a few
reforms to be implemented by the new Government, but Brazil is demonstrating
that it is becoming increasingly connected with the international business
network.
Brazil offers foreign investors a number of competitive advantages, including:
https://globalconnections.hsbc.com/global/en/toolsdata/countryguides/br
1/39
2/15/2015
Brazil is the biggest country in Latin America, occupying almost half of South
America.
The basic legal concepts regulating foreign capital in Brazil are defined in Laws
4131 of 1962 and 4390 of 1964, which were regulated by Decree 55762 of 1965.
The legal concept of foreign capital includes tangible and intangible assets.
In Brazil there is a wide variety of federal programmes designed to encourage
national economic development and also to promote regional development. They

tend to favour operations in the poorer Northeast (SUDENE) and Amazon (SUDAM)
regions. Several programmes provide export incentives.
Relevant benefits are granted to foreign investors not domiciled in tax havens and
who invested in Brazil pursuant to the regulations established by Resolution 2.689.
There are no legal minimum share capital requirements for a corporation, except for
financial institutions and insurance companies, and certain other legal entities with
specific business purposes.
Dividends remitted to non-resident shareholders or quota holders are not subject to
any withholding tax.
Capital gains earned by local resident entities are taxed at a higher rate than the
capital gains of non-residents.

Payments of any type made to tax havens are generally subject to withholding at a
higher rate.
As a general rule, foreign exchange transactions made in order to allow payments to
non-residents, considering royalties, technical services, technical, administrative
and any other assistance or any other revenue, including the reimbursement of any
costs, are subject to specific financial tax (IOF see page 14 for more information).
On 16 December 2009, the Brazilian government established a minimum capital
requirement to invest and thin cap rules through Provisional Measure 472.
This document is an overview of some common issues that investors should be

aware of when operating in Brazil, but it does not constitute financial, legal, tax
or other professional advice. You should not act upon the information contained
in this publication without obtaining specific professional advice.
Foreword
Currently, business opportunities reach the world over. At the time when
business and economic horizons have broadened there has also been a
signicant increase in competition among companies. For this reason it is
essential to have a secure, dependable, and well-positioned partner to stay ahead
of the competition.
This is what HSBC offers to our corporate clients.
HSBC Brazil is present in 545 municipalities and has a customer base of more
than 5.2m individual clients and almost 460,000 business clients. HSBC seeks to
generate excellent business relationships with its clients, attending to each and
2/39
2/15/2015
every need with appropriate support.

Brazil is a member of the G20 of large global economies, possessing a vibrant
agricultural industry that continues to grow. The country has awakened the
attention of the world by creating a healthy and productive business
environment. In 2008, when global markets were shaken by the economic crisis,
Brazil was one of the least affected. This demonstrates Brazil has a stable and
balanced economy supported by a strong and consistent economic policy.
World Bank data shows Brazil accounts for more than half of the South American
economy and is responsible for more than 2% of the worlds GDP. Besides this,
the country has experienced a remarkable growth in the oil extraction sector.
With the discovery of a layer of pre-salt basins, Brazil could jump from its current
production of 2m barrels extracted daily to 3.9m barrels per day by 2020,
doubling its production in just 10 years.
Economic stability is sustained by a democratic system of the government and
relies on the diversity of ethnicities.
Brazil is one of the most promising and diversied business markets in the world.
This guide helps entrepreneurs to understand the characteristics of the Brazilian
market and optimise business opportunities.
Andr Brando
President and
Chief Executive Officer
HSBC Bank Brasil SA
Introduction
This guide, Doing Business in Brazil, provides a high level overview of the
Brazilian business environment, including the common types of business entities
used by foreign investors to enter the Brazilian market and the taxation and
statutory environment.
Geography
Brazil is the largest country in the southern hemisphere and the fifth-largest
country in the world, covering nearly half of South America.
With a population of about 191m people, its consumer market is large and has
3/39
2/15/2015
potential for high growth, since in the past few years millions of people have
reached the middle classes.
Since the inclusion of government-controlled railroads to the Brazilian National
Privatisation Programme, there has been significant investment in development
and modernisation of the railroad network, which is mainly located in the
Southeast and Southern regions, although there are plans (federal and private
projects) for some major extensions in the North and Central-West regions. For
the North-East region, future investments are anticipated.
Road transport is still the preferred method of transport for both long-distance
and intercity travel.
The airline network is well-developed and the majority of the voting stock of
airline companies is held by the private sector.
Economic environment
Economic History
The Brazilian economy is large and diverse by almost any standard, but there is
still a considerable state and semi-state participation in various strategic sectors,
such as transport and utilities. Brazil has undergone several privatisation
programmes of state-owned companies, most of which took place in 1998.
Nearly all of the former state companies are now controlled by the private sector.
Natural resources and agriculture have been the traditional mainstay of the
economy, supported by abundant human resources. Since the 1960s, however,
the emphasis has been placed on industrial development financed largely with
international loans and investments. As a result, exports today reflect a much
more balanced mix of commodities and manufactured items. Moreover, the
profile of imports became more restricted during the 1970s and 1980s because
of the import substitution and the scarcity of foreign currency. This situation is
changing following the lowering of trade barriers and the increased opening of
the economy to globalisation.
The most important business sectors in Brazil are mineral and energy resources,
agricultural, fisheries and forestry. There are several other sectors that have
undergone expansion during the past few years such as manufacturing
industries, high-tech industries, service industries, transport and
communications.
Current Economic Climate

Over the last year, Brazils benchmark interest rate (SELIC Special Settlement
and Custody System) has hovered around 11.04%. While it may seem to be a high
4/39
2/15/2015
average, it is in fact a positive improvement if one considers that the average for
the previous three-year period was 19.22%.
In the beginning of 2012, the Brazilian Monetary Policy Committee (COPOM) has
been showing the intention to significantly reduce the overnight market rate
(SELIC). A reduction of the basic rate of interest is part of a strategy adopted by
the Brazilian government to protect the domestic economy from the international
financial crisis, which, in the government view, threatens the consumption and
growth of local industry.
In the past decade, Brazils investment risk was rated high by various rating
agencies with a number of peaks due to political reasons. By February 2011;
however, Brazil's risk profile had fallen sharply. In relation to the inflation rate,
one of the historically most relevant indicators of Brazilian economy, numbers are
also positive.
Repeating the tendency observed in relation to Brazils risk, in 2002, the year of
the presidential election, the annual variance of inflation reached 25.30%
(according to the general price index measured by Getlio Vargas Foundation
IGP-M).
For the first half of 2013, the average rate of inflation was is 6.43%
Key sectors and trading partners

Brazil is a member of the Latin American Integration Association (ALADI), the
World Trade Organisation (WTO) and the Common Market of the Southern Cone
(MERCOSUL), whose current members comprise Brazil, Argentina, Paraguay and
Uruguay, with Chile, Bolivia, Peru, Colombia, Ecuador and Venezuela as
associated countries.
Under the MERCOSUL agreement, tariffs were abolished; the movement of labour,
goods and services is unrestricted; capital investment is encouraged;
macroeconomic policy is coordinated; and foreign-trade policies and tariffs for
non-member countries are harmonised.
Brazil has a very strong industrial base. It exports not only natural resources and
agricultural products, but also industrial and commercial products.
At the top of the list are natural resources (such as iron ore) and agricultural
products (such as soy beans, coffee and sugar). Moving down the list, there are
manufactured products including vehicle parts, airplanes, petrochemical products
and ethanol.
Brazil is one of the leading developing countries, and is one of the four emerging
5/39
2/15/2015
markets comprising the B-R-I-Cs (i.e. Brazil, Russia, India and China). Since
2010, China has played an important role as Brazils main commercial partner,
followed by the United States, Argentina and Germany. These top commercial
partners represent 15.9%, 12.4%, 8.2%, and 5% respectively of total trade
business.
Brazil has the largest telecoms market in Latin America and Brazilians are the
biggest users of the internet in the region. Future trends include growth of Voice
over Internet Protocol, convergence applications and Next Generation wireless.
Foreign investment
The general policy is to admit foreign capital and treat it in the same way as local
capital. All inward investments must be registered with the Central Bank to
ensure ultimate repatriation rights within 30 days. It should be noted that
acquisitions of local companies should be thoroughly investigated to confirm
their real underlying value.
The basic legal concepts regulating foreign capital in Brazil are defined in Laws
4131 of 1962 and 4390 of 1964, which were regulated by Decree 55762 of
1965.
An important concept in foreign capital legislation in Brazil is equal treatment to
all reflecting the Federal Constitution, article 5. This principle, in Law 4131/62
and later amendments to Federal Constitution, grants foreign capital invested in
Brazil legal treatment identical to that given to local capital, under equal
conditions, and any discrimination not contemplated by this law is prohibited.
Prior approval of the Central Bank is no longer required for all foreign currency
loans received, but they should be documented in a formal contract, which will
set out the terms and conditions, including the interest. The Brazilian Central
Bank will have to be informed of all the conditions of the loan as approval is
required after the loan transaction has actually been entered into. It is also
necessary to obtain prior approval from the Central Bank for operations relating
to the conversion of some liabilities into investment.
Capital may be repatriated without payment of tax up to the amount registered in
foreign currency with the Central Bank. Amounts in excess are considered as
capital gains under exchange disposition and therefore are subject to
withholding income tax of 15% (25% if the beneficiaries are domiciled in
jurisdictions considered as tax havens).
Loans may be repatriated within the terms of the registered loan contract.
6/39
2/15/2015
Interest is freely remittable within the loan contract terms subject to withholding
income tax at the rate of 15% (25% if the beneficiaries are domiciled in
jurisdictions considered as tax havens).
Incentives for foreign investors

Tax or Grant incentives
Relevant benefits are granted to foreign investors not domiciled in tax havens
and who invested in Brazil pursuant to the regulations established by Resolution
2.689. Such resolution establishes that International Investors (institutions and
individuals) are allowed to hold any asset class available to domestic investors in
Brazil and, given that international investors are not established or resident in the
country, the CMN (Brazilian Monetary Council) Resolution 2689, requires
international investors to hire institutions to act as:
Legal Representative: Responsible for presenting all investor registration
information to the Brazilian Authorities.
Fiscal Representative: Responsible for taxes and fiscal issues on behalf of the
investor before the Brazilian Authorities.
In addition, the financial assets and securities traded must be registered, held in
custody or maintained in deposit accounts at an appropriated authorized
institution authorized by the CVM or Brazilian Central Bank.
Capital gains on stock and derivatives traded in stock and futures exchange are
exempt from capital gain tax.
In addition, income on public bonds became tax exempt, provided they were
acquired by these investors after 16 February, 2006.
Foreign investors are exempt from withholding income tax due on FIP and
Investment Funds in FIP quotas. This exemption is subject to compliance with the
rules of concentration of investment in the fund and on the distribution of
earnings established by law. The most notable among these prerequisites is the
requirement that no investor may hold more than 40% of the funds quotas or
earnings.
The National Bank for Social & Economic Development (BNDES) offers low-priced
financing in order to support the implementation, expansion, modernisation or
relocation of plant, including capital goods acquisition and associated working
capital.
Brazil has various incentives available for exporters, including (under certain
conditions) exemption from withholding tax; exemption from excise tax (IPI);
value-added tax on sales and services (ICMS); social contribution on billing
7/39
2/15/2015
(COFINS); contributions to the social integration programme (PIS) on exports of

manufactured products and low-cost export financing.
In Brazil, there is a wide variety of federal programmes designed to encourage
the economic development of Brazil and also to promote regional development.
They tend to favour operations in the poorer Northeast (SUDENE) and Amazon
(SUDAM) regions.
Several programmes provide export incentives. In the SUDENE and SUDAM
regions, incentives are available for the implementation of new industrial projects
or expansion, diversification or improvement of an existing industry.
Statistics for Foreign Direct Investment

As reported by the Brazilian Central Bank (BACEN) website, the census of foreign
capital in Brazil figures (please check copy) stress the performance of the
Brazilian economy as a point of attraction for foreign capital during the second
half of the nineties which deepened the process of internationalizing the
countrys economy.
Greater economic stability and a permanent process of structural reforms,
including the approved breaking of state monopolies, were clearly reflected in
increased flow of capital to Brazil.
The first indication in the census that stresses the higher degree of foreign
capital share in Brazil is the number of forms received by the Central Bank:
11,404 informants with a foreign share in excess of 10% of voting capital or 20%
of total authorized capital.
There was a relevant increase of 80.4% on the 6,322 informants of the previous
census that took 1995 as its base-year. This increase, caused by both
establishment of new corporations and acquisition of existing ones, together with
fresh capital sharing in those already recording some foreign ownership in 1995,
was the main thrust behind the substantial changes recorded in the figures
surveyed.
According to the information gathered, total paid-in capital of informants
reached R$351.7bn, representing an unprecedented nominal increase of 319.7%
against the R$83.8bn of 1995.
Even taking the devaluation of the Real in this period into account, the figures
still have a strong impact, being over twice the figures of the previous census
(from US$86.2bn, in 1995, to US$179.8bn, in 2002, calculated based on the
exchange rate in effect at the end of each period). It should be noted that in 1995
residents held the larger share of paid-in capital: 51.5% of the total. Conversely,
in 2000, the largest share was for non-residents; 57.3% of the total, revealing the
8/39
2/15/2015
trend of foreign investors to share the capital of Brazilian corporations in a

majority position.
Barriers, risks and downsides for foreign investors

Depending on the nature of the business activity, there will be involvement of
some regulatory agencies. Examples include:
Central Bank (BACEN)

responsible for the execution of monetary policy, exchange controls, registration
and control of foreign capital and profit remittances and regulation of Banks and
Financial Institutions.
Securities Commissions (CVM)

responsible for the regulation of the securities markets and listed companies.
Administrative Council for Economic Defence (CADE)

investigation and suppressing unfair business practices and anti-trust
monitoring.
National Institute of Industrial Property (INPI)

responsible for patent, trade mark registration and technological development.
INPI has powers over agreements for the transfer of technology.
Foreign Trade Department (DECEX)

responsible for administration of foreign trade and control of export and import
licences.
Legal and regulatory

Government permission is required for the operation of certain types of business,
such as banks and financial institutions, mining companies, oil refineries,
maritime, road and air transport companies, as well as companies involved in
health products and healthcare.
Restrictions on foreign investor participation exist in certain areas, such as:
communications (television, radio stations or newspapers);
aviation (Brazilian airlines); participation in classified (operations) government
contracts;
coastal and freshwater shipping;
mining and hydroelectric energy.
Furthermore, the direct or indirect foreign ownership of rural land is regulated

and subject to limitations as to the total area. Ownership of land near Brazils
9/39
2/15/2015
borders is subject to further restrictions.
Workforce and cost of living

Availability of Customer/Workforce
In general, adequate labour is available. Semi-skilled and unskilled labour is fairly
abundant, recognised as hard-working and willing to learn, and is relatively
mobile. Skilled labour tends to be in short supply. Personnel with proven
technical, professional or management skills are growing as company in-house
training and other courses take place.
Language
The official language of Brazil is 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 in Brazil.
Business etiquette and culture

Handshakes are the most common form of greeting between business
colleagues. In more informal situations, women will tend to greet each other with
a kiss on either cheek, while men may briefly embrace.
When you meet someone for the first time, it is polite to say muito prazer (my
pleasure). Expressions such as como vai and tudo bem are common forms of
saying Hello once you know someone and can show you are making an effort to
know them.
The use of titles and first names can vary across Brazil. Typically, it is polite to
address your Brazilian counterpart with a title and surname at the first meeting or
when writing to them. Once you know them, it is common to use just their first
name, or else their title followed by their first name.
Brazilian companies tend to have vertical hierarchies where managers at the top
make most of the decisions. Differences in class are still very prevalent in
Brazilian society and business culture. Class is mostly determined by economic
status and is reflected in the salaries people receive, resulting in large disparities
of pay and status. There are laws against discrimination, however, and most class
differences in business are subtle.
Relationships are one of the most important elements in the Brazilian business
culture. By cultivating close personal relationships and building trust, you will
have a greater chance of successfully doing business in Brazil.
10/39
2/15/2015
The future
In the last years market players recognized that global growth and commodity
prices are more and more driven primarily by developments in the Emerging
countries, like China, India and Brazil.
The general policy of Brazilian governments has been to promote overall
economic growth and to fight poverty. However, this policy has been adversely
affected over the years by problems related to lack of infrastructure, of longterm investment financing and tough economic measures that have been taken to
shackle inflation, including the adoption of high interest rates.
There is a clear political need to improve the overall living conditions of lowwage earners by assuring adequate housing, healthcare and food supplies at
reasonable prices.
There is a general recognition that uncertainties concerning the political and
economic climate over the years have deprived Brazilian business of the
necessary investment to modernize and become internationally competitive. The
country is now viewed by most of the international community as a much more
predictable place in which to invest.
The realization of global sporting events like the FIFA World Cup in 2014 and the
Olympic Games in 2016 in Brazil provides a unique opportunity to promote and
attract investments, leveraging the potential of the country and helping reduce
the infrastructure deficit. Strategic and financial (private equity investors) are
strongly considering investments in the area
and are supported by the BNDES
(the Brazilian development bank).
As the World Cup and the Olympic Games are world events, the expected gains in
terms of visibility for Brazil are huge. Therefore these are considered great
opportunities for the country to improve its international image. An increase of
about 1 per cent in Brazil's GDP is expected in the year of each event.
Doing business
Forms of business
Forms of foreign Investment
Investment made by foreigners is normally structured via the acquisition of
interests or financial assets or via the incorporation of new entities.
Depending on the nature of the assets to be invested, the applicable regime will
be different. For assets in the financial and capital markets, the applicable rule in
11/39
2/15/2015
force is Resolution of Monetary Council 2689.

The Resolution provides that non-resident investors are not allowed to trade in
securities of public companies except for the trade over (i) the stock market, (ii)
electronic systems, or (iii) an over-the-counter market which is organised by an
entity authorised by the Securities Commission (CVM) to trade in securities of
publicly-held companies.
There are situations when it is possible to transfer the 2689 equities outside of
an organised market, such as in cases of: subscriptions, stock dividends,
conversions of debentures into stock, indexes referenced in securities,
acquisitions and sales of shares of open investment funds in securities and, when
previously authorised by the Securities Commission, the cases of closing
shareholders capital, cancellation or suspension of trading.
Currently, there are important tax incentives granted for the 2689 investors.
For the assets not related to financial and capital markets, but more linked to the
acquisition of private companies, the basic legal concepts regulating foreign
capital in Brazil are defined in Laws 4131 of 1962 and 4390 of 1964, which were
regulated by Decree 55762 of 1965.
The corporate forms in which a business is normally conducted in Brazil are the
following:
Corporations (Sociedade por Aes S/A) The only corporate form that can have stocks traded publicly.
SA Sociedade por acoes (also known as SOCIEDADE ANONIMA) A limited liability company. It must have at least two shareholders. There is no
minimum share capital except for financial institutions, insurance, utility and
export trading companies. It may be public or private. Shares in public
corporations are freely transferable; shares in private corporations are restricted.
Limited Liability Companies (Sociedade Limitada)

The Brazilian equivalent of a closely-held company in the United States and a
private limited liability company in the United Kingdom.
Limitada or Ltda (Sociedade por quotas de responsabilidade limitada)

Private limited liability company. It must have at least two shareholders. There is
no minimum share capital. Shares are called quotas and their transferability is
restricted. The liability of quota holders is limited to the amounts invested.
12/39
2/15/2015
Joint Ventures The form of a corporation assemble under one of the partnerships stated above.
Branches Significant bureaucracy in its creation and maintenance renders this form limited
to few multinationals.
When setting up a new legal entity in Brazil, given that the incorporation of a
branch requires authorisation granted via a presidential decree, the process is
generally bureaucratic and lengthy. In view of this, the majority of foreign
businesses in Brazil are set up under the form of subsidiaries based primarily on
the insulating effect that incorporation has on the liability of the foreign parent
company for the subsidiarys acts. When incorporating a subsidiary in Brazil, the
most common vehicle is the Limited Liability Company (Sociedade Limitada
LTDA) or the Corporation.
Regulatory matters/issues
In general terms, there are no restrictions on the ownership by foreign investors,
except for:
Communications (television, radio stations or newspapers);
Aviation (Brazilian airlines);
Participation in classified government contracts;

Coastal and freshwater shipping;
Mining and hydroelectric energy, etc.
The financial year (12-month period) of Brazilian legal entities can be freely
chosen for corporate purposes. Accordingly, certain Brazilian companies adopt
the same financial year of the parent company, for corporate/reporting purposes
(e.g. 1 July to 30 June).
Nonetheless, as companies are required to observe the calendar year (January
through December) for tax purposes, most of domestic entities choose the same
period as their corporate financial year.
Setting up a business
Registration formalities
There are no legal minimum share capital requirements for a corporation, except
for financial institutions and insurance companies and certain other legal entities
with specific business purposes.
Upon the decision to incorporate a new legal entity in Brazil, an inaugural
meeting of prospective shareholders must be held to approve the bylaws, which
13/39
2/15/2015
sets up the corporations core activities, appoints management, and indicates the
amount of capital, registered office and distribution of shares (as per the
subscription list) among shareholders (others).
Besides the requirements listed above, a corporation is required to have the
subscription of all the shares into which the corporate capital stock is divided
according to the bylaws, with the initial subscribers being at least two individuals
or legal entities that are considered to be founders. In addition, at least 10% of
the issuance price of the shares subscribed in cash, unless specific legislation
requires a higher percentage, and deposit thereof at a bank. This deposit is
released when the corporation has been registered with the Board of Trade (Junta
Comercial) or after six months, if no registration has been made.
After the fulfilment of these requirements, a quorum of subscribers of at least
one half of the capital is required for the meeting to approve the incorporation of
a corporation. If this quorum is not reached, a second meeting may be held
before any number of subscribers.
Upon approval of the bylaws, the shareholders should elect the members of the
management bodies. There are no nationality requirements for management, but
a foreigner must hold a permanent visa and be domiciled in Brazil to be eligible
for the job. At the end of the meeting, the minutes shall be signed by all
subscribers in attendance or by the number required to validate the resolutions.
These documents must be kept at the corporation and a copy must be filed with
the Board of Trade.
Ongoing filing requirements

A newly incorporated corporation acquires legal existence upon filing its
incorporation documents with the Board of Trade and the subsequent publishing
of its meetings minutes in a local newspaper and the Official Gazette (Dirio
Oficial). The certificate issued by the Board of Trade confirming the filing of the
incorporation documents serves as a legal document for the transfer of assets
used to pay in the capital and becomes a matter of public record.
An annual meeting must be held with the shareholders within the first four
months of the end of the corporate financial year, to approve the annual financial
statements and the management report, approve the proposed distribution of net
income for the year, elect the executive officers or the board of directors
members (if applicable) and approve the authorised capital, minimum or fixed
dividends and premiums on reimbursements (if applicable).
Shareholders meetings must normally be called by publishing an appropriate
announcement at least three times in the Official Gazette and in a local
newspaper.
14/39
2/15/2015
Liabilities for Directors Company

In the most common types of entities, LTDA and SA, executive officers are not
personally liable for the obligations they undertake in the name of a corporation
and in the normal course of business. However, they are liable for losses and
damages caused by negligent or fraudulent conduct or by violating the law or the
corporations bylaws.
Although it may seem easy for investors to do business in Brazil, it is important
to highlight a few key aspects imposed by Brazilian laws which can still be
considered as bureaucratic. The most usual procedure for a foreign investor to
start doing business in Brazil is by organising a company.
In order to do so, the company must request a Federal Tax Number (CNPJ) by
registering the Cademp (Cadastro de Empresas) at Central Bank. If the intention
is to invest in other Brazilian companies or if the intention is exclusively to be
part of the Brazilian financial market, then the company must register itself at the
Brazilian Securities Commission CVM.
Nowadays, one of the most bureaucraticprocedures to be followed in Brazil is to
execute the decision of winding up local presence. A lot of compliance and tax
duties can be demanded in this case. The time required to close a business in
Brazil may be significant.
Taxation
Corporation income tax
Foreign operations
Brazilian resident companies are taxed on worldwide income. Foreign branch
profits are taxed as earned and foreign subsidiary profits are taxed when
distributed or made available. Double taxation is avoided by means of foreign tax
credits.
Resident individuals are subject to tax on all income from abroad but are allowed
to take credit for the foreign tax paid thereon, provided reciprocal treatment is
accorded to Brazilian-source income in the country from which the income is
received.
Brazil has signed various treaties for the avoidance of double taxation.
Fees and other related expenses paid in Brazil for services rendered abroad are
subject to withholding tax of 15%, or a lower rate under some tax treaties.
However, other taxes may also apply on importation or services, such as PIS,
COFINS, CIDE, ISS and IOF.
15/39
2/15/2015
Centre of International Financial or Operations

There are no tax breaks to encourage multinational companies to locate
headquarters or administrative offices in Brazil and/or the use of Brazil as a base
for offshore financial operations. However, the various Brazilian states do offer
different financial incentives they compete between themselves in order to
attract companies, mainly the manufacturing plants.
Corporate Income Tax (IRPJ)

Corporate income tax is based on the calendar year, with monthly tax payments,
and is generally computed on the basis of annual or quarterly taxable income.
Under the Actual Profit Method (APM), IRPJ is charged at the rate of 15% plus a
surcharge of 10% on annual taxable income in excess of R$240,000
(approximately US$110,000).
Additions of expenditure to and deductions of expenditure from the accounting
profit figure are required in order to calculate the amount on which corporation
tax is based. These adjustments are either permanent or temporary. Permanent
adjustments include gifts and donations, and temporary adjustments (which are
reverted in the future) include provisions. All these adjustments should be
controlled in the Livro de Apurao do Lucro Real (LALUR), Part A.
Certain companies can also apply to pay IRPJ according to a presumed profit
method (PPM). The amount of (IRPJ/corporate income tax) will be obtained from a
percentage of the gross revenues. Service providers will be charged at a rate of
8% (effective tax rate). Sellers of goods and assets will be charged at a rate of 2%
(effective tax rate). There are restrictions on applying the PPM Annual where
gross revenues in the preceding calendar year are greater than R$78m (this cap
was recently increased from the prior R$48 million prior cap). Financial
institutions in general, leasing companies, insurance companies, and non-private
pension funds are not allowed to adopt PPM.
In some cases, depending on the effective rate obtained in the APM, PPM can be
considered a tax incentive.
Certain classes of income receive special tax treatment. Some of them are
excluded from taxation or can receive specified tax deduction.
Companies are required to file a corporate income tax return on an annual basis
(generally up to the last working day of June of the subsequent year). Other
corporate returns must also be filed by legal entities.
Social Contribution on Net Income (CSLL)

Brazilian tax legislation also provides for a social contribution tax on profits,
which also has the nature of a corporate income tax.
16/39
2/15/2015
Its taxable basis is quite similar to corporate income tax, but with certain distinct
adjustments. CSLL is charged at the rate of 9%. For financial institutions, the
applicable rate is 15%.
For CSLL, temporary and permanent adjustments are applied in the same way as
for Corporate Income Tax.
Some companies can also apply to pay CSLL based on the presumed profit
method (PPM). Service providers will be charged at a rate of 2.88% (effective tax
rate). Sellers of goods and assets will be charged at a rate of 1.08% (effective tax
rate).
The same restrictions on the application of the PPM method to Corporate Income
tax apply to CSLL.
In some cases, depending on the effective rate obtained in the APM, PPM can be
considered a tax incentive.
Tax losses carry forward (IRPJ and CSLL)

There is no time limit for the carry forward of tax losses. However, the taxable
profit of each year can only be reduced by tax losses up to a maximum of 30%.
Furthermore, it is neither possible to carry back tax losses nor transfer them to
other Brazilian companies.
Tax losses of an acquired company cannot be carried forward to be offset against
the taxable income of a new activity if the following two conditions are both met:
modification in the ownership of the company; and
modification in the activity of the company.
Capital gains
Capital gains earned by local-resident entities are taxed at the normal corporate
rate (34%), while capital gains of non-residents are taxed at the rate of 15%
(unless otherwise specified by international tax treaties).
Individuals are taxed at the rate of 15% on capital gains. Payments of any type
made to tax havens are generally subject to withholding tax at a rate of 25%.
Withholding Taxes (IRRF)

The current rates applicable to the following payments to non-residents are:
Dividends Not Taxable
Interest 15%*
Royalties 15%*
Technical and Admin Services 15%*

17/39
2/15/2015
Other Services 25%*
* These rates are effective unless otherwise specified by tax treaty.

Payments of any type made to tax havens, defined as jurisdictions that do not
tax income or tax income at a rate lower than 20%, are subject to withholding at
a rate of 25%.
The Brazilian concept of tax haven jurisdictions has been amended and has
been in effect since 1 January, 2009. To that extent, it is likely that any other
jurisdiction (not necessarily a country) that falls into the new definition (e.g. a
jurisdiction that grants tax benefits to non-resident investors that do not
perform business activities on it; or a jurisdiction that does not allow access to
information relating to the ownership of shares of local entities, the ownership of
goods, and/or rights or information regarding economic transactions) could now
be subject to Transfer Pricing and Thin Capitalisation rules in relation to the
rendering of services and the acquisition or selling of goods, among others.
At 7 June 2010, Federal Tax Authorities published in the Normative Instruction
1.037/10, article 1, the new list of Tax Havens. This new list includes new tax
havens jurisdictions in addition to the previous list that was published in 2002
that was Andorra, Anguilla, Antigua and Barbuda, Dutch Antilles, Aruba,
Bahamas, Bahrain, Barbados, Belize, Bermuda, Campione DItalia, Cyprus,
Singapore, Costa Rica, Djibouti, Dominica, United Arab Emirates, Gibraltar,
Granada, Hong Kong, Cayman Islands, Cook Islands, Madeira, Isle of Man,
Channel Islands (Jersey Guernsey, Alderney, Sark), Marshall Islands, Mauritius,
Turks and Caicos, U.S. Virgin Islands, British Virgin Islands, Lebuan, Lebanon,
Liberia, Liechtenstein, Luxembourg (holding 1929), Macao, Maldives, Malta,
Monaco, Monserrat, Nauru, Nieui, Panama, Saint Kitts, Saint Vincent, U.S. Samoa,
Western Samoa, San Marino, Saint Cristobal and Nevis, Saint Vincent and the
Grenadines, Saint Lucia, Seychelles, Oman, Tonga, Vanuatu.
The new members are: Ascension Island, Brunei, French Polynesia, Granada,
Kiribati, Norfolk Island, Pitcairn Islands, Qeshm, Saint Helena, Saint Pierre and
Miquelon, Solomon Islands, Swaziland and Tristan of Cunha. On the other hand it
was excluded from the previous list the jurisdiction of Malta and the Luxembourg
Holdings set up under the Law 1929.
Introduced in the Brazilian Tax system in 2008, via Law 9.430, article 24-A,
'privileged tax regime' can be defined as the regime with the following
characteristics: (i) no income tax or income tax lower than 20%, (ii) tax benefits
for non-resident shareholders regardless of whether they carry out economic
activities in the country or dependency, (iii) tax benefits for non-resident
shareholders to the extent that they do not carry out economic activities in the
country; (iv) worldwide income either exempt or taxed at a maximum rate lower
18/39
2/15/2015
than 20%, and (v) no access to the identity of shareholders, the owners of
assets/rights, and no information on economic transactions. Based on the
concept introduced in 2008, NI 1.037, article 2, enumerates some types of
entities that fall under at least one of the characteristics above.
These entities are:
The financial investment corporations (Sociedad Anonima Financiera de Inversion, or
SAFI) under the laws of Uruguay;
The International Trading Companies (ITC) under the laws of Iceland;
The offshore KFTs under the laws of Hungary;
The limited liability companies (LLC) under U.S. state laws that are not subject to
U.S. federal income tax and whose members are non-residents (in the U.S.);
The Entidades de Tenencia de Valores Extrajeros (ETVEs) under the laws of Spain;
The ITCs or International Holding Companies (IHCs) under the laws of Malta;
The holding companies under the Laws of Denmark which do not excise substantive
activities; and
The holding companies under the Laws of the Netherlands which do not excise
substantive activities (suspended from thelist).
Note that different tax effects could impact transactions between Brazilian
counterparts with counterparts in tax havens or with privileged tax regime
entities.
It should also be noted that the tax authorities respect the exemption from
withholding for all dividend payments, including dividend payments subject to
withholding tax under the provisions of a tax treaty. In the case of royalties, the
royalty contract has to be approved by the National Institute of Industrial Property
(INPI) and filed with the Brazilian Central Bank.
Deductions for royalties are generally limited to 5% of net sales of the relevant
products or services; the percentage depends on the type of product or activity.
Federal Excise Tax (IPI)

This Federal Excise Tax is paid by manufacturers on behalf of their customers at
the time of sale, either to another manufacturer who will further the
manufacturing process or to the retailer who sells to the end user.
The tax paid is stated separately on the sales invoice. Certain exemptions are
given to goods considered to be of basic necessity to the countrys economy. The
rates are defined by the products tax code according to the Harmonised System.
As mentioned above, when manufactured products are sold between producers,
the IPI is imposed. However, the subsequent manufacturer is allowed a credit
against its IPI liability, equal to the IPI paid to its suppliers (non-cumulative tax).
19/39
2/15/2015
IPI is also imposed on import transactions. Export revenues are tax exempt from
IPI however, the IPI tax credit recorded on the acquisition of inputs may be kept.
Contribution for the Social Integration Programme (PIS)

PIS, generally levied at 1.65%, is a Federal social contribution calculated as a
percentage of gross revenue. Note that higher rates are imposed in certain
sectors. A PIS credit system is meant to ensure the tax is applied only once on the
final value of each transaction, which means that the company is granted a tax
credit calculated on acquisition of inputs and on certain expenses (noncumulative system).
Note that there are certain companies which must pay PIS under the cumulative
system. The cumulative system imposes a lower rate (0.65%), however, it does
not enable the company to record tax credits on acquisitions.
Since 1 May 2004, the PIS contribution has applied to the importation of goods
and on the payment of services to non-residents. Export revenues are tax
exempt from PIS. However, the PIS tax credit recorded on the acquisition of
inputs and services may be kept.
Contribution for Social Security Financing (COFINS)

COFINS, generally levied at 7.6%, is a monthly federal social security contribution
calculated as a percentage of gross revenue. Higher rates are imposed in certain
sectors. A COFINS credit system is meant to ensure the tax is applied only once
on the final value of each transaction, which means that the company is granted a
tax credit calculated on the acquisition of inputs and on certain expenses (noncumulative system).
There are certain companies which must pay COFINS under cumulative system.
The cumulative system imposes a lower rate (3%), but it does not enable the
company to record tax credits on acquisitions. Financial institutions also have a
special COFINS rate of 4% but some deductions to the tax base are allowed.
As from 1 May 2004, COFINS contributions also apply to imports of goods and on
the payment of services to non-residents. Export revenues are tax exempt from
COFINS (however, the COFINS tax credit recorded on the acquisition of inputs and
services may bekept).
Financial Transactions Tax (IOF)

In October 2009, the Brazilian government changed the IOF tax rates that are
levied on certain foreign currency exchange transactions related to the inflow of
funds to Brazil. For foreign investors entering into the financial and capital
markets, the applicable rate was previously 0%. In 2010 the IOF rate was
increased to 2% for inflows of equities traded through the Exchanges; however, in
20/39
2/15/2015
December 2011, the rate went back to 0%.

For the outflow of funds from Brazil related to investments in the financial
markets, the IOF rate continues to be 0%.
For investments according to Law 4.131 (into LTDA and SA), inflows and outflows
will trigger IOF at 0.38%.
Contribution for the Intervention in the Economic Domain (CIDE)

Brazilian companies with royalty, licence, service and technical assistance
agreements with foreign entities, shall pay a 10% CIDE, based on the amount paid
abroad.
Service Tax (ISS)

The ISS is a municipal tax on gross billings for certain services designated by the
Federal Government. The applicable rates to be determined by each municipality
can vary between 2% and 5%.
In general, the service tax is levied by the municipality in which the Company is
headquartered. There are some exceptions to this rule for services involving
assembly, construction and demolition, among others.
As from January 2004, important changes to the ISS legislation were made. The
original list of services subject to the tax was expanded and the importation of
services is now subject to ISS. Additionally, ISS is not levied on exports of
services, except when the services are rendered in Brazil or the results of these
services are applied in Brazil.
Transfer Pricing
The rules of transfer pricing in Brazil address imports and exports of products,
services and rights charged between related parties, inter-company financing
transactions not registered at the Central Bank of Brazil, as well as all import and
export transactions between Brazilian residents (individual or legal entity) and
residents in either low-tax jurisdictions (as defined in the Brazilian legislation) or
jurisdictions with internal legislation that call for secrecy relating to corporate
ownership, regardless of any relation.
Exchange Controls or restrictions on repatriation of profit

Dividends remitted to non-resident shareholders or quotaholders are not subject
to withholding tax.
Profits may be remitted abroad without limitations, to the extent that there is
foreign registered capital and retained earnings available. As from 1 January
1996, profits/dividends distributed to non-resident beneficiaries relating to
21/39
2/15/2015
periods beginning on or after this date, are not subject to withholding tax.
On 16 December 2009, thin capitalisation rules were introduced to the Brazilian
tax system.
The new legislation set forth that interest paid or credited by a Brazilian entity to
a related individual or legal entity, not resident or domiciled in a tax haven or a
favourable tax regime jurisdiction, can only be considered deductible for tax
purposes if such expense is necessary for the activities of the local entity, and if
the amount of debt granted by the related party does not exceed twice the
amount of the participation it holds in the stockholder equity of the Brazilian
entity. A second test also needs to be satisfied including the total amount of all
debts with any foreign-related party. If both tests exceed the 2:1 ratio, the
portion of interest related to the exceeding amount will not be tax deductible.
Similar provisions are also applicable to interest paid or credited by a Brazilian
entity to an individual or legal entity (related or not) resident or domiciled in a tax
haven or a favourable tax regime jurisdiction. In this case, the expense would
only be considered tax-deductible if the amount of debt does not exceed 30% of
the amount of the participation it holds in the stockholder equity of the Brazilian
entity. A second test also needs to be satisfied including the total amount of all
debts with any foreign party resident or domiciled in a tax haven jurisdiction. If
both tests exceed the 30% ratio, the portion of interest related to the exceeding
amount will not be tax deductible.
The rules require that a Brazilian company substantiates its inter-company
import and export prices on an annual basis by comparing the actual transfer
price with a benchmark price determined under any one of the Brazilian
equivalents of the OECDs comparable uncontrolled price method (CUP method),
resale price method (RPM) or cost plus method (CP method). Taxpayers are
required to apply the same method, which they elect, for each product or type of
transaction consistently throughout the respective financial year. However,
taxpayers are not required to apply the same method for different products and
services.
For intercompany loan agreements made between Brazilian and foreign related
parties, Brazilian transfer pricing regulations differ in some aspects from
international standards mainly with respect to profit margins and functions and
risks analysis requirements.
On September 2012, a law was introduced (Law 12715) requiring that interest on
related party loans, even when registered with the Brazilian Central Bank should
comply with maximum and minimum interest rates and subsequently Law 12,766
defined how to calculate these limits.
22/39
2/15/2015
The interest paid or credited to a related party abroad, or to a beneficiary located

in a low-tax jurisdiction or under a privileged-tax regime, will be deductible for
income tax purposes up to the amount that does not exceed the rates
determined based on the following rules, plus a spread to be determined by the
Ministry of Finance based on an average market spread:
Brazilian sovereign bonds rate issued in US dollars in foreign markets, for
transactions in US dollars subject to fixed interest rate;

Brazilian sovereign bonds rate issued in Brazilian Reais in foreign markets, for
transactions in Brazilian Reais subject to fixed interest rate; and
LIBOR for the period of six months, for any other transactions.
In the case of transactions carried out in Brazilian Reais, subject to floating rate,
the Ministry of Finance may determine a different base rate.
Regarding the transactions covered in item III above in currencies for which there
is no specific Libor rate disclosed, the LIBOR for US Dollar deposits must be
considered.
The deductibility limit must be verified on the contract date and it will apply
proportionally for its term, during the full contract term, and the new rules will
affect transactions to be carried out as of January 1, 2013. It should be noted
that, for this purpose, the renewal and the renegotiation of contracts will be
treated as a new contract.
In the case of loans provided by Brazilian entities to a foreign related party the
criteria mentioned above must be considered to determine the minimum interest
income to be subject to taxation in Brazil.
Residents of Brazil are taxed on their worldwide income, and non-residents are
taxed exclusively at source on their Brazilian-source income. The source of
income is determined by the place where the taxpayer is located, irrespective of
where the work is performed.
Personal Income Tax

Foreigners, intending to live and/orwork in Brazil, whether for a short or a long
period, will become tax-resident depending on the type of visa they hold:
Permanent visas Holders of permanent visas are considered residents as from the
date of arrival in Brazil.

Temporary visas Holders of temporary visas are also considered residents as from
the date of arrival in Brazil, as long as they have an employment contract in Brazil.
Otherwise, they will become tax residents as from their 184th day of presence in
Brazil within any given 12-month period.
23/39
2/15/2015
Monthly Income (Brazilian currency BRL)
Tax
Rate
Amount to be deducted in tax from tax - in

R$
Upto 1,710.78
From 1,710.79 to 2,563.91
7.5%
117.49
From 2.563.92 to 3,418.59
15%
293.58
From 3418.60 to 4,271.59
22.5%
528.37
Above 4,271.59
27.5%
723.95
*Source:
http://www.receita.fazenda.gov.br/Aliquotas/ContribFont2012a2015.htm
Tax rate Income tax is normally withheld at source, at rates varying from 0% to
27.5%, depending on the income bracket. The final liability is determined upon
filing the tax return. Any difference between the amounts as determined by the
tax return and that withheld at source must be paid or is refunded to the
taxpayer. The Brazilian Tax Authorities have issued an annual tax table (below)
applicable to income tax payable during tax year 2011.
Individuals are required to submit income tax returns by 30 April of every year.
There are penalties for late and incorrect submission.
Income tax arising from employment should be withheld by the employers at the
above-mentioned rates.
Social charges and other employee rights are referred to below.
Sales tax/VAT
State Value Added Tax (ICMS)
The Constitution of 1988 granted authority to the Brazilian States to collect tax
on the circulation of goods and on the supply of inter-state and inter-municipal
transportation services on communications, even when the transaction and the
rendering of services start in another country.
ICMS is not a cumulative tax, that is, the tax is only assessed on the increase in
the price of the product in each part of the supply chain. The calculation process
involves a system that, in each payment period, the taxpayer must check the
amount of debits and credits related to the State Value Added Tax and, if the
taxpayer has more debits than credits, they will have to pay the tax on the
difference between them.
It is a value added tax and is collected by most States at the usual rate of 17%,
24/39
2/15/2015
except for the States of So Paulo, Minas Gerais and Paran, where the tax rate is
18% and Rio de Janeiro, where the rate is 19%. Some products trigger a higher
rate (usually 25%) or a lower rate (automotive industry and other special
industries are below 17% or 18%). Intra-states transactions are subject to lower
rates, depending on the State of origin and destination.
ICMS is also imposed on import transactions. Export revenues are tax exempt
from ICMS, however, the ICMS tax credit recorded on the acquisition of inputs
and services may be kept.
Please note that industries located in certain States of Brazil, such as Mato
Grosso, Gois, Bahia, among others, may apply for State tax incentives, which
correspond mainly to reduction of tax due, deferral of tax due or recording of
presumed tax credits. It is important to mention that, as most of such incentives
are not supported by the necessary agreements pre-approved by all States
(CONFAZ meeting), these tax incentives may be questioned.
Other taxes and incentives

Property Taxes (IPTU and ITBI)
A property tax IPTU (Imposto Predial e Territorial Urbano) is levied annually
based on the fair market value of property in urban areas at rates that generally
vary between 0.2 and 5% according to the municipality and location of the
property. Payments can be made in up to 10 monthly instalments. In a few cases
it is possible to obtain exemption from this tax.
Another property tax ITBI (Imposto de Transmisso de Bens Imveis Inter Vivos)
is levied at rates of up to 6% on sales or transfers of properties and is payable by
the acquirer. A reduced rate of 0.5% applies to transactions under housing
programmes financed by federal government schemes.
Tax Incentives for Financed Debentures on Infrastructure Projects

Since 2011, with the enactment of the Law No 12,431/11, the Brazilian
government has granted tax benefits for investments in infrastructure made
through debentures. These are issued by the so-called Sociedades de Propsito
Especifico - SPEs (Specific Business Purpose companies), whose objective is to
develop infrastructure projects according to governments requirements.
The tax benefit applies to bonds issued by non-financial private companies;
whose purpose is the financing the development of R&D projects and
infrastructure.
For foreign investors, the tax benefit consists of the reduction of the withholding
tax applicable to the interests generated by investments in bonds and funds
25/39
2/15/2015
which allocate their resources in the debentures issued by the companies

mentioned above.
The granting of the benefit is conditional on several requirements, among others;
minimum term of 4 years;
periodical interest payments made with the minimum interval of 180;

simplified documents which proves that the companies resources are effectively
allocated in R&D and infrastructure projects;

the government approval granted by the Ministry which holds jurisdiction over the
area that relates to the infrastructure project.
Special tax incentives for the FIFA Football World Cup (2014)
Law 12,350, published on December 21, 2010, introduced a series of exemptions
on federal taxes. Federal Decree 7,578/2011 and Normative Instructions 1,173,
1,174 and 1,176/2011 set out the main requirements for entitlement to the tax
incentives under Law 12,350. Please find below the main programmes introduced
by this legislation.
RECOPA
RECOPA is a special tax regime for the construction, expansion, reform or
modernization of football stadiums which will host the official matches of the
2013 Confederations Cup and the 2014 World Cup, to take place in Brazil. A
specific license is required prior to being able to take advantage of the associated
benefits. Legal entities that hold construction/reform projects approved by the
Ministry of Sports may be entitled to the following benefits:
Suspension of II, IPI and PIS/COFINS on the import of machinery, working
instruments, equipment and construction materials to be used in, or incorporated

in, the construction of football stadiums.
Suspension of PIS/COFINS and IPI on local acquisition of the above mentioned
goods.
Suspension of PIS/COFINS on import of services by the RECOPA beneficiary
Suspension of PIS and COFINS on local provision of services to RECOPAs
beneficiaries.
Other incentives for the 2014 FIFA World Cup

The Brazilian Government also grants tax benefits to those involved with the
organization of the FIFA Confederations Cup and the 2014 Football World Cup in
Brazil, provided that these entities involved, and the events themselves, have
been licensed by the Brazilian tax authorities, based on a list provided by FIFA.
These benefits include tax exemptions on the import of certain perishable goods
26/39
2/15/2015
or merchandise for use and consumption in the organization of the events

promoted by FIFA and its related entities. These benefits do not apply to the
import of durable goods and equipment, which shall be imported through the
Special Temporary Admission Customs Regime (which also involves the
suspension of taxes).
Law 12,350 also sets out a series of exemptions on federal taxes granted
exclusively to certain bodies:
FIFA itself and related entities domiciled abroad;
to FIFAs Brazilian subsidiary and to the Brazilian Broadcasting Channels;
to FIFAs service suppliers established in Brazil; and
to non-resident individuals hired for, or engaged to work in the events.
Furthermore, acquisitions carried out by FIFA or its subsidiary in the local market
shall be exempt from indirect taxation.
These exemptions will apply to taxable events that take place between January 1,
2011, andDecember 31, 2015.
Audit and accountancy

Regulatory requirements
Accounting Practices adopted in Brazil
The Accounting Practices adopted in Brazil (BR GAAP) are based on the Corporate
Law, which was updated in 2008 with Law 11.638/07.
This Law has approximated the BR GAAP to International Financial Reporting
Standards (IFRS), although there still are many remaining differences. Although
the starting point for the BR GAAP is the Corporate Law, there were
inconsistencies in the accounting treatment between different companies in
Brazil due to the lack of guidance in the Law, which is very superficial on
accounting issues. The Brazilian Stock Exchange Securities (CVM) and other
regulators, including the Brazilian Federal Council of Accountants (CFC), used to
issue accounting guidance to the entities regulated by them. After a round of
negotiations, from 2008 this problem tends to disappear in view of the creation
of the Brazilian National Standard Setter (CPC Comit de Pronunciamentos
Contbeis), which, from now on, will be responsible for issuing the new Brazilian
accounting standards which will be subject to the endorsement from the different
regulators. Once the regulators are part of the CPC, it is supposed that most of
the standards, if not all, will be approved by them as soon as they are issued in
final form. Prior to 2010, standalone Financial Statements could be prepared in
accordance with BR GAAP. However, the CVM, the Brazilian Central Bank (BCB)
27/39
2/15/2015
and Insurance Regulator (SUSEP) have issued regulations determining that entities
must prepare consolidated financial statements in accordance with IFRS from
2010.The format of the financial statements in Brazil is similar to IFRS. Disclosure
in BR GAAP is very limited if compared with disclosure requirements prescribed
by IFRS.
The Transitional Tax Regime (RTT)

As mentioned above, Law 11,638/07 introduced new accounting principles in
Brazil. In order to guarantee the tax neutrality of such changes, the Brazilian
government issued Law 11,491 on 27 May 2009. The focus of this measure was
to guarantee that no adverse tax consequences should be triggered from the
adoption of the new accounting criteria in connection with the recognition of
revenues, costs and expenses computed on the assessment of net profits.
To achieve this result, Brazilian taxpayers will have the option to elect for a
Transitional Tax Regime (Regime Tributrio de Transio RTT) under which, for
tax purposes only, taxpayers will be allowed to calculate corporate income tax
and follow the applicable accounting criteria before the enactment of Law
11,638.
The transitional tax regime was optional for the 2008 and 2009 calendar years
but has been mandatory since 2010 and is in force until a new law is enacted
setting forth the tax effects (if any) stemming from the new methods and
accounting criteria. In addition, the option of the RTT for the Corporate Income
Tax (IRPJ) shall imply the adoption of the tax regime also for social contributions
purposes (CSLL, PIS and COFINS).
Audit requirements
Audited Financial statements are required for listed companies, financial
institutions and insurance companies. Listed companies with total annual gross
revenue above R$100m must present quarterly information reviewed by
independent auditors. Other regulated segments might require audited financial
statements.
In light of recent changes to the Corporate Law, all entities, independent of their
statutory structure or whether they are listed or regulated entities, must have
their financial statements audited by an independent auditor if they are deemed
to be large. Large companies are defined as those whose gross revenue in the
prior year was greater than R$300m (approximately US$150m) or held total
assets over R$240m (approximately US$120m) within Brazil. These limits are
applicable not only to individual legal entities but also to a group of entities
under common control, even if the control is abroad. Please note that the analysis
considers the operations in Brazil only.
28/39
2/15/2015
Human resources and employment law

Employment law
Employment and labour relations in Brazil are primarily governed by the Brazilian
Federal Constitution, the Brazilian Labour Code CLT and Collective Labour
Agreements. The CLT imposes on the employer a series of obligations that
protect employees, reflecting the paternalistic philosophy of the Brazilian Legal
System.
Remuneration
According to the Brazilian Labour Laws, an employment contract (written or
verbal) must state the remuneration of the employee. The remuneration of an
employee includes, besides base salary, fringe benefits and bonuses, amongst
others.
Government Severance Indemnity Fund for Employees (FGTS)

For individuals considered as employees, the company must make a monthly
deposit to the Government Severance Indemnity Fund for Employees (FGTS) at an
amount equal to 8% of an employees remuneration. In case of a dismissal
without just cause, incited by the company, an employee may withdraw this fund
with an additional penalty (to be paid by the employer) equivalent to 40% of the
accumulated FGTS balance.
The company must contribute an additional 10% fine to the social fund.
13th Salary
The employer must pay annually to the employee, the 13th salary, which is a
Christmas bonus due to employees, regardless of their remuneration. It
corresponds to an additional one month salary and includes annual or semiannual bonuses and fringe benefits.
The payment occurs, most commonly, in two instalments, 50% in November and
50% in December. An anticipation of the first instalment may be requested when
the employee leaves for vacation.
Social Security Contribution

Companies are subject to the following social charges, due on the employees
monthly remuneration:
Social Security contributions, equal to 20% (with no ceiling), plus:
Corporate charges:
29/39
2/15/2015
SESI, SESC, SEST
1.5%
SENAI, SENAC or SENAT
1.0%
INCRA
0.2%
SEBRAE
0.6%
Education Salary
2.5%
Work accident insurance (from 1% to 3%)
3.0%
Total (maximum rate)
8.8%
The corporate charges listed above vary according to the nature of the companys
activities.
There are some sectors which are allowed to pay the Social Security taxes, at
reduced rates equivalent to 1% or 2% on the gross revenue, instead of applying
the tax rate on the payroll.
Among the sectors which Social Security tax rate was reduced to 2% are: (i)
passenger transportation; (ii) engineering and technology research and
development; (iii) infrastructure industry
Among the sectors which Social Security tax rate was reduced to 1% are: (i) retail
trade and maintenance; (ii) repair of vessels, cargo transportation (by train or
bus); (iii) journalism and radio broadcasting
In addition to the companys contribution (20%), employees are required to pay a
monthly social security contribution that varies from 8% to 11% of their monthly
compensation, with a current set ceiling of R$405.80 (approximately US$202.50)
per month (this ceiling is altered from time to time).
Working conditions/hours worked

The Brazilian Federal Constitution determines that regular working hours should
not exceed 8 hours per day and 44 hours per week. Specifically for financial
institutions, working hours should not exceed 6 hours per day. A series of
constitutional and legal provisions establish a shorter working week for a variety
of professional categories such as bank clerks, telephone operators and so forth,
who are subject to different working weeks pursuant to specific regulations. Time
worked in excess of the above is treated as overtime.
In general, compensation for overtime work is paid at least 50% above the
compensation paid for normal working hours.
Wages and salaries

All work of equal value must be remunerated at the same rate, irrespective of the
nationality, age, sex, or marital status of the employee.
30/39
2/15/2015
A minimum wage is established by law and is currently set at approximately

US$311 per month (R$622). It should be noted that the minimum wage serves
mainly as a base index for adjusting wages and certain prices. In practice, it is
paid only to some rural, unskilled and migrant workers.
Foreign personnel
Legal entities with three or more employees are obliged to maintain a
proportionality of two thirds of Brazilian employees to one third of foreign
employees.
The proportionality must also be observed in relation to total employee
remuneration. Lower proportionality may be granted by the relevant authorities in
specific circumstances (e.g. lack of Brazilian workforce in a specific sector). For
proportionality purposes, foreigners residing in Brazil for more than ten years
who are spouse or parent to a Brazilian national, and those of Portuguese
nationality, are considered as Brazilians.
Immigration law
Immigration law states that a foreign individual may only enter the country to be
engaged in gainful activity under certain types of visas (permanent and
temporary, type V), which will vary depending on the kind of activity performed
and the period of physical presence in the country.
Temporary visa
Business Trip (Temporary visa)
The business visa permits a foreign individual to enter Brazil for a short term on
specific business assignments. The business visa is recommended to business
owners or their representatives that come to Brazil exclusively in the interests of
their companies, to offer or search for products, to learn about the Brazilian
market or to close or draw up agreements, for example.
Temporary visa V with a labour contract

A foreign national who enters the country holding a temporary visa type V with
a labour contract, must have an employment relationship with a Brazilian
company.
Temporary visa V without a labour contract (technician)

A foreign national entering the country without a labour contract and
consequently, without an employment relationship with a Brazilian company,
must be under a technology transfer and/or technical assistance contract.
Permanent visa
31/39
2/15/2015
A permanent visa is granted to foreign individuals who intend to settle in Brazil

and that satisfy specific requirements established by the National Immigration
Council and/or the Labour Ministry.
Trade
Import duties
Import tax is levied on the CIF price. The rate depends on the degree of necessity
and is defined by the products tax code according to the Harmonised System.
Taxes on the importation are levied on top of one another, as follows:
Import tax is applied to the CIF price (FOB price plus insurance and freight).
IPI is levied on the total of (i) above (CIF price plus import tax).
PIS and COFINS are applied to the total of (ii) above (CIF price, import tax, and IPI)
plus ICMS due on imports and the contributions are included in their own basis.
ICMS is applied to the total of (ii) above (CIF price, import tax, IPI) plus PIS, COFINS
and ICMS is included in its own basis.
Import tax (II) is a cost to the company (not recoverable). ICMS, IPI, PIS and
COFINS paid on imports are generally creditable.
Documentation procedures
In order to perform any international trade transaction, entities established in
Brazil must first obtain an import/export permit (also known as RADAR). This
permit is granted by the Federal Revenue Services and enables entities to access
the international trade electronic system, SISCOMEX, in which companies register
their import declarations or export registrations.
Moreover, some products may require special import licenses. If a license is
required, automatic licensing may be obtained for certain products as well as
under the drawback regime (see below).
Non-automatic licensing is required for imports of used goods, imports under
special concessions, goods subject to governmental control or tax incentives and
others. Imports may be performed either through fully prepaid letters of credit
which can be financed by local banks, or through credit arrangements. Terms
longer than 360 days are subject to special procedures associated with exchange
currency procedures.
The following is a brief summary of the documentation procedures:
License to use SISCOMEX the electronic platform for register imports and exports;
Filing of an application for a non-automatic import license, when applicable, before
32/39
2/15/2015
the goods shipment, This should include the required general information
concerning the importer, exporter, manufacturer, country and port of origin, port of
unloading, description of the merchandise, FOB price in foreign currency, and
supplementary documents as required (these documents do not have to be filed in
advance for automatic import licenses and imports which do not require licenses).
Payment of the application fee.
Issue of the import license.
Completion of the import declaration, which is the basic document for customs
clearance, containing all data related to the respective import, including duties and
taxes incurred.
This should be carried out after arrival of the merchandise but before customs
inspection.
The inspection procedures are based on the type of inspection required by the
Customs authoritys system (green, yellow, red or grey channel). The green
channel requires no inspection, the yellow channel requires only documentary
inspection, the red channel requires physical and documentary inspection and
the grey channel requires physical and documentary inspection, as well as special
customs procedures (including price control).
Customs clearance then finally takes place. Other formalities may be required in
certain cases, mainly for imports which are granted special concessions or tax
incentives. Transportation in Brazilian vessels may also be required.
Anti-dumping measures
Law 9.019/95 and Decree 1.602/95 lay down the anti-dumping measures.
Dumping is defined as the entry of a product into the local market (including
under drawback) at a price lower than its normal price. If entry is considered a
threat to the local market, anti-dumping measures are employed.
Currency/exchange control
The Central Bank allows the official exchange rate to float freely, but forex
trading is restricted to authorised dealers. The Central Bank intervenes when
there are signs of speculative operations. There is an active parallel exchange
market that, although illegal, is quoted in the daily newspapers, as well as an
official tourist rate that normally approximates the parallel rate.
IOF
As a general rule, foreign exchange transactions made in order to allow payments
to non-residents, in the form of royalties, technical services, technical,
administrative and any other assistance or any other revenue, including the
reimbursement of any costs, are subject to the tax on financial transactions (IOF).
33/39
2/15/2015
These transactions are subject to the maximum IOF rate of 25%. The current IOF
rate for any foreign exchange transaction (both inbound and outbound) such as
FDI or Intragroup loan agreement is 0.38% payable upfront; however, there are
many other types of foreign exchange transactions where different tax rates are
applied. As a result, the IOF may not be avoided if the payment requires a foreign
exchange transaction from the Real into a foreign currency, or from a foreign
currency into the Real. Payments of interest for the importation of goods and for
the acquisition of an investment in Brazil by a local resident from a foreigner, are
also subject to the IOF.
The IOF of 6% is charged on foreign loans with an average maturity of less than
360 days (the average term was decreased on December 5, 2012 from 720 days
to 360 days).
All other foreign loans are subject to the IOF at 0% rate. The average maturity is
determined based on the balance of the loan relative to the number of days of
the outstanding balance of the related loan.
From June 2013, the Brazilian government changed the IOF tax rates that are
levied on certain foreign currency exchange transactions related to the inflow of
funds to Brazil made by Resolution 2689 to 0%, also if the equities are traded
through the exchanges. As to the outflow of funds from Brazil related to
investments in the financial markets, the IOF rate continues to be 0%.
Local representation
Local agents
Due to the bureaucratic documentation procedures and the language barrier
frequently encountered, it is recommended to use a local customs agent or
broker. They are particular useful in dealing with the Customs and Tax
authorities.
Sales agent or subsidiaries

Products shipped to Brazil and invoiced directly by the foreign supplier to its
customer in Brazil are only subject to Brazilian corporate income tax, if the sales
agent or representative domiciled in Brazil, who acts as an intermediary, has the
authority to bind the overseas seller contractually. However, if the agent does
have such binding powers income taxes are calculated on the deemed profit,
based on a percentage of gross income (which varies depending on the activity),
plus an additional surcharge of 20 per cent. It is accordingly advisable for the
formal representation agreement to expressly preclude the sales agent or the
representative from contractually binding overseas principal in any sales contract.
34/39
2/15/2015
A sales subsidiary in Brazil may be established and is subject to the same taxes
as any other local company.
Tax treaty
Currently, Brazil has double tax treaties with the following jurisdictions: South
Africa, Argentina, Austria, Belgium, Canada, Chile, China, Korea, Denmark,
Ecuador, Spain, Philippines, Finland, France, Netherlands, Hungary, India, Israel,
Italy, Japan, Luxembourg, Mexico, Norway, Peru, Portugal, Czech Republic,
Slovakia, Sweden and Ukraine.
Banking
All banking business is closely monitored by banks themselves and by the
Central Bank of Brazil (Banco Central do Brasil). Banking rules are strictly
enforced. In addition to the extensive branch network of the major retail banks,
many of which have self-service ATM halls, most services available at the bank
itself are also available via internet banking.
Types of bank accounts:

Brazilian banks offer current accounts, savings, credit and debit card services,
personal loans and overdrafts, and in some cases, foreign exchange services.
Following are the details of each one:
Current accounts (conta- corrente)

Usually entitle the account holder to a chequebook and/or debit card. These
accounts are normally non-interest-bearing.
Savings accounts (conta poupana)

Pay monthly interest on average daily balances for the month. This rate is
currently 0.5% over the basic reference rate, (Taxa Referencial TR). Interest
earned on these accounts is tax-free. Due to a new local regulation, deposits
made on May 4th 2012 and onwards, have new interest basis. Whenever the
Brazilian benchmark interest rate (SELIC Special Settlement and Custody System)
is equal or under 9% per year, the interest paid to customer is 70% over SELIC,
plus the reference rate (TR) variation.
Currently, many banks combine these two accounts into an investment account
(conta investimento). Deposits are automatically routed to the savings account
and transferred to the current account to cover cheques, debit card payments
and cash withdrawals. These accounts are also used for investments in funds,
with all investments and redemptions transiting through the account.
35/39
2/15/2015
Salary payment account (conta salrio)

A simple type of checking account which was launched by Brazilian Central Bank
in 2006 (Res. 3402/06) with the following objectives:
To allow low income customers to withdraw their salaries through Branches or ATMs
without the need to keep a normal fee chargeable checking account in the payroll
processor bank chosen by its employer company;
To allow individual customers to readily transfer their salaries to a checking account

held in a bank which is not the same as the payroll processor chosen by its
employer company. The idea is to stimulate competition among banks for better
quality services and lower fees.
Personal loan (emprstimo pessoal)

Personal loans are repayable in up to 24 or 36 instalments, depending on the
bank. Competition is strong and rates vary from bank to bank.
Overdraft
(cheque especial). This is normally by arrangement and subject to the proper
credit analysis by the bank. Usually, on opening an account, the bank may make
such a credit line available. Interest rates on such facilities are very high.
Setting up a bank account (individual account)

The following documents are required to open a retail bank account;
A valid identity document. In the case of a foreigner resident in Brazil, this will mean
their foreigners identity card (Cdula de Identidade para Estrangeiro CIE) which
contains the foreign register (Registro National De Estrangeiro RNE).
Individual Taxpayers number (Cadastro de Pessoa Fsica CPF).
Proof of residency, such as a utility bill in the name of the person opening the
account.
To obtain the CPF, it is necessary to fill out the application form at any Post
Office, branch of Banco do Brasil or branch of the Caixa Econmica Federal and
present the documentation required (usually the original or a certified copy of the
RNE).
The applicant will receive a counterfoil with a code number and there is a small
fee. Thereafter, the applicant will be notified to appear at a unit of the Federal
Revenue Service and present their documents and the counterfoil in order to
obtain their definitive CPF.
HSBC
HSBC Bank Brazil represents one of the main nancial groups worldwide in our
36/39
2/15/2015
country. Based on four pillars Stability, Proximity, Relationships and Know-How,

the institution follows principles and values that ensure an ethical, fair and
responsible standard when doing business, always focusing on the client.
Services offered by HSBC Bank Brazil include Retail, Commercial Banking,
Corporate and Private Banking.
Head Ofce
HSBC Bank Brazil has its headquarters in Curitiba (PR).
An International Brand
In March 1997, HSBC Bamerindus S.A. was born, which in 1999 became HSBC
Bank Internacional Brasil S.A. Banco Multipo. The HSBC logo and hexagon are
used in order to adhere to the worldwide brand.
Network in Brazil
HSBC Bank Brazil is now present in 564 Brazilian cities, with 867 agencies, 390
bank service ofces, 1,059 electronic service stations and 5,284 ATMs. The
clients also have over 39,000ATMs in the network shared with other banks in
Brazil and 24hr Bank.
Clients
Over 5.2m individual clients and 368,932 legal entity clients.
National Ranking
4th largest non-state-owned bank ranked by total assets.
6th largest by branches.
6th largest by deposits.
4th position on the Central Bank FX ranking by volume.

2nd largest International Custodian and 4th Domestic Custodian.
6th largest by AUM.
Corporate Sustainability
At HSBC, our commitment to sustainability involves taking a look at our own
business and endeavouring to do more and do it, better. The target of acting
sustainably can only be met if sustainability is one of the drivers for our
processes, organizational culture, customer care, creation of new products and
services and, above all, credit policies.
We apply policies and processes to manage potential social and environmental risk
in our lending and other financial activities in sensitive sectors.
We help our clients to identify the opportunities presented by the shift to a low-
carbon economy.
We try to reduce our own environmental footprint and share good practice on this
37/39
2/15/2015
with our clients and other stakeholders.

We focus our community investment (philanthropic activities) on education and the
environment.
Our education programmes strive/aim to lift people out of poverty, build

financial literacy and promote environmental awareness.
Our environmental programme focuses on the HSBC Climate Partnership a fiveyear environmental programme to reduce the impact of climate change on
people, forests, freshwater and cities. HSBCs programme partners are carrying
out original scientific research, developing demonstration projects, creating
working models and proving clear solutions so that governments can enact
legislation for the adoption of low-carbon policies.
ANBID Local Banking
CVM Brazil SEC
ANBID Local Banking
Country overview
Capital City
Brasilia
Area
3,287,000 square miles
Population
190,732,694*
Language
Portuguese
Currency
Real
International dialling code
+55
Business and banking hours
Commercial - 9am to 6pm

Banks - 10am to 4pm
Political structure
Federal Republic
Stock Exchange
BM&FBovespa. Leading share indexes: IBOVESPA & IBrX
*Source: Censo IBGE 2010
38/39
2/15/2015
39/39

HSBC Global Connections - Brazil (Retrieved 15feb15)

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

HSBC Global Connections - Brazil (Retrieved 15feb15)

Caricato da

Copyright:

Formati disponibili

2/15/2015

national economic development and also to promote regional development. They

capital gains of non-residents.

This document is an overview of some common issues that investors should be

every need with appropriate support.

Current Economic Climate

Key sectors and trading partners

Incentives for foreign investors

(COFINS); contributions to the social integration programme (PIS) on exports of

Statistics for Foreign Direct Investment

trend of foreign investors to share the capital of Brazilian corporations in a

Barriers, risks and downsides for foreign investors

Central Bank (BACEN)

Securities Commissions (CVM)

Administrative Council for Economic Defence (CADE)

National Institute of Industrial Property (INPI)

Foreign Trade Department (DECEX)

Legal and regulatory

coastal and freshwater shipping;

mining and hydroelectric energy.

Furthermore, the direct or indirect foreign ownership of rural land is regulated

borders is subject to further restrictions.

Workforce and cost of living

Business etiquette and culture

force is Resolution of Monetary Council 2689.

Limited Liability Companies (Sociedade Limitada)

Limitada or Ltda (Sociedade por quotas de responsabilidade limitada)

Participation in classified government contracts;

Mining and hydroelectric energy, etc.

Ongoing filing requirements

Liabilities for Directors Company

Centre of International Financial or Operations

Corporate Income Tax (IRPJ)

Social Contribution on Net Income (CSLL)

Tax losses carry forward (IRPJ and CSLL)

Withholding Taxes (IRRF)

Technical and Admin Services 15%*

Other Services 25%*

* These rates are effective unless otherwise specified by tax treaty.

Federal Excise Tax (IPI)

Contribution for the Social Integration Programme (PIS)

Contribution for Social Security Financing (COFINS)

Financial Transactions Tax (IOF)

December 2011, the rate went back to 0%.

Contribution for the Intervention in the Economic Domain (CIDE)

Service Tax (ISS)

Exchange Controls or restrictions on repatriation of profit

The interest paid or credited to a related party abroad, or to a beneficiary located

transactions in US dollars subject to fixed interest rate;

Personal Income Tax

date of arrival in Brazil.

Monthly Income (Brazilian currency BRL)

Amount to be deducted in tax from tax - in

From 1,710.79 to 2,563.91

From 2.563.92 to 3,418.59

From 3418.60 to 4,271.59

Other taxes and incentives

Tax Incentives for Financed Debentures on Infrastructure Projects

which allocate their resources in the debentures issued by the companies

periodical interest payments made with the minimum interval of 180;

allocated in R&D and infrastructure projects;

instruments, equipment and construction materials to be used in, or incorporated

Other incentives for the 2014 FIFA World Cup