Starting a business in Brazil can be a challenging yet very rewarding venture. Brazil has the largest economy in Latin America. It has the 9th largest economy, making it an attractive venture for entrepreneurs and investors worldwide. Brazil is the world's fifth-largest country and, with a population of more than 200 million, it boasts of a sizeable market and great economic potential. However, setting up a business in Brazil can be challenging, especially for foreign entrepreneurs. Aside from differences in language and culture, you also have to consider that it's still a developing nation. Brazil also has a complex tax regime and an equally complex bureaucracy. However, Brazil is still a lucrative country that can offer huge growth potential. If you're planning on expanding your business, our guide can help you prepare for your new business venture.
Why Brazil?
Brazil is a country that shows great economic promise, but what can you potentially gain from starting a business in this country? There are two sides to every coin. In this section, let us look at the benefits, risks, and challenges you may encounter when starting a business in Brazil.
Benefits of Starting a Business in Brazil
Access to a large consumer market
Brazil has the world's 5th largest population, and it's now home to a fast-growing middle class, giving it a diverse and sizeable consumer market.
The gateway to international trade in Latin America
Establishing a business in Brazil makes it easier to access the Latin American region and its market. Brazil is part of the Southern Common Market or the Mercosur Trade Bloc. Another trade group, BRICS, which is made up of countries with emerging economies—Brazil, Russia, India, China, and South Africa—is paving the way for free trade initiatives among its member countries.
Openness to foreign investment
The country allows 100% foreign ownership of incorporated local companies. These companies are also allowed to sponsor the visas of their foreign employees. Furthermore, to operate locally, it's not necessary to visit Brazil or be physically present to complete the incorporation process. You only need to have a certified power of attorney from each foreign partner.
Potential Risks and Challenges Foreign Entrepreneurs May Encounter
Bureaucracy
Despite the growth of its economy, Brazil's laws and regulations for starting a business are complex and pose a challenge to foreign investors. Its layers of bureaucracy, which entail an average of 11 to 15 procedures and longer wait times, can make it difficult for entrepreneurs to establish their presence in the country.
Complex tax system
Brazil has a complex tax system that entails more than 90 taxes, duties, and contributions levied by different government spheres. If you're considering starting a business in the country, you may encounter multiple taxes on import duties, corporate income, financial transactions, and more.
Initial Considerations for Setting Up a Business in Brazil
You have two options to choose from if you're considering entering the country's market: enter the market directly as a subsidiary or branch or enter the country through third-party entities. In Brazil, foreign businesses' most used business entities are the limited liability company (LLC) and the corporation.These two legal entities are widely used for several reasons:
They apply to many business types
They present a limited liability for equity holders
Both entities don't have minimum capital requirements
Legal Entity Types
Limited Liability Company (LLC/Limitada/Ltda.)
A Brazilian Limited Liability Company requires a minimum of two shareholders and one director. While you can appoint an individual of any nationality for these positions, you need to have at least one Brazilian permanent resident as your company's legal representative.With LLCs, the shareholders' responsibility is only limited to their assigned capital. LLCs are also not allowed to register or sell shares in the country's stock exchange.
Subsidiary Company (SociedadeAnônima/S.A.)
A Brazilian Public Limited Company requires a minimum of two shareholders and three directors. Like LLCs, an S.A.'s shareholders and directors can be of any nationality. They also don't necessarily have to reside in Brazil.This entity type can either be publicly traded or closed to the general public. Moreover, an S.A. needs to have a Board of Directors, who are fiscal residents in the country or hold a permanent visa, and an Administrative Council, whose members can be foreigners who need not reside in Brazil.
Branch or Representative Office
A branch or representative office of a foreign corporation is allowed to be fully owned by foreign entrepreneurs. However, you would need to appoint a local agent or sponsor. You need to have a special authorization, which you can secure from the Ministry of Development, Industry, and Trade if you're thinking of opening a foreign branch in Brazil. To release invoices to Brazilian residents, sign local contracts, and receive income from the local sales generated, you must appoint a Brazilian agent. For businesses to operate locally within Brazil, they need to undergo a process of incorporation, which can take between 60 to 90 days.
Preparations for Starting a Business in Brazil
The key to successfully starting a business in Brazil lies in thorough planning, research, and preparation. Setting up a business in the country entails a lot of procedures, and you may have to file for additional permits or approvals, not to mention its complex tax system. However, with proper planning and preparation, it's not impossible to successfully start a business in one of the world's largest economies. Here are some key components you need to take note of to prepare for your new venture:
Planning and research
As with any endeavor, planning and research are crucial. Before setting up your business and incorporating it in Brazil, you must determine which information and documents you need to provide the authorities. You should identify and define the type of entity you plan to set up and operate in the country. Aside from determining your entity type, it would help structure your plans, and specific activities as each of Brazil's municipalities runs different tax codes, rules, and regulations. You also need to have an address in Brazil where you will be conducting your operations. LLCs, for example, should have:
A reservation of business name that includes the type of activity you will be running in Brazil
Articles of incorporation that include details like your corporate capital and when it will be paid
Notarized incorporation documents
Tax and business license registration
Familiarize yourself with Brazil's tax system
Before starting a business in Brazil, you need to determine the tax regime you intend to work with. Knowing this beforehand is crucial because you can only change the tax regime once a year. There are two types of tax regimes in Brazil:
Lucro Real
This is considered an ordinary system of accounting. While it does have higher tax rates, one of its advantages is you won't have to pay taxes if you're unable to generate actual profit. This tax regime is ideal for large companies or companies that want to invest in Brazil but foresee losses during the first year.
Lucro Presumido
LucroPresumido entails a fixed percentage of taxes. The only taxable factor with this tax regime is a company's gross turnover. This is ideal for businesses with high EBITDA, or earnings before interest, taxes, depreciation, and amortization. The country also has three main taxes—federal taxes, state taxes, and municipal taxes. The calculation of your taxes will vary, depending on the method used, the tax regime you're under, the taxpayer, and the nature of the transaction.
Decide on the following articles of incorporation
Before undergoing the process of incorporation, you should already have the following preliminaries settled:
Company name
Names of your shareholders
Your legal address in Brazil
Initial capital
Activities
A company manager or administrator who must be a Brazilian resident
Once you've decided on these details, your articles of association or by-laws must be finalized. For this, you need to enlist the services of a Brazilian lawyer, and your company should be duly registered with the state Commercial Registry or the Civil Registry.
Essential Documents
Below are some of the essential documents you need to prepare:
Power of Attorney
Certificate of Incorporation or Articles of Association/ Incorporation
Corporate Taxpayer Registration Number (CNPJ) for foreign corporate partners
Individual Taxpayer Registration Number (CPF) for foreign members
Annotated documents for original documents produced outside of Brazil
Sworn translation of all foreign certified or annotated documents
Certified or annotated personal documents of your administrator
An Overview of How You Can Start a Business in Brazil
The process of setting up a business in Brazil can be tricky, but it can be simplified into six key steps:
Creation of a Power of Attorney
Your Power of Attorney should nominate a Brazilian who will have legal and fiscal responsibilities and be a representative of the foreign partner/s. It should also contain the power to incorporate the company under the foreign shareholder's name.
Certification or notarization of relevant documents
All your documents should already be certified or notarized. If they're made abroad, they must be annotated or certified by the Consulate in the country where the documents were issued. If they're produced in a foreign language, you must provide a sworn translation for each document.
Submission of your Articles of Association/ Incorporation to and its validation by the federal, state, and municipal agencies to obtain the CNPJ
You must register your business with Brazil's public authorities, including the Federal Revenue Bureau, municipal authority, and state authority. You must also be registered with the Board of Trade so you can get your Company Registration Identification Number (NIRE). After obtaining your NIRE, you need to register with the National Registry of Legal Entities to receive your CNPJ.
Acquisition of your company's digital certificate
Once you've obtained your CNPJ, you must acquire your digital e-CNPJ certificate.
Registration of your company before the Brazilian Central Bank
By registering with the Brazilian Central Bank, you'll be able to obtain your taxpayer I.D. number, which you'll be using for remittances to the country.
Opening a corporate bank account
Required documents for this step will vary according to each bank. Generally, you will need to present the following documents:
All documents used when setting up your business, like shareholder documents and your Articles of Association/Incorporation
Bank forms
Taxpayer ID
Additionally, you must meet the minimum compliance requirements:
Local director appointment
Legal representative appointment
Fiscal address (within Brazil) registration
Monthly tax declaration preparation and presentation with the country's national tax authority
Once your trademark is granted registration, the allowance decision will be published in the Official Gazette. Its publication initiates a deadline for you to pay the required fees to issue a certificate of registration. Once you've paid the fees, your registration is granted, and your certificate of registration will then be issued.
How to Register Your Trademark in Brazil
Securing and registering your trademark in Brazil is a key step that ensures the protection of your intellectual property. This is especially important if you're thinking of running a business in another country. A registered trademark sets you apart from the competition and prevents other entities in the country you're in from infringing on your intellectual property. Moreover, it gives your clients a layer of protection by minimizing the risk of confusion between companies or services.In Brazil, trademark registration is governed by the Intellectual Property Law (Ley de Propiedad Industrial). To register a trademark in Brazil, you need to register it with the National Institute of Industrial Property (INPI). The INPI protects your trademark and keeps it valid for 10 years. It's worth noting that any trademark registered with the INPI is considered valid only in Brazil. To register your trademark in Brazil, here are some key steps if you're filing your application online:
Perform a trademark search to find out if your business name has been registered.
Register your trademark online via the E-INPI system using your name or the name of the party you're representing.
Pay the GRU (Guia de Recolhimento da União) fees using the Federal Tax Liability Payment Form.
Get your GRU number, which is needed to access the E-Marcas platform.
Submit your application and attach all relevant documents.
Undergo an evaluation process, which can take up to 60 days
You can also file your trademark registration in person by printing the form from the INPI website and submitting it to any INPI office or by post. Once you've registered your trademark, this doesn't automatically mean that it's protected. The protection for your trademark only technically begins on the date that it's granted.
Signs That Can be Registered as Trademarks in Brazil
Several types of signs can be registered as trademarks in Brazil. These include:
Letters
Words
Names
Images
Symbols
Colors
Graphic forms or composite marks
A combination of these signs
While non-traditional trademarks, such as holograms and sounds, can't be registered in Brazil, this doesn't mean that they're unprotected. Under the Unfair Competition Legislation, owners of non-traditional trademarks can still defend them. With that in mind, here are some entities that cannot be registered as a trademark in Brazil:
Flags and emblems
Generic, common, or descriptive signs
Reproductions or imitations of official seals, titles, bonds, or banknotes under Brazil's jurisdiction
Popular pseudonyms or nicknames
Important Tips and Considerations
We're sharing some helpful tips and considerations for registering a trademark in Brazil:
All application documents must be filed in Portuguese. If they're produced in another language, make sure that you're able to provide certified translations when filing or within 60 days of your filing date.
A Brazilian trademark that hasn't been used within five years after it has been granted may be subject to cancellation.
Be prepared to wait. Typically, it takes around 24 to 36 months to register a trademark in Brazil. This period covers the entire registration process, from the filing to the final ruling. However, if you encounter opposition, the process may take longer.
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