Doing Business in Brazil

During the last few years, Brazil has emerged as a stronger and more attractive global player. A high degree of economic diversification, combined with a strong domestic consumer market and a broad selection of trading partners, bolstered by a well regulated financial system, have been keys to successfully mitigating the effects of the international economic crisis.

Unemployment in Brazil is low, wages are rising and the level of foreign direct investment is high. There are plenty of opportunities, particularly in the workforce management industry focused on oil and gas high specialists and heavy construction professionals.

However, as with any other emerging economy, Brazil presents issues and challenges that businesses must consider prior to establishing operations here.

The purpose of this publication is to introduce the major business and legal issues to be considered by foreign companies in establishing business operations in Brazil. The discussion under each heading is not intended to be an exhaustive analysis but rather to provide general observations and guidance to the many questions we have encountered from client.

In the year 2013, Brazil was ranked the 5th country which most received foreign investment. Brazil received US$ 64 bi of alien investment. See below:

foreigner investment

Among the 20 countries most attractive to receive foreigner direct investment (when a foreign company hold more than 10% on a Brazilian entity), 9 are countries in which their economies have been growing.

The study prepared by SOBEET (Sociedade Brasileira de Estudos de Empresas Transnacionais e Globalização Econômica) foreseen that the direct investment in Brazil for year 2014 would reach US$ 60 billion.

The Brazil Central Bank projected US$ 63 billion of foreigner direct investment in Brazil for year 2014. In the period from January to May 2014, the alien investment has reached US$ 25,34 billion.
The global scenario also points to greater difficulties in attracting investment to developing countries. UNCTAD (United Conference on Trade and Development) projections indicate that already in 2014 the richest nations have attracted about 50% of FDI inflows, after three years with slice below the developing countries.
The volume of Foreign Direct Investment (FDI) destined to Brazil grew 40% from 2007 to 2010, a rate considerably favorable when compared to this kind of investment in the world, which has decreased 36.9% due to the international financial crisis, as per report prepared in 2010 by the United Nations Conference on Trade and Development (UNCTAD). In addition, according to UNCTAD’s report prepared in 2013, FDI remained robust, confirming the country’s primacy as the leading investment destination in Latin America and Caribbean, accounting for 27% of the total amount.
The 2012-2013 Global Competitiveness Report, a study conducted by the World Economic Forum to access the degree of competitiveness of countries based on economic, institutional, social and business variables, showed that Brazil climbed 5 positions and now occupies the 48th position among 144 countries.

Brazil is the 8th largest consumer market in the world and can attain the 5th position by 2020, surpassing France, England and Italy, thus attracting investments in various sectors.

In 2013 the foreign investments were responsible for 44% of all proceeds of shares reaching 323 merger or acquisition, as reported by PWC.

In accordance with PWC report, among the 811 transactions announced last year, only 35.9% (291) had disclosed their value, totalizing US$ 88.1 billion. Among this total announced, 13 transactions had purchase value above $ 1 billion, totaling $ 55.2 billion. Transactions up to $ 100 million representing 68.4% of the total.

In the period from January to July 2014, were announced 461 corporate transactions and 175 foreigner investments in Brazil.

In 2011, the credit rating agency Standard & Poor’s raised the long term rating of Brazil from BBB- to BBB. Moody’s, in 2011, has modified the investment rate of Brazil from BAA3 to BAA2 with a positive perspective.

In 2013, Standard & Poor’s established the rating of Brazil in A- and Moody’s has maintained as BAA2. This boost shows the great maturity of the Brazilian companies, which has been proven by the improvement of the fiscal and foreign debt and by the perspectives of economic growth.

In accordance with the American Chamber of Commerce for Brazil, among other factors, the elevation of the number of investments in Brazil, the stability of real interest rates, productivity gains, and the strengthening of companies have generated an enormous trading and investment flow in favor of Brazil over the past years.

In this sense, the interest of foreign investors in Brazil has grown significantly, and to approach the main legal aspects involved in the establishment of a new company in Brazil is a matter of paramount importance.

Generally, foreign investors who do exports products or services to Brazil operate without hiring a representative or setting up a company in country once it would be the simplest way to work in Brazil. The investors who intend to experience the Brazilian market prior to make a solid investment decision usually use this scenario; however, it can trigger a high level of taxation.

In some cases, exporting services to Brazil can reach withholding taxes of 40%-45% on international payments.

Foreigners initially plan to structure a subsidiary in Brazil, however the subsidiary must be carefully studied and discussed in order to clarify all the pertinent impacts of Brazilian Law on such structure, plans, objectives and bureaucracy.

Regarding the possible legal structures in Brazil there are the “Limitada”, which is similar to a “limited liability company – LLC”, and that is in fact by far the most common and used corporate structure in Brazil.

The corporate capital of a sociedade limitada is divided into quotas. Each partner’s liability is restricted to the value of his/her quotas, but all of them are jointly liable for the payment of the corporate capital.

The sociedade limitada requires at least two partners and the amendments to its articles of association require the approval of at least 75% of its capital.

The sociedade limitada has some practical advantages, such as a more simple and flexible corporate structure, reduced costs, and less formality. It is extremely appropriate for the case of foreign partners with one common controller.

However, if the quotas are held by different groups of partners and/or the company has plans to issue debentures, subscription warrants, commercial papers and other securities and stock, then adopting a sociedade anonima is more appropriate.

It is also important to highlight that the incorporation of a sociedade anonima is mandatory depending on the economic activities to be performed. For example, financial institutions must necessarily adopt that business form.

“Sociedades Anonimas” or “Sociedades por Ações – SA”, are similar to a Corporation. S.As have their corporate capital divided into shares and the shareholders’ liability is limited to the value of subscription/acquisition of their own shares.

The sociedade anonima is operated by the decisions taken by the majority of the votes and in a specific case may have one sole shareholder (the so-called wholly-owned subsidiary).

It is very difficult to determine that one form is better or worse. It is crucial to comprehend the foreigner needs and to match them with all legal forms available in Brazil.

Having a company designed specifically to meet the foreigner needs is the only way to fully exploit their activities and to enjoy all benefits and possibilities allowed by domestic law.

A possible form of commercial partnership is the consortium between the foreign investor and the Brazilian partner. The consortium is not equipped with a legal personality and its participants respond only to the obligations they accounted for (joint and several liability is not presumed).

The consortium contract shall include the purpose of the partnership, the term, address, form of dispute settlement, obligations and responsibilities of each consortium participant, share of profits/losses, accounting rules, representation, management fees and the form of deciding on common interest issues. The consortium format is widely adopted for major projects to be contracted by the Brazilian government, through public bids.

The Brazilian law reflects the rule of autonomy of assets, separating the rights and obligations of the company from its members. Thus, all the assets belong to the company and not to its partners, and such assets may be used only to cover responsibilities attributable to the company as such company and its partners are considered separate entities.

Determining the company’s address is also an essential provision. Initially, it may be established in a place for merely developing its representation functions, though with time and due to the type of economic activity developed, the need of allocation of a specific infrastructure will certainly be raised to better assist the Brazilian market.

It is important to note that there are legal provisions and court decisions that exempt the application of the legal autonomy related to the company, enabling, in specific situations, the pierce of the corporate veil, rendering the partners liable for company’s debts. Those situations normally involve the abuse of the legal personality characterized by misuse or by confusing of assets.

As a general rule, the pierce of the corporate veil is most usually verified in circumstances such as failure to pay taxes by the partners in charge of the company’s management, the consumers’ protection and the repression of acts that are harmful to the environment. In sum, there is a tendency toward the restriction of the effects of the company’s legal autonomy in the relationship with its employees, its consumers and with the government.


The incorporation of companies in Brazil must be registered at State Board of Trade (local acronym Junta Comercial), in charge of enrolling all the companies thatexercise economic activities.
All the foreign partners shall appoint a legal representative domiciled in Brazil to receive summons and represent the foreign partner before government authorities.


Companies have the obligation to maintain their bookkeeping records under the responsibility of an accounting department with duly certified professionals. Bookkeeping has several purposes: management assessment, support for third parties’ information interests and surveillance of compliance with legal obligations, mainly tax related obligations.
Companies also have to compile periodical accounting reports. The legal requirements for the accounting reports of sociedades anonimas are more detailed than those for the accounting of sociedades limitadas.


A previous search at the Board of Trade regarding the corporate name intended to be used in Brasil is required, once a company cannot use a name previously registered.
The company name is property of the company’s owner, being the exclusiveness of its use (as a general rule, within the state where the company has registered its head office and branches) protected by the Brazilian law.
Foreign investor shall be concerned not only with the protection of the company name, but also with the protection of possible intellectual property which will be used by the future Brazilian company.
Trademarks, industrial designs, utility models and patents already registered abroad or already being used by the foreign investor must be registered at the Brazilian Patent & Trademark Office (local acronym INPI – National Industrial Property Institute) in order to obtain the right of exclusive use within the Brazilian territory. In this respect, it is important to highlight that such protection in the Brazilian territory only takes place upon the effective enrollment at INPI.


The Brazilian legislation define foreign capital as: “any goods, machinery and equipment that enters Brazil with no initial disbursement of foreign exchange, and are intended for the production of goods and services, as well as any funds, financial resources or cash, brought into the country to be used in economic activities, provided that, in both hypothesis, they belong to individuals or legal entities resident, domiciled or headquartered abroad”.

Foreign capital may constitute direct or indirect investment. Direct investments are carried out through the establishment of new companies or by the acquisition of participation shares/quotas in already existing Brazilian companies.
Foreign capital is subject to registration at the Central Bank of Brazil (Foreign Capital Registration – RDE). Intangible goods, like trademarks and goodwill, may be used for the companies’ capitalization
provided that they are duly assessed.

Capital registration at the Central Bank will grant the foreign investor the right of return on the invested capital and the right of remittances of profit and dividends.
This means that the currency remittances abroad can undergo restrictions whenever there is no registration at the Central Bank because the remittances of profit, the repatriation of capital and the registration of reinvestments are all based on the amounts previously registered as foreign investment.


Management positions that imply representation of a corporation established in Brazil, or foreigners who hold a permanent visa and considering that the Brazilian Law prohibits the exertion of such activities by foreigners who holds temporary visas can, only exercise the practice of managerial acts.

It is necessary to obtain in advance a work permit before the Ministry of Labor and Employment.

Granting the permanent visa must requires that the company invest in Brazil R$ 600,000.00 (six hundred thousand reais) per foreigner that will be assigned to work in the country and, or an investment equal or greater than R$ 150,000.00 (one hundred and fifty thousand reais) and taking into account a commitment to generate 10 national employments during the period of two years.

In the first case, the permanent visa can be valid for up to five years renewed once the foreigner evidencing that still has managerial powers and duties in the same company.

In the second case, the permanent visa can be valid for up to two years and it’s renew depends on the proof that the foreigner still has managerial powers and duties in the same company, and that the generation of 10 employments commitment has been achieved.

In both cases, the pertinent law establishes that the foreigner capital invested in Brazil must be registered in the Brazilian Central Bank within thirty days, as of the date of the entry of the capital in Brazil, as stated in “Foreign Capital” item. Otherwise, the investment would be invalid for its legal-immigration purposes and be subject to penalties.


The Brazilian Law allows a permanent visa to foreigners who invested resources of his own, from abroad, in productive activities in Brazil of at least R$ 150.000,00 (one hundred and fifty thousand reais).

The Brazilian investment requisite is low comparing with other countries, as it is not the only requirement. The utmost important requisite is that the company that receive the investment (a new company or an existing one) shall create a compromise of create job positions and hire local Brazilian employees, as well as demonstrate that the foreigner will increase the productivity in Brazil and the absorption of technology by Brazilian citizens.

The individual investor permanent visa can be valid for up to three years and it’s renew depends on the proof that the foreigner remains as an investor upon submission of the inherent documentation, especially the Brazil Individual Income Tax Return.

It is possible to apply for a permanent visa with a foreigner investment lower than R$ 150.000,00 (one hundred and fifty thousand reais) under authorities analysis and subject to comply with social interest of the investment showing (i) the creation of Brazilian jobs (ii) amounted invested and the region where it will be useful (iii) the economic segment that the investment shall occur; and (iv) contribution to increase productivity or assimilation of technology.Publicada a RN 108/14 que disciplina a concessão de visto temporario e permanente e permanência a título de reunião familiar.

Related Post