Opening a company in Brazil
One of the most important topics to keep in mind when opening a company in Brazil, is the legal representation. Foreign companies that intend to open a subsidiary in Brazil, must have a Brazilian Resident as Proxy Holder to each of the foreign partners of the Brazilian company. It is an important matter to be planned ahead, due to the time it can take to have the Power of Attorney documentation signed and notarized.
Another important position to be taken by a Brazilian resident is the Legal Manager position. This is the person who will be in charge, and responsible for all liabilities of the Brazilian Company.
Summarizing these two important roles in the constitution of a company in Brazil, the Legal Manager will be signing on behalf of the Brazilian Company, while the Proxy Holders will sign on behalf of the Foreign Shareholders.
When you start your company in Brazil, you will need cash to get your business going. With this in mind, it is important to know that all foreign exchange transactions are regulated and tracked by the Brazilian Central Bank.
The Brazilian Central Bank only allows foreign exchange remittances to Brazilian companies of three different natures: Capital, Loans or Payment for services provided or Goods sold.
Remitting money as Capital, the Foreign Shareholders are investing on the company, therefore, it is a money that cannot be remitted back. However, this kind of remittance is not subject to taxes, and if the Company is profitable in Brazil, the dividends can also be sent back to the parent company free of taxes.
This requires a loan agreement, establishing the term, interest rates and amounts involved in the loan. This kind of transaction is subject to the taxes on the interests, and the Brazilian company must pay the parent company back.
– Payment for Services
The Brazilian Company may also invoice the parent company for services provided. Choosing this nature of remittance, it will be necessary to have a commercial agreement, specifying the services provided and payment terms. It is important to highlight that the Brazilian company may be subject to taxes when receiving payments for services provided.
Note that all foreign exchange transactions are subject to an IOF tax of 0.38%. However, loans have a minimum term of 180 days. If loans are paid back in less than 180 days they will be subject to an IOF tax of 6%.
When calculating your sales price in Brazil, keep in mind that, differently from most countries, all sales taxes must be already included in your sales invoice. Sales tax will vary according to the City, State and type of service provided or good sold.
In Brazil, there are three main sales taxes: ICMS, PIS and COFINS, and some of these sales taxes may also be recoverable, through tax credits, depending on your product and taxation method chosen by your company.
Calculating your sales taxes may not be an easy tax, and to avoid having a loss when selling your products, we highly recommend hiring professional assistance to calculate your sales price.