Simplified Special Regime for Brazilian Startups

Written by | Corporate, Intellectual Property, Tax and Customs

On 24 April 2019, Complementary Law 167/2019 (“Law”) was published. The Law creates a simplified system for startups.

The Law defines as “disruptive companies” those companies that create something totally new and “innovative companies” as companies that aim to improve existing systems, methods, business models, production processes, services or products. Both “disruptive companies” and “innovative companies” are regarded as startups for the purposes of the Law.

The Law also establishes that startups are those companies that “develop their innovations under uncertain conditions that require constant testing and validation, including through provisional experimental marketing, before proceeding to full trade and revenue generation”.

The Law creates the Inova Simples, a special regime for faster incorporation and dissolution of startups through an automatic and simplified form incorporated in the existing system called REDESIM (National Network for Simplification of Registration of Company and Business Legalisation). REDESIM is a national system that integrates Federal, State and Municipal governments with commercial registries to facilitate registrations of companies.

As part of the registration process, the shareholders need to state the scope of the innovative business intention and the expression “Inova Simples” must appear in the entity’s registered name.

The REDESIM will have automatic communication with the Brazilian National Institute of Intellectual Property (INPI) to facilitate the registration of intellectual property rights.

Following the publication of the Law, on 10 January 2020 the Municipality of Florianópolis, Santa Catarina published Municipal Complementary Law 686/2020. This Municipal Law authorises the Executive Branch to grant tax incentives to startups, including exemptions from payment of Municipal rates and Tax over Services (ISS) for a period of three years. Together with São Paulo, Florianópolis has become a hub for startups in Brazil and this will provide further encouragement to those looking to establish a startup there.

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Last modified: January 23, 2020