Written by Company registration has become a lot quicker in recent times. Here you will find the key issues to consider once you decided to set up a company in Brazil.
1. Have you decided on the type of company you would like to register?
The two main corporate structures in Brazil are the limited liability partnership (sociedade limitada) and the corporation (sociedade anônima).
A sociedade limitada can have one or more shareholders, while sociedades anônimas require at least two. Sociedades limitadas are faster to register.
2. Have you selected a person to make executive decisions in Brazil? If so, have you undertaken a background search and decided on their appointment terms?
Non-residents (including foreigners) can be appointed as executive directors of Brazilian companies. Hence, there is no need for permanent residents of Brazil.
However, there is likely to be many situations where a physical presence is required. This can be solved by appointing an individual to act as attorney-in-fact with specific and limited executive powers. Powers of attorney can be granted in different ways, with the most effective for practical purposes being a power of attorney issued by a Brazilian notary public.
Once the individual is selected, it is strongly recommended that you obtain a background search on them. Brazil is a very litigious country, so you can find valuable information about a person by undertaking court searches and checking public databases.
Finally, it is important to have a detailed agreement in place for the appointment of the individual.
3. Have you chosen the shareholder for the Brazilian company? Have you considered setting up a company just for this purpose?
None of the shareholders of Brazilian companies need to reside in Brazil or hold Brazilian citizenship, except in some specific sectors.
Brazil does not have many double tax agreements in force and currently does not impose taxes on the payment of dividends. Thus, selecting the right entities to hold the shares in the Brazilian subsidiary can have major tax benefits.
There are Brazilian laws that hold shareholders liable for the company’s liabilities. Yet, since the Law of Economic Freedom came into force, shareholders have greater protection from liability.
Registering one or more legal entities abroad that do not hold substantial assets to act as vehicles for holding the Brazilian shares is often a valid strategy to reduce the risks involved in operating a business in Brazil.
4. Have you selected a trustworthy resident of Brazil to hold a power of attorney for the foreign shareholders of the Brazilian company?
Non-resident shareholders of companies registered in Brazil must appoint a person to hold their power of attorney. The individual must permanently reside in Brazil and have at least the powers to:
- be served on behalf of the foreign shareholder; and
- “manage the entity’s assets and rights in Brazil”.
While not mandatory by law, invariably the attorney needs to have the power to represent the foreign shareholders before the Central Bank, tax authorities and the Companies Registries (Boards of Trade). This is often a difficult issue from a corporate governance point of view, as the person has almost absolute powers over the company. Strategies to minimise corporate governance risk include:
- having third parties (often lawyers) who are not involved in the day-to-day activities of the Brazilian company to hold the powers of attorney;
- appointing two individuals that can only exercise their powers jointly; and
- making it clear in the power of attorney document that the powers granted are the minimum allowed powers required for the purposes of compliance with Brazilian law.
At times, foreign companies choose to appoint accountants to hold the powers of attorney for the non-resident shareholders. This is far from ideal, as tax authorities can notify accountants for issues relating to the Brazilian company’s tax affairs which can give rise to conflicts of interest – for instance, where the shareholders are given notice due to non-compliance with tax obligations and the non-compliance was caused by these accountants.
5. Have you selected accountants registered in Brazil?
Complying with Brazilian law is time consuming. All Brazilian companies with foreign shareholders must appoint a Brazilian accountant to prepare their books and make all required filings.
Finding an accountant who is familiar with international issues and fluent in English can be a challenge, especially for companies on tight budgets.
It is recommended to put in place an agreement customized for Brazilian law with the chosen accountancy firm.
6. Have you decided on the locations where the business will be operating in Brazil?
State Sales Tax (“ICMS”) and Municipal Services Tax (“ISS”) rules and calculation bases will vary depending on the state and the municipality where the company will operate. (click here for further information on Brazilian taxes).
For businesses that sell goods from different locations, a branch office needs to be registered for each location.
Different tax rates will apply where goods are sold interstate, with states having different rates and calculation methods. Municipalities also have different rates depending on the type of service is to be supplied by the business.
7. Have you considered the tax consequences at home?
Investing abroad involves more than just looking at the country of destination – you will also need to check how Brazil’s rules will interact with the jurisdiction where you and your company are based. These issues are likely to include:
- how the profits of the Brazilian entity will be dealt with at home, including whether there are deeming rules for controlled foreign companies (known as “CFCs”);
- how transfer pricing rules will affect your profits at home and in Brazil;
- whether the Brazilian operation will be treating as a permanent establishment ;
- whether the potential income from the Brazilian operations will be considered active or passive income; and
- how Brazil’s taxes and contributions will be treated in your home country and the extent to which they can be used as tax credits.
8. Have you selected a physical address to be used as the company’s registered office?
Brazilian companies generally need to have a registered office with a unique address. In some circumstances a company may use a virtual office for administrative purposes or if it is a service provider who does not sell any goods.
Companies that sell goods can lease their own warehouses or have a lease in place with a third-party warehouse. The warehouse needs to be suitable for the company’s operations and may be inspected by tax officers to confirm that it is suitable for the company’s operations.
9. Are you willing to disclose the full chain of control of the Brazilian company to the Brazilian banks and Federal Revenue Department?
Brazilian law mandates that foreign shareholders of Brazilian entities disclose their final beneficiaries (ultimate beneficial owners or “UBOs”) to the Federal Revenue Department. This extends to providing details about each entity of the controller’s hierarchy extending all the way to the individual or publicly listed holding company – see further here).
Additionally, due to internal bank controls, as a condition for opening a bank account, Brazilian banks often demand that the full chain of ownership of the Brazilian entity be disclosed to them.
10. Have you selected a suitable name for the Brazilian company?
Company names in Brazil must include at least one word or expression indicating the company’s main activity. Company names cannot include obscene words or expressions that may be offensive or immoral, among other things. Foreign words can be used.
The selected type of legal entity also needs to be shown in the company same – for instance, “Ltda” or “Sociedade Limitada” for limited liability partnerships, and “Companhia”, “S.A.” or “Sociedade Anônima” for corporations.
11. Have you undertaken a Brazilian trademark search? And, if so, filed for registration of a Brazilian trademark?
The Brazilian National Institute for Intellectual Property (“INPI”) has a unified database of all trademark applications and registrations. Searching on the INPI database is fairly straightforward and can be done online free of charge.
Brazilian law follows the first-to-file principle. Thus, it is strongly recommended that you file trademark applications as soon as you form a view that you may sell products or services in Brazil using your business trade names. These applications can be made by the Brazilian company, or by any individual or foreign entity (and there are important tax consequences to this). For further information, click here.
12. Have you obtained advice on what licences and permits will be required for the Brazilian company to operate and the time it will take to obtain them?
Different businesses and activities require different licences and permits to operate. Pharmaceuticals, chemicals, foodstuffs, agriculture-related and mining activities are well known for demanding various licences and permits.
Some types of licences and permits can take some months to be granted by authorities. Therefore, it is important that you ascertain the requirements and allow for reasonable estimates when planning the start of your Brazilian operations.
13. Are you planning for the Brazilian company to import goods? If so, have you checked the applicable requirements to be able to import them into Brazil?
Not all Brazilian companies are allowed to import goods from abroad. Before a company can import goods, it must be registered on the Foreign Trade Integrated System (“Siscomex”). In broad terms, there are two types of registration available:
- limited, which allows for a total of US$150,000 worth of goods to be imported every six months; and
- unlimited.
The Brazilian Federal Revenue Department (“RFB”) is tasked with analysing the Brazilian entity’s “financial capacity” when deciding which type of registration it will hold. This analysis is undertaken every six months and is based on the sum of corporate income tax (“IRPJ” ), the Social Contribution on Net Profits (“CSLL”), PIS and COFINS (these being Federal indirect taxes), as well as the amount of Social Security paid by the company to its employees in the previous five years. Where a new company has been operating for less than five years, it may apply for a Siscomex registration with a higher threshold if it can establish that it has sufficient net assets to meet its import-related obligations.
In addition to Siscomex registration, different licences may need to be obtained depending on the type of product to be imported. These licences may be under the jurisdiction of different bodies such as the National Health Registry Agency (“ANVISA”), the Ministry of Agriculture (“MAPA”), the Ministry of Defence and the Foreign Trade Chamber (“Camex”), among others.
14. Have you decided on the bank that will hold the company’s account?
Opening a bank account in Brazil can take between one to two months (even longer in some cases). Hence, it is important to confirm with your bank of choice the timeframe required for approvals and allow for possible delays. Of course, large corporate groups with long-lasting relationships with major banks can speed this up.
Banks generally have different registration processes for a company to buy and sell foreign exchange. It is not unusual for companies to hold an account with a foreign exchange specialist bank, as the larger banks tend to be very compliance-intensive for small and medium-sized companies (especially those that are not listed on any stock exchange).
Final words of warning
Seeking advice before proceeding with the registration of a company will avoid many pitfalls and greater costs down the track. The issues above are just some that you will need to consider before registering a company in Brazil.
Questions?
Contact me if you would like further information. My firm is ready to assist you.
Brazil Brazil business set up Brazil company registration Brazil company set up Checklist for company set up Company registration in Brazil Corporate law Registering a company in Brazil Setting up a company in Brazil Subsidiary
Last modified: 21 February 2025
The site is managed by Fabiano Deffenti, a lawyer admitted to practise in Brazil and Australia, enrolled as a barrister and solicitor in New Zealand and licensed as an attorney-at-law in New York.
