When a foreign company chooses to set up a branch in Brazil, this is governed by the Brazilian legislation. The establishment of a branch in this country necessitates an authorization issued by ministerial ordinance, which is a complex procedure. As follows, our company formation advisors in Brazil cover a few aspects related to establishing a Brazilian branch.
Our team offers complete services to local and foreign investors who wish to open a company in Brazil in 2024. We provide information and counsel on the existing business forms, offer a comparison between these based on the industry in which the future company will activate, and start by assisting investors with the preparations for the formal registration of the new business.
| Quick Facts | |
|---|---|
| Applicable legislation (home country/foreign country) |
Brazilian law |
|
Best Used For |
Expanding the same business operations in Brazil as the one the parent company engages in abroad |
| Minimum share capital (YES/NO) for company formation in Brazil | No minimum share capital. The capital destined for the activities in Brazil is highlighted in the branch registration documents |
| Time frame for the incorporation (approx.) |
It can take at least 3 months to establish a branch in Brazil as a special approval is needed |
| Documents to be filed by parent company when they establish a branch in Brazil | Special license for the branch, the parent company’s Articles of Incorporation, list of shareholders, proof of registration in its country of origin and financial information |
| Management (Local/Foreign) |
Foreign |
| Legal representative required (YES/NO) in Brazil | Yes |
| Local bank account (YES/NO) | Yes |
| Independence from the parent company | No |
| Liability of the parent company | The parent company is fully liable for the debts and obligations of its branch in Brazil |
| Corporate tax rate in Brazil | 34% including surtax |
| Annual accounts filing requirements | Yes |
| Possibility of hiring local staff when you establish a branch in Brazil (YES/NO) | Yes |
| Travel requirements for incorporating branch/subsidiary (YES/NO) | Yes |
| Double tax treaty access (YES/NO) in Brazil | Yes |
Obtaining the authorization to set up a branch in Brazil
The legal entity which intends to establish a branch in Brazil has to address a request to the National Department of Business Registration and Integration of the Ministry of Economy.
The requirement to obtain the prior approval of the Brazilian authorities when opening a branch is performed as per the regulations set forth in the Brazilian Civil Code. The request can be made electronically and, upon request, our team of agents who specialize in Brazil company formation can provide foreign investors with complete assistance during the needed submissions for authorization.
This request has to contain:
- The corporate decision related to its setting up in Brazil, with the operations the company intends to undertake in the country, as well as the capital, in the local currency, assigned for its activities here;
- The articles of association;
- A list of the partners and associates, comprising their complete names and qualifications;
- The certificate which proves that the company was set up and it abides by the legislation in its country of origin;
- The appointment of a regal representative who resides in Brazil, together with his or her acceptance on the conditions of setting up and activating in the country;
- Other documentation: our Brazil company formation consultants can offer more details about what this other documentation consists of if you are submitting the documents in 2024.
The result of the evaluation is communicated by the Department via the online platform. The applicant (the representative) will also be informed via the platform and e-mail to provide any additional documents and in this case he will have 60 days to complete the request.
If the application is approved by the Department of Business Registration, as a next step it will be forwarded to the Minister of Economy and once this authorization is obtained, the decision will be published in the Federal Official Gazette.
Characteristics of a branch in Brazil
After the publication in the official press and filing the set up documents with the Public Register of legal entities and all the other formalities have been completed, the branch in Brazil is allowed to start doing business.
A certain capital has to be set aside for the activities which are effectuated in the country by the Brazilian branch.
This capital is considered a foreign investment, therefore it has to be acquitted and registered with the Central Bank of Brazil.
One of the final steps for opening a Branch in Brazil will be to open a bank account. Our team can provide complete assistance during this process.
Branch taxation in Brazil
As for taxation, branches in Brazil constitute permanent establishments of non-resident legal entities, therefore they are not a separate company from the parent corporation.
There is no special branch tax rate, and these types of establishments are taxed using the same rate applicable to resident companies, the standard corporate income tax rate to which a surtax applies. We list the rates of the main taxes below:
- 15%: the corporate income tax rate, with a surtax, making the effective rate 34%;
- 0%: the withholding tax on dividend payments, when the distribution is made to a resident; no withholding tax applies to distributions made to non-residents when these are paid out from IFRS profits.
- 25%-4%: the value of the state VAT, or the ICMS; this is levied on the provision of certain types of goods and services;
- 5%-2%: the value of the municipal tax, or ISS, applicable to services other than those subject to the ICMS; exported services can be exempt in certain cases;
- 8%: the social security contributions payable by the employers to each deferred salary of an employee;
- Others: there is no payroll tax, no capital duty, no tamp tax; a real property tax, or IPTU, is collected by the municipality on an annual basis and is calculated according to the deemed sales price of the property.
Brazil has signed approximately 30 double tax treaties, however, it has not signed the OECD multilateral instrument (MLI) developed to implement tax treaties with measures targeting the prevention of base erosion and profit shifting. Our team can give you more details about these treaties as needed.
The branch in Brazil is subject to following the compliance requirements for corporations, however, it can be subject to lighter requirements in terms of annual accounting and reporting. In general, the tax year is the same as the calendar year and all business entity in the country, including branches of foreign companies, is expected to file an annual income tax return corresponding to the previous business year. The filing is performed before the last business day in July, the year following that for which the submission is made. For the corporate income tax, monthly or quarterly advance payments are usually submitted. In case of excess tax, this can be used to offset future taxes, under certain conditions.
Working with our team for taxation purposes is recommended in order to avoid late payments which are subject to penalties and interest.
Our company registration agents in Brazil can offer more details about the taxation imposed on branches in 2024.
Options for investors in Brazil
The process of opening a branch in Brazil can seem lengthy, given the fact that the aforementioned authorizations are mandatory. Investors are advised to keep this in mind, as well as to ask our company formation agents if there are any industries in which foreign ownership is limited. Alternatively, we can also help entrepreneurs to open a company in Brazil. This will be different from a branch in the sense that it will be independent of the foreign company abroad, however, the foreign legal entity will still be able to retain a certain level of control when owning shares in its Brazilian subsidiary.
When opening a resident company, foreign investors have to choose between several business forms, however, the limited liability company is among the preferred ones. As in other jurisdictions, the Brazilian LLC allows investors to maintain their liability limited to only their equity interest, however, all members of the company will make contributions to the corporate capital. The LLC is commonly used for small or medium-sized businesses and it has at least two members. Another option is to open a corporation (the anonymous company-sociedad anônima) which is suitable for larger businesses with more classes of shares.
Establishing a presence in the Brazilian market is, therefore, possible either through a branch, incorporating a Brazilian company, or purchasing an already existing one.
Brazil company statistics
Brazil’s industry ended the year 2023 with positive indicators. Both the revenue and the hours worked in production increased in December 2023, compared to most months of the same year. Other data from the National Confederation of Industry shows that:
- The real revenue of the industry sector increased by 2% in December, compared to November 2023; this is the second consecutive increase;
- Employment in the industry sector also increased in December 2023, compared to December 2022 (a 0.3% increase);
- As far as the business confidence index is concerned, this remained positive in December 2023, increasing by 0.6 points; this was mainly due to a more positive assessment of the Brazilian economy.
If you have more questions about branches in Brazil, or for assistance in setting up a company in Brazil in 2024, please do not hesitate to get in touch with us.