Incorporation Services in Brazil: How to Establish a Company
Setting up a company in Brazil: Things to Consider
Setting up a legal entity in Brazil can be a complicated process. Whether you want to do it yourself or outsource incorporation services in Brazil, we’ve compiled everything you need to know. Before you begin your business setup, here are a few things to consider:
There are many different industries and types of business with varying setup requirements. Nationality of the headquarters or individuals may also be a factor to consider. Finally, you’ll need to specify the presence of existing trade agreements or relationships.
Since Portuguese is the main language in Brazil, all processes must be performed in their native language. Although there aren’t many deviations from the official language itself, many words and phrases are different from Portugal. However, businesses can enjoy the fact that English is the most common foreign language used by the business community.
Brazil is a large country with many states operating under differing regulations (i.e. indirect tax rates and incentives). There are some federal programs that reward business development in the poorer regions of Northern Brazil. It’s important to discuss these specific requirements with state development agencies.
In this article, we list the necessary steps for business setup. However, there may be additional permits, approvals, etc., which will depend on the industry and location of the business. Businesses will need to obtain the necessary operation permits from their local municipalities.
Lack of Centralization:
Centralized registration processes can be a challenge with some areas still lacking proper integration with federal authorities. Because of this, some of the requirements may vary and could result in more setup issues, depending on the region established. For instance, many businesses experience excessive delays as the documentation can take over 100 days to review by the proper authorities. This means setting up a legal entity in Brazil could take extra focus, money and patience to complete.
Complicated Tax Structure
It’s well known that Brazil charges a high tax rate for its citizens and companies. Their tax structure includes a wide range of fees, which are encompassed in these 16 most common taxes in Brazil. As we mentioned earlier, Brazil is governed at federal, state and municipal levels. Because these systems aren’t centralized, it can lead to increased complexities when considering incorporation services in Brazil.
Setting up a legal entity in Brazil is a very common approach for establishing a presence in a country. Incorporation services in Brazil can be provided, or you can follow these steps on your own. The two most common types of entities established are Limited Liability Company (Sociedade Limitada) and the Corporation (Sociedade por Ações – SA). For companies with only a single member, they can set up a single-member or individual limited liability company (EIRELI).
Brazilian LLCs require at least two shareholders, known as “quotaholders”. These persons may incorporate an LLC by executing their Articles of Association, in addition to meeting all other federal and local registration requirements. However, the business will need to be managed by at least one member resident in Brazil.
We’ve listed out the basic steps a company will need to take to incorporate in Brazil. As we mentioned before, we also offer incorporation services in Brazil.
Appoint a Representative
In Brazil, companies must have one manager that is a permanent resident, though they don’t always need to be a citizen. This person is responsible for executing the express power to act on behalf of the company. As the designated representative, they will have the power to deal with all necessary business matters. They’ll also be in charge of legal and official documents, including judicial summons, on behalf of the parent company. Before a company can apply for approval for a branch office, they’ll need to make this a formal decision.
Check Company Name
Although it’s not required for a company to reserve a name before incorporation, it’s highly recommended to check first. Verifying whether the company name exists can help you avoid problems in the future. Most states offer this service online and is very quick and simple to complete. If you want to check the company name on a federal level, you must submit a “request for extension” to the Board of Trade.
Establish an Office
The process of establishing an office can vary from state to state. Because of this, there is some convolution over the order and prerequisite requirements of registration. For instance, in some cases you’ll need a company address to incorporate, while in others, you must incorporate first to obtain a tax number before you can establish an office. With this step creating some confusion, it’s common for businesses to simply register a virtual office on the Articles of Association, incorporate and establish an office first. Then they can change the address after incorporating. With no clear office registration requirements, the process will depend on finding a lease agreement before a business files the incorporation documents.
Register Company at Board of Trade
After the incorporation documents are prepared and notarized, the business will need to register at the federal level. The company will need to file their corporate documents with the Board of Trade or the Registry of Civil Companies, depending on your industry. This is where the business will receive an identification number (NIRE). If filing with the Board of Trade, you can also register your federal taxes (CNPJ) and social security (INSS).
Since the Board of trade is responsible for all business activities, they can typically handle several registrations in one place. There is a Board of Trade for each stated, which have oversight from the National Department of Business Registration (DNRC), the Brazilian Ministry of Development, Industry and Foreign Trade.
Publishing Financial Statements
Operating authorization depends on the foreign companies publishing their financial statements in an Official Gazette and a widely circulated newspaper. These publishers usually charge on a per letter or word basis and a fee is decided at the time of publication.
Register for Federal Tax
Businesses need to register for taxes with the Federal Revenue Services in the National Register of Corporate Taxpayers and obtain a CNPJ Certificate. After you place the order for the CNPJ, a company will need to specify the types of activities they’ll be conducting. This information is used for both taxation purposes and for monitoring the activities of the company.
In the major cities of Brazil, the registration process for tax and social security has been coordinated between federal and state regulators. As a result, this step may be taken care of in the previous step. However, because it can be different depending on the state of operation, we’ve listed it as its own step for clarity purposes. Local tax authorities could inspect the company’s head office prior to approval of registration into the CNPJ.
Register for Social Security
The government of Brazil offers social security insurance (INSS) to its citizens to help during times of unemployment or retirement. The program is funded by workers, with a part of their salary being removed for contributions.
The Brazilian government provides social security insurance (the INSS) to workers to cover circumstances such as unemployment and retirement. The scheme is funded by workers having contributions taken from part of their salaries.
In the major cities of Brazil, the registration process for tax and social security has been coordinated between federal and state regulators. As a result, this step may be taken care of in the previous step. However, because it can be different depending on the state of operation, we’ve listed it as its own step for clarity purposes. Regardless of whether a company has employees or not, they must register with INSS. The designated company representative must reach out to the Social Security Agency to request registration within 30 days of trading.
Approve Office Address
As we mentioned earlier, location will need to be taken into consideration here. Depending on where the business operates, the office address will need to be approved by the municipality and the fire department. In some cases, this will be required before registering for tax or business permits. Many companies choose to establish a temporary or virtual office before incorporating to avoid any miscommunication or other associated challenges.
Check and Apply for Municipal Business License/Permit
When the CNPJ has been obtained, the business might be required to apply for a business license or operations permit. This usually takes place on the local and regional levels. Because the application process can often take a while to complete, businesses can usually begin operations before officially receiving the permit.
Even with all that said, the process can still be a bit complicated. When and how a business executes this step varies, depending on several factors. Some states won’t provide a business license until the tax registration is complete. Other states are the opposite, not allowing tax registration until a business license is acquired. But as a general rule, here is the documentation your company should have ready:
- Completed municipality’s application form for permit
- Company’s address (previously approved by the municipality and the fire department)
- Copy of the CNPJ
- Copy of the Articles of Association
Register for Municipal Taxes
The Municipal Taxpayers’ Registry is responsible for local tax registration. Usually when a company registers for the federal tax, municipal authorities are also automatically notified. This means that sometimes this step is resolved during Step 6.
Municipalities require an enrollment form CCM (Cadastro de Contribuintes Mobiliarios) to be delivered to them. This means that the following documentation is being requested:
- DUC form, in triplicate
- DCC form, one copy
- Proof of address of the holders, certified copy or original
- Certified copy of a document proving the right to use the business property, such as a leasing contract or deed of property
- Number of the tax accountant’s registration
- Proof of the ISS contributor to the service providers
- Articles of Incorporation, one copy
- Copy of the CNPJ
- Copy of the business license (alvará de funcionamento)
- ID and CPF of the holders
The company will be charged an annual fee (TFE) in order to operate compliantly within municipal laws. This TFE rate is based on a business’s corporate purpose.
Register for State Taxes
As with the other steps mentioned, although this appears to be the final level of tax registration, it may have been taken care of in a previous step. It may have been handled automatically during the federal or municipal registration because of agreements between the states and their agreements with the federal tax office. It’s important to inquire whether the state you’re operating in has one of these agreements in place. This will impact the order of the business license and tax registration.
This registration is managed by the state Department of Finance and varies from state to state. The main state taxes in Brazil comprise of the ICMS and the ISS. ICMS is a state-based VAT applied to imports and some transactions regarding goods, inter-municipal and interstate transportation services, and communication services. These rates can vary from 7% to 18%. ISS taxes are applied to other services offered to a third party by a company and is paid by the service provider, which typically has a rate of around 5%. Before operations, businesses should consult with state and municipal authorities to ensure all the proper registration.
Apply for Digital Certification for E-Invoice
It’s important for a business to be able to print invoices and authenticate the tax books. In order to do this, you’ll need to request permission from the municipality of your location. Companies can file a form called the AIDF, along with Book No. 51 and Book No. 57. Companies that operate in trade may also be required to register with the State Department of Finance. When this is done, the business needs to order official receipts/invoices with its CNPJ numbers from the designated printing companies.
Register Employees in Social Integration Program
All companies operating in Brazil must register with their Social Security program (Programa de Integração Social, PIS). This step is required even before you hire your first employee, or if you don’t have any employees.
Open Retirement/Unemployment Fund
Brazil protects its working citizens by requiring companies to open a special fund and make contributions to unemployment insurance and retirement funds.
To get started, the company representative or attorney-in-fact must open an account with the Federal Saving Bank. In order to open the account, the company will need to provide:
- A copy of the company’s taxpayer registry number (CNPJ certificate),
- The adhesion form issued by the bank,
- The list of employees,
- The company’s articles of association or bylaws.
Employers will be required to fill out a PIS/PASEP registry form for each employee, which must be delivered to the bank responsible for the FGTS account.
Notify the Ministry of Labor
The Ministry of Labor is in charge of keeping track of any new hires or dismissals. The employer is responsible for reporting this information to their local department by the seventh day of each month. An annual report must also be submitted, which contains more detailed information about the employees, such as names, salaries, hiring dates, etc.
Registration with the Patronal Union and Employees Union
Businesses operating in Brazil must register with an employee union. These unions list the necessary documentation and registration on their websites. Be sure that you are aware of your local municipality and state requirements for the unions the company should be registering with. Depending on your location, the company is expected to provide:
- Company registration form, Federal Register of Corporate Taxpayers,
- Articles of association,
- List of employees
Both employees and employers must contribute annually to their representative employee unions and employer associations. Usually, the amount is equal to a single day’s salary. This fee is collected in the month of the company’s registrations, but this is subject to change depending on the specific union requirements.
Open Company Bank Account
The requirements for opening a bank account may vary depending on if the company is using a national, regional or international bank in Brazil. With that said, there are some basic documentation that is required across the board, including:
- Incorporation documents and registration certificate
- Power of attorney document if applicable
- CNPJ certificate
As you can see, incorporating in Brazil can be a complicated and time-consuming process. Even after the entity is created, businesses will have to manage the HR and payroll challenges associated with international markets. For companies that want to avoid the cost, time, and headache of incorporation, a Global PEO might be a good fit for you. Whether you want to use incorporation services in Brazil or outsource to a PEO, we can help.
A Professional Employer Organization uses their own network of legal entities to hire and onboard employees. Then, the employees are “leased” to a business. This means that you don’t have to worry about much of the administrative burden associated with international operations. The PEO will handle all the compliance tasks, such as payroll, HR, employment contracts, taxes, and more. While the employer still has full control over the day-to-day tasks of their employees. This may be a good fit for you if:
- Your business wants to set up an office quickly
- Your business has a defined budget
- Your business wants to test the Brazilian market first
- Your business needs help with tax, employment, immigration and payroll compliance
Global PEO Services offers comprehensive employment solutions in Brazil, with clearly stated costs and timelines. As the Employer of Record, we assume the legal responsibility for all compliance regulations around employment, payroll and taxes. Using a PEO provider can save you time and money as you expand to international markets.