The decision to open a representative office in Brazil is an important step for an international company interested in setting up a permanent establishment here.
The representative office, or liaison office as it is also called, offers a first entry into the market and, even though it is not used for commercial purposes, it provides valuable intelligence on the Brazilian business climate and market potential.
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The benefits of a representative office in Brazil
Once the foreign company will set up a liaison office in Brazil, it will be able to find customers, as well as suppliers, and gain important knowledge on how the market will respond to its product or service. Company formation in Brazil is subject to several important steps, however, the representative office is easier to establish, compared to other business forms.
| Quick Facts | |
|---|---|
| Best used for | Advertising and promotional activities, market research, general liaison. |
|
Prohibited activities |
Commercial business purposes |
|
Name |
As the parent company’s |
| Legal entity | No |
| Judicial capacity |
It cannot be a party to legal proceedings in its own name. |
| Liability |
The foreign company is liable for its Brazil representative office. |
| Types of companies that can use a liaison office |
All types of companies interested in exploring their opportunities in the Brazilian market. |
| Limitations on foreign companies |
No restrictions apply on the type or size of the foreign company that can open a representative office in Brazil. |
| Local representative |
An appointed agent. |
| Subject to taxes | No |
| Subject to reporting |
No |
| Registration |
Registration is not needed for this business form. |
| Alternatives to the Brazil representative office |
Open a branch (subject to approvals and conditions), or incorporate a local company (subsidiary). |
| How we can assist you |
Our company formation experts in Brazil assist foreign investors who wish to set up a representative office or open another business form. |
| When to contact us for assistance | As soon as the company’s Board considers it is favorable to commence promotional or market research activities in Brazil. |
Foreign companies interested in other options, such as that to open a branch in Brazil, can also reach out to our agents for complete assistance.
The liaison office is, as its name suggests, a point of contact between a foreign company and its Brazilian clients. This office is set up when the parent company abroad is not yet licensed to engage in activities in Brazil.
Once the foreign company completes the process to establish a representative office in Brazil, the office will be able to engage in the following activities:
- perform different types of market research;
- general liaison activities, sourcing potential business partners, or sourcing products for the parent company;
- quality control, and client relations activities;
- engage in administrative assistance activities and drawing up contracts for the parent company;
- hire staff, however, only as necessary to perform the aforementioned types of activities.
A company that decides to open a liaison office in Brazil will essentially create a springboard for its potential future activities in the country. medium and large companies are more inclined to test the market in this manner, as they will have the needed resources for this purpose.
Of course, a foreign company can also open a company in Brazil with no mandatory need to conduct market research beforehand. This means that it will be setting up a subsidiary, and not a branch or a liaison office. Our team can give you more details.
The obligations and limitations of a Brazilian liaison office
The liaison office can be successfully used to gain knowledge on the Brazilian market, clients, and potential business partners, however, it is not a legal entity that can be used to derive income from the country. As such, foreign companies that establish a liaison office in Brazil will not be able to:
- use the office to engage in manufacturing or the provision of services;
- derive income from Brazil, as a result of the liaison office’s activities;
- engage in trading, or the sale of goods or services.
The Brazilian liaison office is limited to non-commercial activities. Therefore, the office and its appointed representative in Brazil, need to observe the requirements for non-trading.
Establish your company’s presence in Brazil
Foreign companies can choose to incorporate branches or subsidiaries in Brazil as means of establishing their presence in the country. A representative office in Brazil can be set up, as previously stated, for purposes that are not related to generating income. Nonetheless, a representative will need to be appointed and the general procedure for incorporation (such as in the case of a subsidiary) will be followed, to register it as a structure, due to the fact that a legal structure for a representative office is not in place.
An essential step for those who set up a company in Brazil, whether they are registering an office, branch, agency, or facility is to submit an application to the Secretary of Micro and Small Enterprises of the Ministry of Industry, Foreign Trade and Services. This is accompanied by the foreign company’s decision to open an office/branch/agency in Brazil. In addition to this act, the foreign legal entity will also enclose:
- Information about the activities it will engage in Brazil, according to its object(s) of activity and Bylaws, as they were drafted, approved, and registered for operation in the foreign country;
- Details on the foreign capital (converted into Brazilian currency) intended for the development of the operations in Brazil.
Another key requirement for a representative office or branch is to have an appointed representative agent. This means that the foreign company will also submit a decision to appoint an individual in this role.
The power of attorney is also included among the documents submitted for the office’s approval for functioning. This is the document that grants the agent powers to handle any issue that may arise in Brazil during the time in which the representative office (or branch, if applicable) is operational. The appointed representative is a natural person.
Important considerations for investors who open a company in Brazil
Taxation is one of the most important aspects to consider for many entrepreneurs who decide to set up a legal entity in Brazil. Our Brazil company formation experts highlight the most important taxes applicable to companies:
- 15% corporate income tax rate which rises to 30% when combined with the surtax;
- 0% dividend withholding tax;
- State VAT, federal excise tax, municipal tax and federal social contributions with various values (such as the state VAT ranging from 4% to 25%).
Public and nonpublic companies follow different reporting rules, with these being more stringent for publicly listed entities.
If the decision to open a representative office in Brazil is one that is in line with your foreign company’s goals for expansion, our team will be able to give you more details about company formation, as well as industry-specific regulatory information.
Contact our agents specializing in Brazil company formation if you wish to know more about the registration of a representative office, or the set up of other business forms, such as branches.