Foreign companies can set up a presence in the country by establishing a subsidiary in Brazil. Subsidiaries, which are Brazilian legal entities opened according to the domestic legislation, constitute a more straightforward option, rather than setting up a branch here.
Even though there are different types of companies that can be set up according to Brazilian law, the two most popular ones are the limited liability company (Limitada) and the Corporation (S.A.).
Starting with 2012, a new type of legal entity has been introduced in Brazil and it is made of a single member, known as a single-member or individual limited liability company (EIRELI).
Establishing a subsidiary company in Brazil necessitates expertise, particularly for foreign investors; our consultants are readily available to guide you through company incorporation in Brazil. This article will look at how foreign businesses can legally do business in Brazil. Our company formation consultants in Brazil explain different aspects related to opening a subsidiary in 2023.
If you are interested in other matters, such as how to open a company in Brazil that is not subject to the control of a foreign legal entity (even if it retains its level of independence, like a subsidiary), our team is ready to assist you each step of the way. You can read below to find out more about subsidiaries, or you can reach out to us if you wish to know more about other business forms.
How to set up a subsidiary in Brazil
A foreign company that wishes to establish a subsidiary in Brazil may select one of the company structures available during company incorporation in Brazil. However, limited liability companies (SociedadeLimitada) are Brazil’s most famous legal entities when establishing subsidiaries because they are easier to establish and operate.
A limited liability company requires at least one administrator, who has a similar position to that of a director and who has to be a local resident. This type of company also must have a minimum of two quota-holders, who can be local or foreign resident individuals or legal entities.
Our company registration advisors in Brazil can help you open a company in Brazil in 2023, according to your own needs and requirements.
Here is the list of steps to open a subsidiary in Brazil.
- File the articles of incorporation as they were registered in the country of origin;
- Register with the Board of Trade: Registration applications should be sent to the Ministry of Industry, Foreign Trade, and Services.
- Obtain a tax ID.
- Get a Brazilian visa and open a bank account for yourself.
- Get a business license in your municipality.
- Register with the Inscricao Estadualto to pay taxes in Brazil.
Differences between a subsidiary and a branch
The table below highlights these important differences:
|1||A legal entity distinct from the parent company allows for greater autonomy and limited liability.||A branch is an offshoot of a larger corporation and is legally the same as the parent company.|
|2||It has rights and obligations and is governed by Brazilian laws and regulations.||The parent company is liable for the branch’s actions.|
|3||Must pay 5%/35% tax plus surtax.||A branch is required to pay 5%/34% tax plus surtax.|
Legal and regulatory considerations
When deciding to establish a subsidiary in Brazil, it is essential to consider several key factors that can significantly impact your business. These factors include:
1. Legal and Regulatory Considerations: Brazil has laws and regulations governing business operations, including company formation in Brazil, labor laws, intellectual property rights, and contract regulations. Understanding and complying with these legal requirements is crucial to avoid potential legal issues and ensure a smooth operation.
2. Liability and Risk: opening a subsidiary in Brazil involves assessing the liability and risk associated with your business activities. Understanding the local legal framework, liability laws, and potential risks is essential for mitigating any adverse effects on your company. Considerations include product liability, employee liability, and contractual obligations.
3. Tax Considerations: Brazil has a complex tax system, and understanding the tax implications of establishing a subsidiary is crucial. This includes corporate income tax, value-added tax (VAT), payroll taxes, and other local taxes. Corporate taxes are generally subject to taxation on profits or presumed profits, with an income tax between 15%and 25%. For proper compliance with the tax regulation, consulting with our tax professionals will help you.
4. Operational Control and Flexibility: Consider the level of operational control you can maintain over your subsidiary in Brazil. Understanding local labor laws, hiring practices, and cultural norms can help establish efficient operational processes. Flexibility in adapting to local market conditions, regulations, and business practices is also essential for long-term success.
Overall, thoroughly evaluating these factors before company formation in Brazil can help you make informed decisions, navigate the legal landscape, minimize risks, and maximize the potential benefits of expanding your business there. Consulting with our legal, tax, and business professionals with expertise in Brazil can provide valuable guidance.
The following facts are interesting to observe:
- In 2020, Brazil had approximately 1.83 million legally registered retail and trade companies.
- These companies accounted for about 34% of all legally registered companies in Brazil.
- During the same year, over 103,000 agricultural businesses were registered.
- Various sectors were represented among the registered companies, including retail and trade, administration, real estate, health, education, media, art, finance, oil and gas, and more.
How our lawyers can help you with company formation in Brazil
Our Brazilian company formation team can help you establish a company in Brazil by assisting with subsidiary company formation in 2023 if you choose to incorporate one. Our incorporation agents can provide legal advice and guidance, walk you through the step-by-step incorporation process, draft and review legal documents, conduct due diligence, register a license, protect intellectual property, and even handle post-incorporation matters such as filing annual reports.
If you have further questions about how to open a subsidiary in Brazil or a company in Brazil, we kindly invite you to contact us.