Property, Land & Commercial Investments in Brazil

Both foreign individuals and companies may set up a business in Brazil. The general rule is that such businesses may encompass any legal business objective. However, foreigners may find some restrictions in certain business areas (for example publishing) or if the company's business activities will be carried out in certain geographical areas considered to involve national security (for example borders with other countries or coastline properties).

Types of Companies

There are two basic types of limited liability company in Brazil:

• Sociedade Limitada (LTDA): This is the most common form of company in Brazil. It is also the simplest and most flexible and inexpensive type of company to operate. It is governed by a Contrato Social (Articles of Association) and its capital is divided into quotas (shares). There are no minimum capital requirements and the company is managed by one or more Administrators, resident in Brazil and appointed by the quotaholders. To be ensured total control of the company, a quotaholder must own at least 75 percent of its quotas. 
• Sociedade Anônima (SA): This form of company is not as flexible as a Limitada and is considerably more expensive to operate and more transparent, since all corporate acts and its annual financial statements must be published in newspapers. It is governed by Estatutos (By-laws) and its capital is divided into one or more classes of shares. An SA is managed by a Management Board and a Fiscal Council, each composed of two or more Brazilian residents. If an SA is listed on the stock exchange or has authorised capital, it must also have a Board of Directors, made up of shareholders.

Documents Required to Set up a Company

Unless the foreigner intends to be physically present in Brazil when the incorporation documents are signed, they will have to provide their Brazilian lawyer with a Power of Attorney containing powers to incorporate the company in their name. This applies to either foreign individuals or companies.

In addition, foreign companies will also have to provide a copy of their Certificate of Incorporation issued by the competent authority in their country and containing at least the following information:

• Company name
• Registered Office Address
• Corporate Purposes
• Registered or Authorised Capital (and classes of stock)
• Names of Officers (or the name of the incorporators)

The above documents will have to be authenticated at the Brazilian Consulate in the investor's country of origin and then sent to Brazil, where they will be translated into Portuguese by an official translator.

Procedures for Setting up a Company

Before a Brazilian company may be incorporated, the following preliminary matters must be decided upon:

• Name of company: the company name must give an indication of its business area. If a foreign company is the investor, the foreign company's name may be used followed by the words do Brasil (of Brazil). The individual may check the company name with the State Commercial Registry Office (Junta Comercial) to ensure that the name of the company is not already registered (although this is not obligatory)
• Names of quotaholders or shareholders: the identity of the quotaholders, in the case of a Limitada, or shareholders, in the case of an SA, must be known before the company can be incorporated
• Legal address: the company must have a legal address. If a permanent office for staff is not required, the services of a company offering virtual office addresses may be used
• Capital: the initial capital of the company must be decided as well as the period during which it will be paid up, which may be as long as one or two years
• Management: the people who will comprise management must have been identified and named

Once the above has been decided upon, the text of the Articles of Association or By-laws must be finalised with the Brazilian lawyer and the company must be registered with the competent state Commercial Registry or the Civil Registry. This registration will be handled by the Brazilian lawyer.

The procedures mentioned below apply for the state of São Paulo and can be safely used to set up a company in any other Brazilian states. Please bear in mind that the times for completion of each of the procedures as well as the fees applied may vary according to state.

 

Procedure 1.

Check company name with State Commercial Registry Office
Time to complete:
1 hour
Cost to complete:
no charge
Comment:
The entrepreneur checks whether the company name exists in the state of São Paulo, a process that takes an hour to complete on average. For a federal check, a request for extension must be submitted to the Board of Trade (Junta Commercial). According to Law no. 11598/2007, published on December 3rd, 2007, the company's name shall be available for checking free of charge. However, said law does not establish a term for the implementation of this specific procedure. According to understandings held before the Board of Trade of São Paulo, there is no official position on how long it shall take for its implementation.

Procedure 2.

Pay registration fees
Time to complete:
1 day
Cost to complete:
see following procedures
Comment:
A receipt of payment must be obtained for use in the Procedure 3.

Procedure 3.

Register with the commercial board of the state where the main office is located and obtain identification number (NIRE)
Time to complete:
1 day
Cost to complete:
R$59.06 registration + $100 (expediting fee)
Comment:
Depending on the company activities (business or civil), its corporate acts (articles of association and amendments) should be registered either with the Board of Trade (Junta Comercial) or with the Registry of Civil Companies. The registration cost for a limited liability company before the Board of Trade of the state of São Paulo is about R$  60,00. The cost for registration of a limited liability company before the Registry of Civil Companies depends on the amount of corporate capital of the company to be incorporated. Only for “civil companies” must signatures on articles of incorporation be authenticated before a notary public before registration and filling with a registry of civil companies.

Procedure 4.

Register for federal and state tax (Secretaria da Receita Federal do Ministério da Fazenda, SRF/MF), obtain the CNPJ number, which also registers employees with the National Institute of Social Security (Instituto Nacional da Seguridade Social, INSS)
Time to complete:
About 22 days (including inspection visit)
Cost to complete:
no charge
Comment:
For the register of the company before the Institute of Social Security (INSS), it is necessary to present to the INSS the company's Articles of Association registered before the Register of Commerce of State of São Paulo and the CNPJ Certificate.

The Normative Rule (IN) No. 748, dated June 28, 2007, issued by the Federal Revenue Services requires that the relevant company obtain licenses from Compania de Tecnologia de Saneamento Ambiental (CETESB) and/or from the Sanitary Surveillance Department (depending on its main activities). Licenses must be issued before registration in the CNPJ is granted (enrollment for the taxpayer’s tax). For example, industrial and pharmaceutical companies are required to obtain a previous license from the CETESB before applying with the CNPJ. The process at the CETESB, however, will be completed only by obtaining the installation permit and operating license from the CNPJ. The licenses from CETESB and/or the Sanitary Surveillance Department are necessary to complete the state regular process. Normative Rule IN 568 regulates only the CNPJ registration process and not the licenses from CETESB and the Sanitary Surveillance Department.

The Normative Rule (IN) No. 632 dated March 17, 2006, issued by the Federal Revenue Services has been amended several times and the last amendment was done by the Normative Rule (IN) No. 837 dated April 2, 2008, issued by the Federal Revenue Services, which updates the Programa Gerador de Dados (PGD). Indeed, the registration process is sinchronized only across the Brazilian Federal Revenue Services and the State Tax Authorities. The Municipality of São Paulo has not been included in this process yet.

The registration process was synchronized across the federal revenue and tax authorities of both the state and the city of São Paulo, which allows the sharing of company registry data. When the company requests the CNPJ number, the SRF/MF, via an internal system, informs the tax authorities of São Paulo of that request. Once the company obtains registration in the CNPJ registration, its legal representative visits the Office of Federal Revenue to confirm the information contained in the forms presented to Secretaria da Receita Federal do Ministério da Fazenda (SRF/MF1).

State tax authorities schedule an official inspection of the company's head office before approving its registration. Registration of businesses before the SRF/MF (to obtain the CNPJ number) and before the tax authorities of the state of São Paulo is done simultaneously

Procedure 5.

Confirm INSS enrollment
Time to complete:
1 day (simultaneous with previous procedure)
Cost to complete:
no charge
Comment:
The company information must be entered on forms available on the Internet. After about 4 days, the company’s legal representative will go to the Office of Federal Revenue to confirm the information in the forms. Only firms that purchase or sell goods must register with the state tax authority. The state registration is done before the Secretaria da Fazenda Estadual of the State of São Paulo, and the municipal registration, before the Municipality of São Paulo at the Secretaria Municipal de Finanças.

Procedure 6.

Receive state tax inspection
Time to complete:
1 day (simulaneous with previous procedure)
Cost to complete:
no charge
Comment:

Procedure 7.

Get the authorization to print receipts/invoices from the Secretaria da Fazenda Estadual
Time to complete:
1 day
Cost to complete:
no charge
Comment:
Once the company is registered with the Secretaria da Fazenda Estadual, a specific form (known as the AIDF) must be presented to that authority.

Procedure 8.

Register with the Municipal Taxpayers’ Registry (Secretaria Municipal de Finanças) of the City of São Paulo
Time to complete:
5 days ( Simultanous with procedure 5)
Cost to complete:
no charge
Comment:
An enrollment form must be delivered to the municipality.

Procedure 9.

Pay TFE to the Municipal Taxpayers’ Registry
Time to complete:
1 day (simultaneous with Procedure 5)
Cost to complete:
R$ 300 (for retailing business), may vary in accordance with the company’s activities
Comment:
The proof of payment of the location, installation, and operation tax (TLIF) has been replaced by a new tax, the taxa de fiscalização de estabelecimento (TFE). The main difference between the TLIF tax and the TFE tax is the basis for the annual rate: The TLIF is based on the company’s number of employees, and the TFE is based on the company’s corporate purpose. The annual rate of the TFE may vary from BRL 100,000 to BRL 12 million. Once the company has been registered with the Secretaria de Finanças e Desenvolvimento Econômico, it shall pay an annual fee for the control and fiscalization of the compliance with municipal laws. This payment is due on the tenth day of the second month following commencement of company operations. The TFE tax is related to the operations permit (alvará de funcionamento).

Procedure 10.

Get the authorization to print receipts/invoices from the Secretaria Municipal de Finanças
Time to complete:
1 day
Cost to complete:
no charge
Comment:
Upon registering the company at the Secretaria Municipal de Finanças, the company must file a specific form (known as the AIDF) and present it to that authority, along with Book No. 51 and Book No. 57.

Procedure 11.

Order receipts/invoices (notas fiscais) with CNPJ numbers from authorized printing companies
Time to complete:
3 days
Cost to complete:
R$ 600 (R$0.6 per page, assume printing 1000)
Comment:

Procedure 12.

Obtain fire brigade license from the State of São Paulo
Time to complete:
procedure 12-14 takes 120 days
Cost to complete:
no charge
Comment:
To obtain the operational license, the company must first obtain the fire brigade license and, if necessary, the sanitation license, the CETESB license, and the police license. All licenses are requested at the same time, though such requests must precede that for the operational license.

Procedure 13.

Inspection from the Fire Brigade
Time to complete:
included in the previous procedure
Cost to complete:
no charge
Comment:

Procedure 14.

Apply to the municipality for an operations permit (Alvará de Funcionamiento)
Time to complete:
included in the previous procedure
Cost to complete:
no charge
Comment:
After registration with the Secretaria de Finanças e Desenvolvimento Econômico, the company has 30 days to apply for the operations permit (alvará de funcionamento) by filling out the proper forms and submitting the required documents. The operational license is a prerequisite for the company to begin operations. However, because of practicalities and the long processing time to obtain the license, municipalities have permitted companies to operate provided that they pay the TFE. An inspection to obtain the municipal license is necessary but not mandatory. The inspector shall verify whether the company is respecting such municipal laws as zoning laws

Procedure 15.

Register the employees in the social integration program (Programa de Integração Social, PIS)
Time to complete:
1 day, simultaneous with Procedure 14
Cost to complete:
no charge
Comment:
After duly registering the new employees in the social integration program (Programa de Integração Social, PIS/PASEP), the employer must open an Fundo de Garantia por Tempo de Serviço (FGTS account for each employee). To open the account, the company's representative or attorney-in-fact must go to any local branch of the federal savings bank (Caixa Economica Federal) with a copy of the company's taxpayer registry number (CNPJ/MF), the adhesion form issued by the Federal Saving Bank (Caixa Economica Federal), the list of employees, and the company's articles of association or bylaws. Upon opening the employee FGTS accounts, the company will make monthly deposits equal to 8.5% of the total payroll, of which 8% is allocated for the employees and 0.5% for the government. The employees are entitled to withdraw those deposits for specific events provided by law (termination without cause and serious disease or disability, among others).

A new online procedure (Sistema Empresa de Recolhimento do FGTS e informações à Previdência Social, SEFIP) was developed to speed up FGTS payment and information exchange between the employer and the federal savings bank. SEFIP can be accessed through the Federal Savings Bank’s Web site. This procedure permits the online transfer of data, creating a company file with all information required by the FGTS and Social Security. After the referred data transmission, the program issues a tax payment form (guia de recolhimento do FGTS) necessary for employer contribution payment.

Procedure 16.

Open a special fund for unemployment (FGTS) account in bank
Time to complete:
1 day, simultaneous with Procedure 14
Cost to complete:
no charge
Comment:
After duly registering the new hire in the employee registry book (livro de registro de empregados), the employer must proceed to register the employees in the social integration program (Programa de Integração Social, PIS/PASEP). The PIS/PASEP registry is intended to identify the worker in order to establish an unemployment guarantee fund (FGTS) account, to request unemployment insurance, and to be entered in the National Registry of Social Information (Cadastro Nacional de Informações Sociais).

The employee must thus be registered into the PIS/PASEP to not only set up an FGTS account but also to be eligible for unemployment insurance, if necessary. To register the employee, the employer must complete a PIS/PASEP registry form (documento de cadastramento do trabalhador, DCT), to be delivered to the federal savings bank responsible for the FGTS account. The enrollment is completed in about 5 to 10 business days from application if all enrollment requirements are met. The employee is enrolled with the Social Integration Program (Programa de Integração Social, PIS) upon entry, and if the employee has already a PIS/PASEP registry, the employer must only inform the Federal Savings Bank of the new employment relationship. The employer will obtain the receipt of the application to PIS within 15 days.

Procedure 17.

Notify the Ministry of Labor (Cadastro Geral de empregados e desempregados, CAGED)
Time to complete:
1 day (trivial) , simultaneous with Procedure 14
Cost to complete:
no charge
Comment:
Pursuant to applicable legislation, the employer must inform the Ministry of Labor of any new hires or employee dismissals, as well as any transfer to another locality. The employer must make that notice to the local department of the Ministry of Labor (Delegacia Regional do Trabalho) by the seventh day of the month subsequent to the month of the event, through delivery of a written notice by postal mail or the Internet. Delay in delivering that information makes the company liable for a fine calculated according to the number of employees in question and the duration of delay. In addition, the company must submit annually to the Labor Ministry the “annual report of social information” (relação anual de informações sociais, RAIS), which contains information on company employees (name, salary, admission date, and employment booklet number, among others).

Procedure 18.

Registration with the Patronal Union and with the Employees Union.
Time to complete:
5 days, simultaneous with Procedure 14
Cost to complete:
Annual fee to be paid depending on the Union.
Comment:

Pursuant to labor law, registration with the employees union is mandatory and ensures that the company is obeying employee labor rights. Each municipality and state must have unions that represent the activities performed by the company. Once a year, employees and employers must contribute to their representative employee unions and employer associations an amount equivalent to one day’s salary (regardless of whether they are affiliated to the union or association). The employer must withhold this amount from the employee’s pay and send it to the respective union by March of each contribution year or upon hiring the employee. As a result, the company must check each new employee’s employment booklet to verify whether any union contributions have been recorded for the year of hire. If not, the company must discount the union contribution from the employee’s pay at the end of the first month after hire and must forward the contribution to the employee’s union.

The payment of the company’s contribution to the employer's association shall be proportional to the company’s corporate capital. Payment is due every January, except for the first payment, which is due in the month of the company’s registration. The time may vary for each employers union and employees union.

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