Professional Documents
Culture Documents
Contents
Executive summary
Foreword
16
Taxation in Brazil
22
34
36
Trade
38
Banking in Brazil
40
HSBC in Brazil
42
Country overview
44
Contacts
46
Disclaimer
This document is issued by
HSBC Bank Brazil SA (the bank)
in Brazil in partnership with
PricewaterhouseCoopers (PwC).
It is not intended as an offer or
solicitation for business to anyone in
any jurisdiction. It is not intended for
distribution to anyone located in or
resident in jurisdictions which restrict
the distribution of this document.
It shall not be copied, reproduced,
transmitted or further distributed by
any recipient.
The information contained in this
document is of a general nature only.
It is not meant to be comprehensive
and does not constitute financial,
legal, tax or other professional
advice. You should not act upon
the information contained in this
publication without obtaining specific
professional advice. This document
is produced by the Bank together
with PricewaterhouseCoopers
(PwC). Whilst every care has been
taken in preparing this document,
neither the Bank nor PwC makes
any guarantee, representation or
warranty (express or implied) as to its
accuracy or completeness, and under
no circumstances will the Bank or
PwC be liable for any loss caused by
reliance on any opinion or statement
made in this document. Except as
specifically indicated, the expressions
of opinion are those of the Bank
and/or PwC only and are subject to
change without notice. This document
is not a Financial Promotion.
The materials contained in this
publication were assembled in
May 2012 and were based on the
law enforceable and information
available at that time.
Executive summary
Brazil is one of the most
promising emerging markets
in the world. A high degree
of diversification in its product
exportation base, a diversified
list of trading partners, internal
economic stability, increasingly
large work force and good
social standards are helping
to attract more and more global
investors. In addition to this, the
forthcoming 2014 Soccer World
Cup and 2016 Olympics are
generating a large number
of infrastructure investment
opportunities.
The Brazilian Government
and Congress have made
a concerted effort to improve
the economic stability of the
country and have implemented
changes in Brazils tax
legislation, governance,
and regulatory background.
There are still a few reforms
to be implemented by the
new Government, but Brazil
is demonstrating that
it is becoming increasingly
connected with the international
business network.
The purpose of this publication
is to provide foreign investors
with a broader view of the
current economic, legal and
business environment, to be
faced when doing business
in Brazil.
Foreword
Currently, business opportunities
reach the world over. At the
time when business and
economic horizons have
broadened there has also
been a significant increase in
competition among companies.
For this reason it is essential
to have a secure, dependable,
and well-positioned partner to
stay ahead of the competition.
This is what HSBC offers to
our corporate clients.
HSBC Brazil is present in 545
municipalities and includes a
customer base of more than
5.2m individual clients and
almost 460 thousand business
clients. HSBC seeks to generate
excellent business relationships
that perform for its clients,
attending to each and every
need with appropriate support.
Brazil is in the top-ten of world
economies, sporting a vibrant
agricultural industry that
continues to grow. The country
has awakened the attention
of the world by creating
a healthy and productive
business environment. In 2008,
when global markets were
shaken by the economic crisis,
Brazil was one of the least
affected. This demonstrates
Brazils stable and balanced
economy supported by a strong
and consistent economic policy.
According to World Bank data,
Andr Brando
President and
Chief Executive Officer
HSBC Bank Brasil SA
Introduction
Doing business in Brazil
Economic environment
Economic History
The Brazilian economy is large and
diverse by almost any standard.
There is still a considerable
state and semi-state participation
in various strategic sectors,
such as transport and utilities.
Brazil has undergone several
privatisation programmes of
state-owned companies, most
of which took place in 1998.
Nearly all of the former state
companies are now controlled
by the private sector.
Natural resources and agriculture
have been the traditional
mainstay of the economy,
supported by abundant human
resources. Since the 1960s,
however, the emphasis has
been placed on industrial
development financed largely
with international loans and
investments. As a result,
exports today reflect a
much more balanced mix of
commodities and manufactured
items. Moreover, the profile
of imports became more
restricted during the 1970s
and 1980s because of the
import substitution and the
scarcity of foreign currency.
This situation is changing
following the lowering of trade
barriers and the increased
opening of the economy to
globalisation.
The most important business
sectors in Brazil are mineral and
8
Language
The official language of Brazil
is Portuguese. There are no
significant local dialects or other
deviations from the official
language, but a number of words
and phrases differ from those
used in Portugal. English is the
foreign language most used
by the business community
in Brazil.
Ease of Doing Business/
Ease of Leaving
The general policy is to admit
foreign capital and treat it in
the same way as local capital.
All inward investments must
be registered with the Central
Bank to ensure ultimate
repatriation rights within
30 days. It should be noted
that acquisitions of local
companies should be thoroughly
investigated to confirm their
real underlying value.
The basic legal concepts
regulating foreign capital in
Brazil are defined in Laws
4131 of 1962 and 4390 of
1964, which were regulated
by Decree 55762 of 1965.
The legal concept of foreign
capital includes tangible and
intangible assets.
10
in jurisdictions considered
as tax havens).
Loans may be repatriated
within the terms of the registered
loan contract. Interest is freely
remittable within the loan contract
terms subject to withholding
income tax at the rate of
15% (25% if the beneficiaries
are domiciled in jurisdictions
considered as tax havens).
Although it may seem easy
for investors to do business in
Brazil, it is important to highlight
a few key aspects imposed
by Brazilian laws which
can still be considered as
bureaucratic. The most usual
procedure for a foreign investor
to start doing business in Brazil
is by organising a company.
In order to do so, the company
must request a Federal Tax
Number (CNPJ) by registering
the Cademp (Cadastro de
Empresas) at Central Bank. If
the intention is to invest other
Brazilian companies or if the
intention is exclusively to be
part of the Brazilian financial
market, then the company must
register itself at the Brazilian
Securities Commission CVM.
Nowadays, one of the most
bureaucratical procedures to
be followed in Brazil is to
execute the decision of winding
up local presence. A lot of
compliance and tax duties can
be demanded in this case. The
time required to close a
business in Brazil may be
significant.
Securities Commissions
(CVM) responsible for the
regulation of the securities
markets and listed companies.
Restrictions on foreign
investor participation exist
in certain areas, such as:
(i) communications (television,
radio stations or newspapers);
(ii) aviation (Brazilian airlines);
(iii) participation in classified
(operations) government
contracts; (iv) coastal and
freshwater shipping; (v)
mining and hydroelectric
energy, etc.
Furthermore, the direct or
indirect foreign ownership
of rural land is regulated and
subject to limitations as to the
total area. Ownership of land
near Brazils borders is subject
to further restrictions.
Currency/exchange control
The Central Bank allows the
official exchange rate to float
freely, but forex trading is
restricted to authorised dealers.
The Central Bank intervenes
when there are signs of
speculative operations. There
is an active parallel exchange
market that, although illegal, is
quoted in the daily newspapers,
as well as an official tourist rate
that normally approximates the
parallel rate.
IOF
As a general rule, foreign
exchange transactions made
in order to allow payments to
non-residents, in the form of
royalties, technical services,
14
Setting up a business
When setting up a new legal
entity in Brazil, given that
the incorporation of a branch
requires authorisation granted
via a presidential decree,
the process is generally
bureaucratic and lengthy.
In view of this, the majority
of foreign businesses in Brazil
are set up under the form of
subsidiaries based primarily
on the insulating effect that
incorporation has on the liability
of the foreign parent company
for the subsidiarys acts. When
incorporating a subsidiary
in Brazil, the most common
vehicle is the Limited Liability
Company (Sociedade Limitada
LTDA) or the Corporation.
Regulatory matters/issues
In general terms, there are no
restrictions on the ownership
by foreign investors, except for:
i.
Communications (television,
radio stations or newspapers);
ii.
iii. Participation
in classified
government contracts;
iv. Coastal
v. Mining
and hydroelectric
energy, etc.
18
Registration formalities
There are no legal minimum
share capital requirements
for a corporation, except
for financial institutions and
insurance companies, and
certain other legal entities
with specific business
purposes.
Upon the decision to incorporate
a new legal entity in Brazil,
an inaugural meeting of
prospective shareholders
must be held to approve
the bylaws, which sets up
the corporations core activities,
appoints management, and
indicates the amount of
capital, registered office
and distribution of shares
(as per the subscription list)
among shareholders (others).
Besides the requirements listed
above, a corporation is required
to have the subscription of all the
shares into which the corporate
capital stock is divided according
to the bylaws, with the initial
subscribers being at least two
individuals or legal entities that
are considered to be founders.
In addition, at least 10% of the
issuance price of the shares
subscribed in cash, unless
specific legislation requires
a higher percentage, and
deposit thereof at a bank. This
deposit is released when the
corporation has been registered
with the Board of Trade (Junta
Comercial) or after six months,
if no registration has been made.
Exchange Controls or
restrictions on repatriation
of profit
Dividends remitted to nonresident shareholders or
quotaholders are not subject
to withholding tax.
Profits may be remitted abroad
without limitations, to the extent
that there is foreign registered
capital and retained earnings
available. As from 1 January
1996, profits/dividends
distributed to non-resident
beneficiaries relating to periods
beginning on or after this date,
are not subject to withholding tax.
On 16 December 2009,
thin capitalisation rules were
introduced to the Brazilian
tax system.
The new legislation set forth
that interest paid or credited by
a Brazilian entity to a related
individual or legal entity, not
resident or domiciled in a tax
haven or a favourable tax regime
jurisdiction, can only be considered
deductible for tax purposes if
such expense is necessary for
the activities of the local entity,
and if the amount of debt granted
20
Liabilities for
Directors Company
In the most common types of
entities, LTDA and SA, executive
officers are not personally liable
for the obligations they undertake
in the name of a corporation
and in the normal course of
business. However, they are
liable for losses and damages
caused by negligent or fraudulent
conduct or by violating the law
or the corporations bylaws.
Taxation in Brazil
Corporation income tax (or equivalent)
International aspects
Foreign operations
Brazilian resident companies
are taxed on worldwide income.
Foreign branch profits are taxed
as earned and foreign subsidiary
profits are taxed when distributed
or made available. Double taxation
is avoided by means of foreign
tax credits.
Resident individuals are subject
to tax on all income from abroad
but are allowed to take credit
for the foreign tax paid thereon,
provided reciprocal treatment is
accorded to Brazilian-source
income in the country from which
the income is received.
Brazil has signed various
treaties for the avoidance
of double taxation.
Fees and other related
expenses paid in Brazil for
services rendered abroad
are subject to withholding
tax of 15%, or a lower rate
under some tax treaties.
Centre of International
Financial or Operations
There are no tax breaks
to encourage multinational
companies to locate
headquarters or administrative
offices in Brazil and/or the use
of Brazil as a base for offshore
financial operations. However,
the various Brazilian states
do offer different financial
22
Tax losses carry forward
(IRPJ and CSLL)
There is no time limit for the
carry forward of tax losses.
However, the taxable profit of
each year can only be reduced
by tax losses up to a maximum
of 30%. Furthermore, it is
neither possible to carry back
tax losses nor transfer them
to other Brazilian companies.
Tax losses of an acquired
company cannot be carried
forward to be offset against
the taxable income of a new
activity if the following two
conditions are both met:
i.
ii. modification
in the activity
of the company.
Capital gains
Capital gains earned by localresident entities are taxed
at the normal corporate rate
(34%), while capital gains of
non-residents are taxed at the
rate of 15% (unless otherwise
specified by international
tax treaties).
Individuals are taxed at the
rate of 15% on capital gains.
Payments of any type made
to tax havens are generally
subject to withholding tax
at a rate of 25%.
ii. Interest
iii.
15%*
Royalties 15%*
iv. Technical
and Admin.
Services 15%*
v.
26
28
Transfer Pricing
The rules of transfer pricing
in Brazil address imports and
exports of products, services
and rights charged between
related parties, inter-company
financing transactions not
registered at the Central Bank
of Brazil, as well as all import
and export transactions
between Brazilian residents
(individual or legal entity)
and residents in either low
tax jurisdictions (as defined
in the Brazilian legislation)
or jurisdictions with internal
legislation that call for secrecy
relating to corporate ownership,
regardless of any relation.
The rules require that a Brazilian
company substantiates its
inter-company import and export
prices on an annual basis by
comparing the
actual transfer price with a
benchmark price determined
under any one of the Brazilian
equivalents of the OECDs
comparable uncontrolled
price method (CUP method),
resale price method (RPM)
or cost plus method (CP
method). Tax payers are
required to apply the same
method, which they elect,
for each product or type
of transaction consistently
throughout the respective
financial year. However,
taxpayers are not required
to apply the same method for
different products and services.
Tax Rate
Amount to be
deducted from
tax in R$
From 1,566.62 to
2,347.85
7.5%
117.49
rom 2,347.86 to
F
3,130.51
15%
293.58
From 3,130.52 to
3,911.63
22.5%
528.37
A bove 3,911.63
27.5%
723.95
Up to 1,566.61
*Source: http://www.receita.fazenda.gov.br/Aliquotas/ContribFont2012a2015.htm
Sales tax/VAT
State Value Added
Tax (ICMS)
The Constitution of 1988
granted authority to the
Brazilian States to collect tax
on the circulation of goods and
on the supply of inter-state and
inter-municipal transportation
services on communications,
even when the transaction and
the rendering of services start
in another country.
ICMS is not a cumulative tax,
that is, the tax is only assessed
on the increase in the price of
the product in each part of the
supply chain. The calculation
process involves a system
that, in each payment period,
the taxpayer must check the
amount of debits and credits
related to the State Value
Added Tax and, if the taxpayer
has more debits than credits,
they will have to pay the tax on
the difference between them.
It is a value added tax and
is collected by most States at
the usual rate of 17%, except
for the States of So Paulo,
Minas Gerais and Paran,
where the tax rate is 18%
and Rio de Janeiro, where
the rate is 19%. Some products
trigger a higher rate (usually
25%) or a lower rate
(automotive industry and other
special industries are below
17% or 18%). Intra-states
transactions are subject to
lower rates, depending on the
State of origin and destination.
32
Other taxes
ICMS is also imposed on import
transactions. Export revenues
are tax exempt from ICMS,
however the ICMS tax credit
recorded on the acquisition of
inputs and services may be kept.
Please note that industries
located in certain States of
Brazil, such as Mato Grosso,
Gois, Bahia, among others,
may apply for State tax
incentives, which correspond
mainly to reduction of tax due,
deferral of tax due or recording
of presumed tax credits. It is
important to mention that, as
most of such incentives are
not supported by the necessary
agreements pre-approved by
all States (CONFAZ meeting),
these tax incentives may be
questioned.
Property Taxes
(IPTU and ITBI)
A property tax IPTU (Imposto
Predial e Territorial Urbano) is
levied annually based on the
fair market value of property
in urban areas at rates that
generally vary between
0.2 and 5% according to the
municipality and location of
the property. Payments can
be made in up to 10 monthly
instalments. In a few cases it
is possible to obtain exemption
from this tax.
Another property tax ITBI
(Imposto de Transmisso de
Bens Imveis Inter Vivos) is
levied at rates of up to 6% on
sales or transfers of properties
and is payable by the acquirer.
A reduced rate of 0.5% applies
to transactions under housing
programmes financed by federal
government schemes.
34
Accounting Practices
Adopted in Brazil
The Accounting Practices
Adopted in Brazil (BR GAAP)
are based on the Corporate
Law, which was updated in
2008 with Law 11.638/07.
This Law has approximated
the BR GAAP to International
Financial Reporting Standards
(IFRS), although there still are
many remaining differences.
Although the starting point for
the BR GAAP is the Corporate
Law, there were inconsistencies
in the accounting treatment
between different companies
in Brazil due to the lack of
guidance in the Law, which
is very superficial on accounting
issues. The Brazilian Stock
Exchange Securities (CVM)
and other regulators, including
the Brazilian Federal Council
of Accountants (CFC), used
to issue accounting guidance
to the entities regulated by
them. After a round of
negotiations, from 2008 this
problem tends to disappear
in view of the creation of the
Brazilian National Standard
Setter (CPC Comit de
Pronunciamentos Contbeis),
which, from now on, will be
responsible for issuing the new
Brazilian accounting standards,
which will be subject to the
endorsement from the different
regulators. Once the regulators
are part of the CPC, it is
supposed that most of the
standards, if not all,
Human Resources
and Employment Law
Labour Relations
Employment and labour
relations in Brazil are primarily
governed by the Brazilian Federal
Constitution, the Brazilian Labour
Code CLT and Collective
Labour Agreements. The CLT
imposes on the employer
a series of obligations that
protect employees, reflecting
the paternalistic philosophy
of the Brazilian Legal System.
Main Employees Rights
Remuneration
According to the Brazilian
Labour Laws, an employment
contract (written or verbal)
must state the remuneration
of the employee. The
remuneration of an employee
includes, besides base salary,
fringe benefits and bonuses,
amongst others.
36
Government Severance
Indemnity Fund for
Employees (FGTS)
For individuals considered as
employees, the company must
make a monthly deposit to
the Government Severance
Indemnity Fund for Employees
(FGTS), at an amount equal
to 8% of an employees
remuneration. In case of a
dismissal without just cause,
incited by the company, an
employee may withdraw this
fund with an additional penalty
(to be paid by the employer)
equivalent to 40% of the
accumulated FGTS balance.
The company must contribute
an additional 10% fine to the
social fund.
13th Salary
The employer must pay annually
to the employee, the 13th
salary, which is a Christmas
bonus due to employees,
regardless of their remuneration.
It corresponds to an additional
one month salary and includes
annual or semi-annual bonuses
and fringe benefits.
The payment occurs, most
commonly, in two instalments,
50% in November and 50%
in December. An anticipation
of the first instalment may be
requested when the employee
leaves for vacation.
Social Security Contribution
Companies are subject to
the following social charges,
due on the employees
monthly remuneration:
Social Security contributions,
equal to 20% (with no ceiling),
plus:
Corporate charges:
SESI, SESC, SEST
SENAI, SENAC or SENAT
INCRA
SEBRAE
Education Salary
Work accident insurance
(from 1% to 3%)
Total (maximum rate)
1.5%
1.0%
0.2%
0.6%
2.5%
3.0%
8.8%
Temporary visa V
with a labour contract
A foreign national who enters
the country holding a temporary
visa type V with a labour
contract, must have an
employment relationship
with a Brazilian company.
Temporary visa V without
a labour contract (technician)
A foreign national entering
the country without a labour
contract and consequently,
without an employment
relationship with a Brazilian
company, must be under a
technology transfer and/or
technical assistance contract.
Permanent visa
A permanent visa is granted
to foreign individuals who intend
to settle in Brazil and that
satisfy specific requirements
established by the National
Immigration Council and/or
the Labour Ministry.
Trade
Import Tax (II)
Tax Treaty
i.
ii.
iii.
iv.
38
Personal loan
(emprstimo pessoal). It is
repayable in up to 24 or 36
instalments, depending on the
bank. Competition is strong and
rates vary from bank to bank.
Banking in Brazil
All banking business is closely
monitored by banks themselves
and by the Central Bank of
Brazil (Banco Central do Brasil).
Banking rules are strictly
enforced.
40
Savings accounts
(conta poupana). Pay monthly
interest on average daily
balances for the month. This rate
is currently 0.5% over the basic
reference rate, (Taxa Referencial
TR). Interest earned on these
accounts is tax-free.
Due to a new local regulation,
deposits made on May 4th
2012 and onwards, have new
interest basis. Whenever
the Brazilians benchmark
ii. Allow
individual customers
to readily transfer their salaries
to a checking account held in a
Bank which is not the same as
the Pay Roll processor chosen
by its Employer company. The
idea is to stimulate competition
among Banks for better quality
services and lower fees.
Overdraft
(cheque especial). It is normally
done by arrangement and
subject to the proper credit
analysis by the bank. Usually,
on opening an account, the
bank may make such a credit
line available. Interest rates
on such facilities are very high.
Setting up a bank account
(individual account)
The following documents
are required to open a retail
bank account, such as:
A valid identity document.
In the case of a foreigner
resident in Brazil, this will
mean their foreigners identity
card (Cdula de Identidade
para Estrangeiro CIE)
which contains the foreign
register (Registro National
De Estrangeiro RNE).
Individual Taxpayers number
(Cadastro de Pessoa Fsica
CPF).
Proof of residency, such as a
utility bill in the name of the
person opening the account.
To obtain the CPF, it is
necessary to fill out the
application form at any Post
Office, branch of Banco do
Brasil or branch of the Caixa
Econmica Federal and
present the documentation
required (usually the original
or a certified copy of the RNE).
The applicant will receive
a counterfoil with a code
number and there is a small
fee. Thereafter, the applicant
will be notified to appear at
a unit of the Federal Revenue
Service and present their
documents and the
counterfoil in order to obtain
their definitive CPF.
HSBC in Brazil
Who are we?
HSBC Bank Brazil represents
one of the main financial groups
worldwide in our country.
Based on four pillars Stability,
Proximity, Relationships and
Know-how, the institution
follows Principles and Values
that ensure an ethical, fair and
responsible standard when
doing business, always focusing
on the client.
Services offered by HSBC
Bank Brazil include Retail,
Commercial Banking,
Corporate, and Private Banking.
Head Office
HSBC Bank Brazil has its
headquarters in Curitiba (PR).
An International Brand
In March 1997, HSBC
Bamerindus S.A. was born,
which in 1999 became HSBC
Bank Internacional Brasil
S.A. Banco Multipo. The
HSBC logo and hexagon
are used in order to adhere
to the worldwide brand.
Network in Brazil
Corporate Sustainability
Clients
Over 5.2m individual clients
and 368,932 legal
entity clients.
National Ranking
4th largest non-state-owned
bank ranked by total assets.
6th largest by branches.
6th largest by deposits.
4th position on the Central
Bank FX ranking by volume.
2nd largest International
Custodian and 4th
Domestic Custodian.
6th largest by AUM.
42
Country overview
Capital city
Brasilia
Area
Population
190,732,694*
Language
Portuguese
Currency
Real
+55
National Holidays
Good Friday
29 March
Tiradentes Day
21 April
Labour Day
1 May
Corpus Christi
30 May
Independence Day
7 September
12 October
2 November
Proclamation Republic
15 November
Christmas Day
25 December
Political structure
Federal Republic
Stock Exchange
44
Contacts
Alvaro Taiar
Tel: +55 11 3674 3628
Email: alvaro.taiar@br.pwc.com
Thierry Franois-Marsal
International Banking Centre
Phone: +55 11 3847 5450
Email: thierry.f.marsal@hsbc.com.br
3rd Edition: July 2012
Copyright
Copyright 2012. All rights reserved.
46
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