Doing Business In.. 2020 Comparisons

Last Updated July 15, 2020

Law and Practice


Castro Barros Advogados is one of Brazil’s most traditional and respected law firms. Although its lawyers are experts in the various areas in which they practice, the firm avoids excessive specialisation and prefers to invest in practitioners who are able to integrate different practices and offer the best and most creative solutions to their clients’ legal issues. After many decades of dealing with complex transactions and disputes, the firm has acquired valuable intellectual capital and experience, including substantial knowledge of the business environment, both locally and internationally. The firm is known for the quality of its work, its quick response time and the dedication of its lawyers. Its areas of expertise include: agribusiness, banking, commercial and government contracts, corporate and M&A, infrastructure, labour, litigation and arbitration, and tax, among others.

The Brazilian legal system may be defined as a civil law system. The law is the main legal source; case law, precedents and practices are deemed secondary sources of law. One of the peculiarities of the Brazilian system refers to constitutional control, which may be held by any court or appellate court, and not necessarily by a constitutional court only.

The Brazilian constitution regulates the judiciary branch, which is fully independent from the legislative and executive branches, and is comprised of several courts, headed by the Federal Supreme Court (STF). The STF’s primary role is to ensure compliance with the Brazilian constitution. Another court, the Superior Court of Justice (STJ), is responsible for standardising the interpretation of federal laws and confirming the enforceability of foreign judgments in Brazil.

The Brazilian judiciary branch has a number of bodies operating within the scope of the federal government and of the states (including the federal district and territories):

  • the federal court system (federal bench) consists of federal courts (including federal small claims courts) and the courts of special jurisdiction (labour court system, electoral court system and military court system); and
  • the state court system consists of state judges (trial court, first degree of jurisdiction) and appellate judges, who work in the courts of appeal (appellate court, or second degree of jurisdiction), in addition to the small civil and criminal claims courts.

The state court system presides over and decides on any case that is not subject to the jurisdiction of any other court (federal court system, electoral court system and the military court system).

Apart from a few exceptions, cases are filed before the lower court, subject to the decision of a single judge. After the trial, the relevant judgment may be appealed before the second degree of jurisdiction, upon decision of the en banc court. As a rule, the appellate court decision may be challenged before the STJ (or other higher courts, as the case may be), or even before the STF, should it refer to any constitutional issue (providing some mandatory requirements have been met).

As a rule, foreign investments in Brazil do not require prior approval from the authorities.

However, only the issue of a presidential decree confirming the Brazilian government's interest in the relevant operations enables financial institutions domiciled abroad to open new branches in Brazil, or foreign investors to increase interest held in the capital of financial institutions domiciled in Brazil. As for fintechs, a presidential decree automatically confirms national interest in foreign capital interest of up to 100% in credit fintechs (direct lenders and peer-to-peer lenders).

The amount of foreign investment allowed in healthcare, coasting trade (cabotage), journalism and broadcasting, mining and airlines is limited.

Foreign capital or companies may hold direct and indirect interest, and even have control of healthcare developments, in Brazil if they are:

  • donations made by international organisations tied to the United Nations or by technical co-operation, funding and loan agencies;
  • legal entities that implement, operate or exploit
    1. general hospitals, including for philanthropic purposes, specialised hospitals, multi-speciality clinics, general clinics and specialised clinics, or
    2. family planning actions and research;
  • non-profit healthcare services maintained by companies to provide healthcare to employees and their immediate dependants, without any burden on the social security system; and
  • any other cases provided for under specific laws.

Regarding the mining and coasting industries, Brazilians must hold at least 51% of the capital of any companies operating in these sectors.

The journalism and broadcasting sectors can only be owned by natural-born Brazilians or naturalised Brazilians with over ten years' residency, although Brazilian and/or foreign legal entities may hold interest and voting rights of up to 30% in any such companies.

Finally, acquisition of rural properties by foreigners is restricted and authorised only in specific circumstances.

Each regulatory agency or authority that supervises and inspects the specific activity foreign investors are interested in developing has its own rules, requirements and regulations. Compliance with such rules and regulations is mandatory for foreign investors in order to obtain approval to form companies and/or make any investments in Brazil.

In relation to the insurance and reinsurance industry, the Brazilian Federal Insurance Commission (SUSEP) usually takes six months to one year to decide on the organisation of insurance, reinsurance and capitalisation companies. The Central Bank of Brazil (BACEN) has a regulatory period of one year, determined by the National Monetary Council (CMN), to review cases and approve or deny requests to organise financial institutions in the banking industry. In practice, this may take from two months to two years, depending on whether the supporting documents of the case are regular and complete.

If the approval of the regulatory agencies and/or competent authorities is denied, the local Registry of Commerce will not register the relevant organisational documents, and the Ministry of Economy and BACEN will not register any such company that applies for enrolment in the National Register of Corporate Taxpayers (CNPJ). Such acts prevent the transfer of foreign capital to pay into any subscribed interest in the capital of a Brazilian and/or foreign company, and the performance of the activity for which the company would be organised.

It is worth mentioning that registration with BACEN of a foreign investor and of a subsidiary formed in Brazil, or of a foreign company authorised to operate in Brazil, is mandatory in order to receive financial investment and distribute dividends, as well as to repatriate capital, in the event of the dissolution and termination of the Brazilian company.

As a rule, Brazilian laws do not apply conditions to the approval of foreign investment in commitments.

According to the Brazilian constitution, in the event that a foreign investor believes the authorities have denied a request to form a Brazilian company, in violation of a clear and certain right, such unlawful decision can be challenged before the pertinent branch of the judiciary. The investor must be able to prove it has met all the legal requirements for the approval.

The most common types of corporate vehicles foreign investors use are corporations (sociedade anônimas, S/As) and limited liability companies (sociedadelimitadas). As a rule, in both types the partner’s/member’s liability is limited to the amount of the subscribed capital, except in the event of fraud and/or abuse of power.

Companies interested in attracting foreign investors are generally organised as S/As, as corporations allow for control to be exercised by voting blocs (whereas control in sociedade limitadas requires ownership of at least 75% of the capital). Public companies must be organised as S/As, because the law does not allow limited liability companies to go public. Typically, joint ventures will be organised as a corporation.


These may be organised as:

  • a public company whose shares are listed on the local stock exchange (B3 – Brasil, Bolsa, Balcão), supervised by the Brazilian Securities and Exchange Commission (CVM) and subject to the disclosure of any material information, in addition to the annual reference form, pursuant to the final rulings (directives) the CVM publishes; or
  • a closed corporation, whose shares are not listed, but which has an obligation to publish and disclose minor information, when compared to public companies.

As a rule, there is no minimum capital required to organise an S/A (exceptions are financial institutions and other institutions operating in the financial system, and insurers and reinsurers, among others). The capital may consist of national currency or any type of property subject to valuation, including the pay-in, as a rule, of at least 10% of the issue price of shares subscribed in cash. The S/A is also required to have at least two partners.


The Brazilian Law of Corporations requires the approval of shareholders representing at least half of the voting shares to resolve on:

  • the issue of preferred shares or increase of the existing class of preferred shares;
  • any changes to the rights of refusal, benefits and conditions to redeem or pay one or more classes of preferred shares, or to create a new and more favourable class;
  • the reduction of mandatory dividends;
  • the merger of, into or consolidation of the company;
  • whether interest may be held in business groups;
  • a change of corporate purpose;
  • ceasing any liquidation;
  • the establishment of beneficiaries;
  • the spin-off; and
  • the dissolution.

The articles of incorporation may even determine stricter quorums than those provided for by law.

Limited Liability Company

As a rule, a limited liability company does not require any minimum initial investment for its organisation. The only exception is the individual limited liability company (EIRELI), which is organised by a single individual or legal entity, whose paid-in capital cannot be lower than 100 times the highest monthly minimum wage in effect in Brazil at the time of the company’s organisation.

Law 13,874, enacted on 20 September 2019, amended the Brazilian Civil Code in order to allow for limited-liability companies to be organised by one person or legal entity only (the prior wording required two or more partners), which may be a foreign entity. The sociedade limitada's capital may be in national currency or in any type of property subject to valuation. The capital can only be increased when the previously subscribed capital has been fully paid in, proportionate to the interest each partner/member holds in the capital. There is no legal requirement on any minimum pay-in amount.


The Brazilian Civil Code sets forth minimum quorums to resolve on certain matters in sociedade limitadas, such as:

  • conversion of the corporate type (approval of 100% of the capital required);
  • amendment to the articles of organisation, merger, consolidation, spin-off and dissolution (approval of 75% of the capital required); and
  • removal of any managers who are not partners/members (approval of 50% of the capital + 1 required).

The articles of organisation may determine higher quorums than those set forth by law.

Investing in certain industries also requires the organisation of the vehicle that will be used to perform such activities as an S/A, for instance, in the baking and finance industry in general, and to bid for concessions to exploit public property/assets.

Firstly, a company’s organisational documents must be registered with the Registry of Commerce in the jurisdiction of the company’s headquarters, along with the effective organisational documents of its legal entity partners, or their ID, in the case of individuals. Also, should such partners be foreigners, the apostille for the relevant documents must be provided, together with a certified translation into Portuguese, to be registered with the Registry of Deeds and Documents.

Foreign partners must obtain the corresponding tax identification number (CNPJ or CPF) and appoint a legal representative resident in Brazil by means of a power of attorney, with the authority to receive summons and manage the foreign investor’s property and rights in Brazil, as well as to execute the organisational documents of the Brazilian company and vote on any resolutions on behalf of the investor, whether at partners’ meetings or when formalised under amendments to the articles of organisation.

The company must also be registered as a taxpayer with the state tax authority of its principal place of business (depending on where the activities will be performed) and with the local municipality. Finally, it is necessary to file for a municipal operating permit for the property in the municipality where its headquarters and branches will be located.

It is worth mentioning that foreign investors, or foreign companies authorised to operate in Brazil, or Brazilian companies receiving foreign investment, must register with the BACEN in order both to receive foreign capital and to distribute dividends.

Furthermore, if a company needs to directly import the goods it will market, then it must register with the Integrated Foreign Trade System of the Brazilian Federal Revenue Service (SISCOMEX) to obtain the relevant import licence and provide for the financial transactions on any import to be registered.

S/As must also keep the relevant corporate books (the common share book, the share transfer book, the book of minutes of annual shareholders’ meetings, etc), which must be registered with the Registry of Commerce.

Such procedures may take 45 to 60 days from filing of the company’s organisational documents with the Registry of Commerce. However, it may take up to 90 days to obtain the SISCOMEX import licence. Also, it generally takes more than one year for a municipal operating licence to be granted.

Both S/As and sociedade limitadas that have foreign partners must inform BACEN on an annual or quarterly basis (for companies with equity exceeding BRL250 million) of the Brazilian company’s equity and paid-in capital, as well as the capital paid in by non-resident investors. It is also necessary to file a foreign capital census form on an annual basis, or every five years.

S/As must publish the minutes of their annual shareholders’ meetings and annual financial statements in newspapers with wide circulation. Moreover, public companies must provide, in addition to other disclosure obligations, copies of all minutes of shareholders’ meetings, minutes of audit committee meetings and minutes of executive board meetings, which will be accessible on the CVM website.

Companies defined by law as "large-sized companies" (with assets totalling BRL240 million or annual gross revenue exceeding BRL300 million in one tax year), have the same disclosure obligations applicable to S/As, even if they are not organised as S/As.

Finally, the Ministry of Economy must be informed about ultimate beneficiaries.


Public companies must necessarily have two management bodies:

  • a board of directors, which must have at least three directors, elected by the shareholders at the annual shareholders’ meeting, who may be resident and domiciled abroad, but represented by an attorney-in-fact resident in Brazil, with the power to receive summons; and
  • an executive board, to be elected by the board of directors and comprising at least two officers, necessarily resident in Brazil.

Members of both management bodies may or may not be shareholders. Up to one-third of the directors may be elected to the executive board.

A board of directors is optional in closed corporations. If there is no board of directors, the officers are directly elected by the shareholders.

An S/A must also have an audit committee, which may or may not be permanent. If the audit committee is not permanent, it may be convened at any time, upon a resolution of the shareholders’ meeting.

Sociedade Limitadas

Limited liability companies may be managed by one or more persons, who may be natural-born Brazilians or foreigners with a permanent residence visa, partners/members or otherwise. The election of any non-partner/member manager is subject to unanimous approval if the capital has not yet been fully paid in, and to approval of two-thirds of the partners/members representing the capital, if it has been fully paid in.

Common Management Structure

The representation of S/As and sociedadelimitadas, in what concerns normal management acts, may be determined under the respective articles of incorporation/organisation. As such, the performance of certain management acts may require prior approval of the majority of the capital, and performance thereof by two managers, acting collectively, may be determined and regulated under the respective articles of incorporation/organisation.

As a general rule, the partners' liability in S/As and in sociedadelimitadas is limited to the capital subscribed thereby, except in the event of violation of the law or of the articles of incorporation/organisation (misconduct of the corporate purpose), or co-mingling of assets. The corporate veil may be pierced in said events, and exclusively upon a court order, in order to have affect the partners’ property.

As for managers, as a general rule, they are not held liable for any acts performed on behalf of the company, in the normal course of business, and in compliance with any limits set out in the articles of incorporation/organisation. Managers may only be held liable in the event of:

  • fraud, fault or intent;
  • failure to perform fiduciary duties; and/or
  • performance of any acts in violation of the law or the articles of incorporation/organisation, pursuant to the terms of the Brazilian Civil Code and the Brazilian Law of Corporations.

In essence, labour laws regulate the rights arising out of the employment relationship formalised under a contract executed by the employee and employer. As such, labour laws protect both employee and employer rights.

Labour laws have been especially included in: 

  • the Brazilian constitution, which sets forth the basic and general labour rights inherent to the employment relationship (eg, limitation on working hours and overtime premium); and
  • the Labour Code (CLT), which includes both the general and specific rights and duties of both employees and employers.

However, not only the constitution and CLT regulate employment relationships. It is also necessary to comply with the following:

  • any specific provisions in the employment contract;
  • collective-bargaining agreements (entered into by the company and the employees’ union);
  • collective labour agreements (entered into by the employers and employees);
  • social security law;
  • the regulatory rules and regulations issued by the Ministry of Labour;
  • the international rules issued by the International Labour Organisation (ILO); and
  • Provisional Executive Acts (Medidas Provisórias – MP) No 927/2020 and 936/2020 have been recently published amidst a scenario of exception, setting forth more flexible labour measures to counter the economic impacts and the unemployment arising from COVID-19.

In general, employment contracts are in writing, for an indefinite term. In this case, employees perform their duties on the days and times pre-determined by the employer, until one of the parties terminates the contract, or upon mutual agreement to terminate.

Employment contracts may also be executed for a definite term. This is nevertheless an exception, provided for by law, whereby certain specific requirements must be met, as is the case, for instance, with employment contracts for a probation period of up to 90 days.

Any verbal agreement the parties enter into is deemed valid. However, companies prefer executing written employment contracts, so as to eliminate any legal objections to any benefits the employees eventually receive.

During the state of emergency due to COVID-19, companies are authorised to implement temporary suspension of the employment contracts and proportional reduction of work hours and salaries.

According to the Brazilian constitution, as a rule, working hours should not exceed eight hours a day or 44 hours per week. Any overtime worked must be paid at an additional fee of at least 50% of the regular hourly rate.

Nonetheless, certain arrangements may be implemented for employees’ working hours to become more flexible. For instance, employees may work eight hours and 48 minutes per day during five days of the week, usually from Monday to Friday, without it being necessary for the employer to pay overtime.

In turn, when it comes to working four to six hours a day, employees are entitled to a rest and meal (snack) break of at least 30 minutes. Such break must be increased to one hour if the employee works more than six hours a day.

Moreover, employees are entitled to 11 hours of uninterrupted break every two work shifts.

During the state of emergency due to COVID-19, companies may implement the full-time or part-time remote work regimes and are authorised to shutdown activities and compensate negative hours using a flexitime system, which hours must be offset within 18 months, as from 31 December 2020.

Both employees and employers may terminate the employment relationship at any time, for any reason (subject to a few exceptions to protect the employee), in the event of which employees will always be entitled to receive severance payments. However, the amount and nature of the severance payments depend on the type of termination, as follows.

Termination Upon Employee’s Request

This occurs if the employee resigns, in which case, the following severance payments are due:

  • salary balance proportional to the number of days worked in the month of termination;
  • accrued and/or unpaid proportional vacations, in addition to the one-third of monthly salary vacation bonus; and
  • proportional 13th month salary.

Termination With Cause

This occurs in the event of serious violation by the employee, in which case, such practice is defined in the Labour Code as subject to termination with cause. The following severance payments are due in this case:

  • salary balance proportional to the number of days worked in the month of termination; and
  • accrued and/or unpaid proportional vacations, in addition to the one third payment.

Termination Without Cause

An employer may terminate a contract at any time. The following severance payments are due in this case:

  • salary balance proportional to the number of days worked in the month of termination;
  • accrued and/or unpaid proportional vacations, in addition to the one-third of monthly salary vacation bonus;
  • proportional 13th month salary;
  • a fine in the amount of 40% of the balance available in the Employee Severance Fund (FGTS);
  • 30 to 90-day notice payment (depending on how long the employee has worked for the employer); and
  • the employee will also be entitled to withdraw any balance available in the FGTS account.

Termination Upon Mutual Agreement

In the event of a dismissal to which the employer and the employee agree, the payment of basic and routine damages will be the same as for the preceding item, except for prior notice and FGTS, payable at 50% of the aforesaid amounts. The employee will be entitled to withdraw 80% of the balance available in the FGTS account.

Voluntary Dismissal Plan/Programme

A voluntary dismissal plan offered by the employer to the employees, as set out in the collective bargaining agreement or in the collective labour agreement, is applicable to individual, multiple or mass terminations. The purpose of the plan is to offer more financial benefits to the employee than those eventually received upon resignation. Should the employee apply for the plan, the relevant confirmation will result in the full and irrevocable release of the rights arising out of the employment relationship, except if otherwise agreed by the parties.

Companies with over 200 employees must elect a representation committee, to ensure their direct contact/understanding with the employers.

Such committees will be comprised: of three people, where the company has from 200 to 3,000 employees; of five people, where the company has from 3,000 to 5,000 employees; and of seven people, where the company has more than 5,000 employees.

The duties of such committees are as follows:

  • to represent employees before the company management;
  • to improve the employees’ relationship with the company, which should be based on good faith and mutual respect;
  • to ensure there is room for dialogue and debate in the workplace, to mitigate any conflicts;
  • to attempt to quickly and effectively solve any existing disputes regarding the employment relationship, to ensure the company offers equal treatment without any type of discrimination in the workplace; and
  • to check and ensure compliance with labour and social security laws, as well as with the terms set out in the collective bargaining agreement or in the collective labour agreement.

Individual Income Tax (IRPF)

Employers must withhold income tax at source, upon payment of any salary to the employee, at progressive tax rates ranging from 7.5% to 27.5% (depending on the relevant monthly income). The tax must be deducted from the employee’s compensation (thus, fully borne by the employee).

Social Security and Third Party Contributions

Employers must also withhold the social security contribution to the National Social Security Institute (INSS) at source, upon payment of the relevant earnings to the employees, at the rate of 7.5% and 14% on the contribution salary (capped at BRL854.14 per month), which must be deducted from the employee’s compensation (therefore, fully borne by the employee). In turn, the tax rate for independent workers or contractors is 20% (capped at BRL1,220.21 per month).

The employer’s social contribution to INSS corresponds to 20% of the total compensation paid, due or credited on any account during the month, to the relevant employees, independent workers and contractors providing services to the employers.

Any compensation paid, due or credited to the relevant employees is subject to the following social security contributions due to other entities (which may vary according to the company’s business):

  • 1.5% to the Trade Social Service Association (SESC);
  • 1.0% to 1.2% to the National Trade Learning and Education Service (SENAC);
  • 0.6% to the Support Service for Small and Very Small Businesses (SEBRAE) and the Brazilian Agency to Promote Exports and Investments (Apex-Brasil);
  • 0.2% to the National Colonisation and Agrarian Reform Institute (INCRA); and
  • 2.5% as Social Contribution to Public Basic Education Projects.

Finally, employers are subject to payment of a contribution to Occupational Accident Insurance (SAT) based on the total amount paid to the workers, and ranging from 1% to 3%, depending on the company’s accident risk factor.

Contribution to the Employee Severance Indemnity Fund (FGTS)

Employers must pay an amount corresponding to 8% of the compensation paid or due in the preceding month to the employees, on a monthly basis, into the FGTS account. It is also necessary to make an additional payment of 40% on all FGTS deposits made during the effectiveness of an employment contract in case of termination without cause.

Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL)

As a general rule, taxpayers may choose or are subject to the following tax regimes to calculate IRPJ and CSLL.

Taxable income

Legal entities operating under the taxable income regime may determine profit based on the annual balance sheet prepared on 31 December, or based on quarterly balance sheets. It is possible to advance the monthly IRPJ and CSLL payment under the annual taxable income regime.

IRPJ is payable at a rate of 15% on taxable income, corresponding to the net income of the fiscal year, adjusted according to additions, exclusions or set-offs determined or authorised by the tax laws. Also, an additional IRPJ rate of 10% applies on any profit exceeding BRL20,000 per month.

In turn, CSLL is payable at a rate of 9% on net taxable income.

Presumptive profit

The presumptive profit regime is optional only for companies whose annual gross revenue in the prior year was equal to or less than BRL78 million. Under this regime, both IRPJ and CSLL must be calculated on a quarterly basis.

According to this regime, IRPJ will apply at a 15% rate on a pre-defined presumption of profit set out by law, according to the company’s activity. As a rule, this will be:

  • 8% on the gross operating revenue for business activities; and
  • 32% on the gross operating revenue for services (telecom services included).

Any revenue that does not result from the legal entity’s operating activity (such as financial investments and earnings and capital gains) must be included in the tax base. Furthermore, an additional IRPJ rate of 10% applies on any profit exceeding BRL60,000 per quarter.

CSLL applies at a rate of 9% on presumptive gross operating revenue, at the following rates:

  • 12% on business, industrial, hospital services and transportation activities; and
  • 32% on service activities (transportation services included), and the revenue from non-operating activities must be included in the contribution base.

Simples Nacional

The Simples Nacional is a simplified tax regime applied exclusively to very small businesses (annual gross revenue of up to BRL360,000) and small businesses (annual gross revenue of up to BRL4.8 million).

Under the regime, legal entities must pay the following taxes and contributions on a monthly basis, by means of a single payment document, depending on the company’s activities: IRPJ, CSLL, PIS, COFINS, IPI, Employer’s Social Security Contribution – CPP, ICMS or ISS, at the pre-defined rates determined by law, according to the company’s activity and turnover. When added together, this ranges from 4% to 22.45%.

Contribution to the Social Integration Programme (PIS) and Contribution to Finance Social Security (COFINS)

Social contributions to PIS and COFINS are calculated on the monthly turnover of legal entities, understood as gross revenue. Certain exclusions are accepted, such as cancelled sales and unconditional discounts granted, among others.

The rates of the cumulative regime are 0.65% for PIS and 3% for COFINS, applicable on the company’s turnover. The rates of 1.65% for PIS and 7.6% for COFINS apply under the non-cumulative regime, and it is possible to set off certain credits authorised by law against the debits of the respective contributions.

The contribution to PIS and COFINS also applies on the import of goods and services. In relation to imported goods, the rates are usually 2.1% for PIS and 9.65% for COFINS on the customs price. In turn, as a rule, the rates applicable to the import of any services are 1.65% for PIS and 7.6% for COFINS on the amount paid, credited, delivered, used or transferred abroad, prior to the withholding income tax, plus ISS and the amount of said contributions.

Tax on Manufactured Products (IPI)

IPI is a federal tax applicable on national and foreign manufactured products, upon the customs clearance of the products or upon the output of the product from the industrial establishment or equivalent venue.

The taxpayers are the importer, the manufacturer (or the party regarded as such by law), any establishment similar to a manufacturing establishment of products subject to taxation when purchased by the previous taxpayers, and the buyer at any auction of seized or abandoned products. For IPI purposes, manufacturing means any action that modifies the nature, operation, finishing, presentation or purpose of a product.

IPI rates vary according to the nature of the product, meaning that non-essential/hazardous products (eg, cigarettes) may be taxed at the highest rate. As such, the applicable rate depends on the product’s tax classification according to the Common Mercosur Terminology (NCM) set out in the IPI schedule (TIPI), ranging from 0% to 60% (there are exceptions, as is the case for cigarettes, which are subject to a 300% rate) on the taxable amount of the products.

As a value-added tax, IPI is recoverable to the extent that tax paid on import or purchase of products may be set off against any tax due on subsequent transactions.

Withholding Income Tax (IRRF)

IRRF applies on the payment, credit or transfer of income, interest or capital gains to any person or legal entity domiciled abroad. The general applicable rate is 15%, which may be increased to 25% when the beneficiary is domiciled in countries whose income tax rates are lower than 17% (deemed by Brazilian law as tax havens).

Royalties and interest are usually subject to a 15% rate; dividends are exempt.

Brazil has double taxation agreements (DTCs) with several countries, in relation to individual and corporate income tax, not only to avoid double taxation but also to reduce the internal withholding tax rates levied in each country for income earned by residents of the other country. Tax treaty provisions prevail over internal regulations.

Contribution for Intervention in the Economic System (CIDE)

CIDE at a rate of 10% is imposed on Brazilian legal entities that license, purchase or otherwise acquire technological knowledge (CIDE-Royalties). The scope of assessment of such tax has been extended, comprising technical services, administrative assistance and similar services (CIDE-Royalties are only due on a software licence whenever there is any technology transfer).

CIDE also applies on the import and sale of oil, natural gas, ethanol and related products (CIDE-Fuel), at specific rates per type and amount of fuel (eg, gasoline at BRL860/m³).

Import Tax (II)

The federal government applies this tax on the import of products, at rates varying according to the product classification in the Mercosur External Fee Code (TEC), which is based on the Uniform Fee System. The import tax base is the cost, insurance and freight (CIF) price of the imported goods, due upon customs clearance.

Because import tax can be a useful government tool to balance trade debts, it may be increased at any time, by means of an act of the executive branch. Notwithstanding such possibility set out in Brazilian law, any increase exceeding the TEC rate has to be approved by the other Mercosur members.

Tax on Financial Transactions (IOF)

IOF may be levied, as provided by the corresponding legislation, on transactions of:

  • credit (IOF-Credit);
  • currency exchange (IOF-Exchange); and
  • insurance and securities trading.

As a regulatory tax, IOF rates may be raised and lowered by the executive branch at any time, with immediate effect.

The IOF tax base and rates vary according to the taxable event and the nature of the transaction. Usually, IOF rates on credit transactions vary from 0% to 1.5% per day; on exchange transactions from 0% to 25%; on insurance transactions from 0% to 25%; and on securities transactions from 0% to 1.5% per day.

Tax on the Circulation of Goods and Provision of Interstate, Inter-municipal Transportation and Communication services (ICMS)

Aside from the transport and communication services, ICMS also applies on the entry of goods or products from abroad, as well as on any service provided abroad, or whose provision began abroad.

As it is a state tax, its rates vary according to the laws of each state. Usually, the rate on internal transactions and imports ranges from 17% to 21%, and the state law may determine a specific rate for certain activities. Moreover, the rate on interstate transactions ranges from 4% to 12%, depending on the recipient’s location and the nature of the transaction.

As a rule, the transaction price is the tax base; in the event of an import, the tax base is the price of the goods or product set forth in the import documents, plus II, IPI, IOF-Exchange and any other taxes, fees, contributions and customs expenses.

ICMS is non-cumulative, meaning any amount due on each transaction related to the circulation of goods or provision of interstate and intermunicipal transportation and communications may be set off against the sums charged in prior transactions by the same or by any other state.

Service Tax (ISS)

The taxable event of ISS, under the jurisdiction of municipalities and the federal district, is the provision of services specifically listed by law. The tax also applies on foreign services, or those whose provision began abroad.

Because it is a municipal tax, the rates are in line with the nature of the service provided and the local laws, ranging from at least 2% up to 5% on the service price.


As an emergency action to fight the COVID-19 outbreak, the federal government has reduced to zero the IPI rates on medical/hospital products, IOF-Credit on transactions closed from 3 April to 3 July 2020, for 90 days, and by 50% the rates of the contributions to the System S, as detailed in 5.1 Taxes Applicable to Employees/Employers ('Social Security and Third Party Contributions').

FGTS and taxes due under the Simples Nacional regime have been deferred to December 2020; the federal government has also extended emergency options for tax payments in instalments, and all tax and debt renegotiation proceedings have been suspended for 90 days.

In order to encourage business sectors and activities, the federal government, states and municipalities grant several tax breaks in Brazil, whether regionally or by industry, in the form of funding/loans, exemptions or tax reductions, or concession of presumptive tax credits. The purpose of this is to promote investment in specific industries and to balance socioeconomic development across different Brazilian regions, as may be seen in the following examples.

Duty-Free Zone of Manaus (ZFM)

ZFM is a model industrial area, the purpose of which is to ensure the economic development, and social and production integration of the Amazon region, upon the concession of certain benefits, such as:

  • 75% IRPJ reduction on priority projects for regional development, calculated on the exploitation profit;
  • up to 88% II reduction on manufacturing input;
  • IPI exemption;
  • IPI and COFINS exemption on internal transactions in ZFM; and
  • reimbursement of 55% to 100% to ICMS.

Offices for the Development of the Amazon Region (Sudam) and for the Development of the Northeast (Sudene)

Sudam (which represents the states of Acre, Amapá, Roraima, Amazonas, Goiás, Mato Grosso, Tocantins, Mato Grosso do Sul, part of Maranhão, Rondônia and Pará) and Sudene (which represents the states of Maranhão, Ceará, Alagoas, Rio Grande do Norte, Pernambuco, Bahia, Sergipe, Piauí, Paraíba and part of Minas Gerais and Espírito Santo) aim at fostering the development of those regions, by means of partial or full income tax exemption.

Special Customs Regime for the Export and Import of Goods to Exploit and Produce Oil and Natural Gas (Repetro)

Repetro is a special customs regime for imported and exported goods for the development and exploitation of oil and natural gas, by means of suspended payment of the federal taxes applicable on the transaction (II, IPI, PIS, COFINS and an additional freight tax, AFRMM), and which may also apply to ICMS.

Brazilian laws do not take into account the group relief system and/or the possibility of filing consolidated returns. As such, companies must individually file their tax returns to the competent local authorities.

As per Brazilian rules, any interest paid or credited by a Brazilian company to any related party located abroad is deductible from the IRPJ and CSLL tax base, under the taxable income regime, if the expense is necessary for the company’s activity, according to the following:

  • in case of debt to a related party abroad that holds interest in a Brazilian company – the amount of the debt, upon the credit of such interest, may not exceed twice the amount of the related party’s interest in the Brazilian company;
  • in the event of debt to a related party abroad that does not hold interest in the Brazilian company – the amount of the debt, upon the credit of such interest, may not exceed twice the amount of the equity of the legal entity resident in Brazil; and
  • in the foregoing events, the sum of the debts, upon the credit of such interest, may not exceed twice the amount of the equity of the legal entity resident in Brazil.

Payments exceeding the aforesaid limits will be deemed unnecessary expense for the company’s activity, and will not be considered deductible from the IRPJ and CSLL base.

Brazilian transfer pricing rules apply to the import and export of goods, services and rights, as well as to loans and financing extended between related parties involving countries deemed as tax havens.

The Brazilian rule that determines the prices charged between related legal entities, in the import of goods, services and rights, is limited to the reference price; any amount exceeding this cannot be deducted to determine the taxable income and the CSLL base.

The applicable rules also control payments of interest on loans between related parties, limiting the deductibility of the incurred expense, as well as the revenue resulting from such contracts. Any interest fees or insufficient revenue exceeding this must be added to the calculation base of IRPJ and CSLL. Interest paid or credited to a related party, from a loan agreement, is deductible up to the amount not exceeding the LIBOR for deposits in US dollars for six months, plus an annual spread determined by the Ministry of Economy (currently, 3%).

In turn, any prices charged between related legal entities in the export of goods, services and rights are limited to the reference price. Any amount exceeding this is added to the net income to determine the taxable income, and is also calculated to determine the presumptive profit and the estimated profit.

Transfer pricing rules are not applicable to the payment of royalties or fees for technical, scientific, administrative or similar assistance (provided that the agreement is registered with the Brazilian Trademark and Patent Office – INPI).

The Brazilian anti-evasion rule is set out in the sole paragraph of Article 116 of the National Tax Code (CTN). The competent administrative authorities may disregard legal acts and transactions aimed at concealing a taxable event or the nature of the elements that are part of the tax liability.

In Brazil, the Brazilian Antitrust Authority (CADE) oversees the investigation of any anti-competitive practices, as well as the review and approval of any mergers and acquisitions that fall under the turnover criteria defined by the antitrust law.

The following are deemed mergers: direct or indirect acquisition of control or part of one or more companies; consolidation; and execution of any association agreement, consortium or teaming arrangement or joint venture by competitors in the relevant market of the relevant contract purpose, with term equal to or exceeding two years, establishing any mutual project to develop any business economic activity, including the shared risks and results thereof.

The only exceptions are acts executed within the scope of government procurement proceedings. Mergers must be notified and are subject to CADE’s prior review if:

  • the total annual gross turnover or business volume of one of the business groups in Brazil, in the year prior to the transaction, was equal to or in excess of BRL750 million; and
  • the total annual gross turnover or business volume of at least one of the business groups in Brazil, in the year prior to the transaction, was equal to or in excess of BRL75 million.

For the purposes of such calculation, a business group means:

  • companies that are under internal or external common control; and
  • companies in which any of the companies under common control directly or indirectly hold at least 20% of the capital or voting capital.

Regarding the direct or indirect purchase of control or part of one or more companies, it is only necessary to notify CADE when the invested company does not compete or operate in any vertical-related market if:

  • the purchase grants direct or indirect ownership of 20% or more of the capital or voting capital; or
  • the purchaser already holds 20% or more of the capital or voting capital and purchases 20% or more of the capital or voting capital of another individual shareholder.

As for competing companies in a vertically related market, notification is mandatory whenever the purchase:

  • is of 5% or more of the capital or voting capital; or
  • it results in an increase of interest equal to or exceeding 5% of the capital or voting capital, where the investor already holds 5% or more of the voting capital.

Gun Jumping

The parties cannot complete transactions until CADE has reviewed such acts, under penalty of nullity. Any merger completed prior to CADE’s review subjects the parties to the payment of a fine ranging from BRL60,000 to BRL60 million.

Mergers must be notified to CADE before the transaction is completed, preferably after the execution of the binding document with the agreement on terms. The Antitrust Law does not determine a term for such notice to be served, but the intended transaction may only be completed following CADE’s approval.

The parties to the merger must notify CADE, including a summary of the transaction and extensive documents and information on the parties and their corresponding business groups, key clients, key suppliers, business lines, geographical areas/territory in which the products are marketed, information on both parties’ relevant market in the past five years and the market share of the competitors in the relevant markets, among other information.

Merger control therefore occurs prior to the completion of the transaction, within 240 days from the filing of the relevant motion or amendment thereto. Such term may be extended for up to 90 days, including the grounds of the relevant decision.

CADE applies a summary proceeding to cases with minor anti-competitive results, in view of the simplicity of the mergers, and the events are set out in the resolution the authority publishes, at CADE’s discretion. In said event, CADE must comply with a 30-day term from the filing of the relevant motion or amendment thereto, to decide on mergers subject to summary proceeding.

The information the parties to the summary proceeding must provide to CADE is not as complex as the information required in the regular proceeding. In the "fast track" procedure, the parties are not required to provide details of the structure of the offer involving the transaction or copies of reports, analyses and other documents. The parties are also not required to provide information on clients, prices, switching costs, suppliers, etc.

According to Brazil’s Antitrust Law, a cartel refers to any agreement or anti-competitive practice organised by competitors to establish prices, divide markets, determine shares or limit production, or to implement previously agreed terms in government procurement bids.

Any companies CADE sentences for cartel crimes may be subject to the payment of fines ranging from 0.1% to 20% of the gross turnover of the company, group or conglomerate in the fiscal year prior to the filing of the administrative proceeding, in the line of business in which the violation took place, where such fine cannot be lower than the benefit obtained from the violation. Also, the company managers who are directly or indirectly involved in the crime may also be ordered to pay a fine ranging from 1% to 20% of the fine applied to the company. Other accessory penalties may also be imposed, such as disbarment from contracts with government-controlled financial institutions and prohibition to pay tax liabilities in instalments, as well as disbarment from government contracts – whether with the federal, state or municipal government – for at least five years.

The formation of cartels is furthermore deemed a crime by Brazilian antitrust law, punishable by a penalty of two to five years' imprisonment, plus a fine.

It is also worth mentioning that CADE has the power to punish international cartels, provided the possible effects in Brazilian territory of the formation of the cartel have been proven.

As per Brazil’s Antitrust Law, holding monopoly power itself is not illegal. However, abuse of monopoly power constitutes an anti-competitive practice and is defined as occurring when a company or group of companies uses its market power (defined as control of at least 20% of the relevant market or the ability to unilaterally or jointly change market conditions), in order to have control over a given relevant market of goods or services.

Examples of abuse of monopoly power are:

  • predatory pricing;
  • tying arrangements;
  • closing the market or increasing market barriers in relation to a given product or service;
  • discrimination against suppliers or purchasers;
  • exercise or abusive exploitation of intellectual property rights; and
  • refusal to contract.

Any abuse of monopoly power leads to fines ranging from 0.1% to 20% of the gross turnover of the company, group or conglomerate, in the last fiscal year prior to the filing of the administrative proceeding, in the line of business in which the violation took place. Such fine cannot be lower than the benefit resulting from the violation. Also, the company managers directly or indirectly involved in the violation may be ordered to pay a fine ranging from 1% to 20% of the fine applied to the company.

CADE may apply other penalties, individually or together with the aforesaid fine, such as the mandatory company spin-off, transfer of corporate control or sale of assets, or partial ceasing of business activities.

Pursuant to the terms of Law 9,279/1996 (IP Law), the inventor or deviser of a utility model is entitled to the right to obtain a patent to protect their property.

The patent application may be filed by the inventor/deviser, by the inventor/deviser’s heirs or successors, by the assignee or by whomever the law, employment contract or service agreement determines is the patent owner or holder, with the Brazilian PTO (INPI) which has jurisdiction over patent applications for inventions, utility models, industrial designs, software, etc.

The patent grants the owner thereof the right to prevent any unauthorised third party from producing, using, marketing, selling or importing the patented product and/or any process or product directly obtained by a patented product.

Patent applications may be filed online via INPI’s e-Patent/Application System, supported by all documents listed in the INPI Patent Manual.

Applicants must remedy any requirements due within up to 30 days. The application will remain confidential for 18 months; after which, the application is published. Should there be no further requirements, and provided all the minimum conditions for the application have been fulfilled, the patent registration will be granted and published in the Brazilian Industrial Property Register (Revista de Propriedade Intelectual – RPI).

Once granted, the patent registration will be effective for 20 years, whereas the utility model registration will be valid for 15 years from the application date.

In general, the infringement of any patent right, trade mark, industrial property in general or copyrights, including software rights, may be subject to the penalty of imprisonment or fine, without limiting the civil action which may be filed by the holder of the infringed property right, who/which may seek specific action to prevent the improper use of their/its work, under penalty of determination of a daily fine and economic redress, including pecuniary losses and loss of profits.

Any visually perceptible distinctive signals that are not covered under legal prohibitions may be registered as a trade mark.

Applicable definitions:

  • a product or service mark is the mark used to distinguish a product or service from another identical, similar or like product or service, of different origin;
  • a certification mark is the mark used to certify conformity of a given product or service with certain rules or technical specifications, especially in terms of the quality, nature, material and methodology used; and
  • a collective mark is the mark used to identify products or services coming from members of a given entity.

Trade mark ownership is acquired upon INPI-issued registration, and the relevant owner is entitled to the exclusive use thereof in the entire country.

Once filed, any trade mark application is subject to INPI’s formal review, to determine the formal conditions necessary for the process to continue. Should there be no formal requirement, or if the requirements have been adequately met, the registration application will be published in the RPI for third parties to challenge such registration within 60 days from publication.

Should any opposition be filed, the relevant applicant will also be notified via RPI and will have access to a copy of the motion for objection, so as to present a reply, which must be filed within 60 days from the first business day immediately after the publication date of the opposition.

After the publication/filing of opposition, INPI reviews the merits of the registration application, resulting in a decision on the registration of the trade mark.

It is only after the review of the merits and if INPI decides in favour of the registration of the trade mark, by granting the relevant application, that the applicant must pay the fees due to issue the certificate and protection for the first ten years (extendable for equal and successive periods).

Industrial design refers to the ornamental plastic form/shape of an object or ornamental set of lines and colours that may be applied to a product, thereby providing a new and original result to the external configuration thereof (in other words, which is not made accessible to the public prior to the date on which the application is filed), and which may be subject to industrial manufacturing.

The application for protection must be filed online to INPI. Should INPI make no preliminary requirement, the registration notice is published in the RPI, and is valid for ten years from the application date, extendable for three successive five-year periods.

Law 9,610/1998 (Copyright Law) defines as protected intellectual works:

  • any creation of spirit expressed in any media or fixed on any tangible or intangible support, whether currently known or invented in the future, including texts on literary, artistic or scientific works;
  • drama and musical drama works;
  • music compositions, with or without lyrics;
  • any audio-visual works;
  • any works of photography;
  • any drawings, paintings, engravings, sculptures, lithography and kinetic art.


In Brazil, databases are protected by copyright, pursuant to the terms of the Copyright Law, and the author is entitled to: moral and property rights over the relevant work, irrespective of registration, as well as to authorise or prevent the reproduction thereof, in whole or in part, by any means or process; the translation, adaptation or reordering thereof, or any other change thereto; the distribution of the original or of any copies of the database, or the disclosure thereof to the public.


The Copyright Law and Law 9,609/1998 (Software Law) protect any software which is defined as the expression of the organised set of instructions in natural or coded language, contained in any physical support/media of any nature, whose use is necessary in automatic information processing machinery, gadgets, instruments, devices or pieces of peripheral equipment, based on digital or analogic technique, in order to make them work in a given way, for certain purposes.

In Brazil, software is protected irrespective of registration. However, the protection offered by the Software Law only covers the expressions contained in the code used, and not any methods or procedures, which may be protected under software registration with INPI. INPI’s software protection is valid abroad and covers the 176 signatory countries of the Berne Convention.

The protection of software rights is valid for 50 years from 1 January of the year following the year of publication or, in the absence of this date, from the software creation date.

Any rights determined by the Software Law are guaranteed to foreigners domiciled abroad, provided the country of origin grants equivalent rights to Brazilians and foreigners domiciled in Brazil.

Trade Secrets

The IP Law protects any trade secrets, whereby any unauthorised disclosure, exploitation or use of any confidential knowledge, information or date in the industry, trade or service provision, as well as any unauthorised disclosure, exploitation or use of any knowledge on such information, when obtained illegally or by fraud, is deemed an offence/crime of unfair competition.

In the event of such infringement, the IP Law sets out the necessary means to immediately seek the ceasing of such practice, as well as to seek redress for any losses incurred. The law expressly authorises the court to preliminarily order such practices to be prevented or prohibited, as well as to determine the relevant payment of damages for losses caused, and the party that disclosed the trade secrets may be sentenced to imprisonment from three months to one year, or to the payment of a fine.

Law 13,709/2018 (the Brazilian Data Privacy Law or LGPD) was largely inspired by the General Data Protection Regulation (GDPR), which became effective in the European Union in May 2018.

Originally, the LGPD was to be effective in Brazil in August 2020. However, due to the COVID-19 outbreak and the impossibility to timely organise and establish the regulatory entities which will supervise the application of such law – as well as to enact complementary laws to regulate certain issues of the LGPD – effectiveness has been postponed to 3 May 2021 under Provisional Executive Act (MP) No 959⁄2020. In order for the MP provisions to remain valid and effective, it must be converted into law within 120 days. Further, Law 14,010/2020, which came into effect on 10 June 2020, has postponed the effectiveness of the applications of penalties provided for in the LGPD to 1 August 2021.

The LGPD applies to any and all treatment of personal data:

  • implemented in Brazilian territory; and/or
  • directed towards the offer of goods or services or to the treatment of data of individuals located within Brazilian territory; and/or
  • collected in Brazilian territory.

The LGPD defines "personal data treatment" as any operation performed with information on individuals, whether identified or identifiable, such as, the collection, production, receipt, classification, use, access, reproduction, transmission, distribution, processing, filing, storage, destruction, analysis or control of the information, modification, disclosure, transfer, promotion or extraction.

In general terms, the Brazilian Data Privacy Law determines, among others, the requirements for the treatment of personal data, including data defined as "sensitive", the rights of the relevant owner thereof, the conditions for the termination of personal data treatment (opt-out), the rules on international personal data transfer, the civil liability of data treatment agents and the administrative sanctions applicable to such agents in the event of any violation.

Aside from engaging an operator to provide the data treatment services, the controller must appoint an individual as "responsible party", to act as the liaison with the owners of the personal data and the competent regulation and supervision authorities of personal data treatment in Brazil. Such person has a role similar to the role played by the Investor Relations Officer (IRO) in publicly traded companies, and by the Data Protection Officer (DPO) in the European GDPR. Such person is responsible for guiding the operators and other controllers in relation to the general rules defined by law and by the controller with respect to data treatment, but does not report to the controller.

Failure to perform any of the obligations set out in the LGPD could result in administrative sanctions being applied to the treatment agents, such as, for instance, a simple or daily fine of up to 2% of the turnover of the last fiscal year of the legal entity of private law, group or conglomerate in Brazil, per violation, capped at BRL50 million.

Brazil’s LGPD applies to any and all treatment of personal data:

  • implemented in Brazilian territory; and/or
  • directed towards the offer of goods or services or to the treatment of data of individuals located within Brazilian territory; and/or
  • collected in Brazilian territory.

Hence, foreign companies marketing goods and services in Brazil must comply with the LGPD.

The Brazilian Data Privacy Law is not applicable to the treatment of personal data coming from outside the national territory and which is not the subject matter of communication, shared data use with Brazilian treatment agents or subject to international data transfer with any country other than the country of origin, provided that such personal data receives some level of appropriate protection.

The National Data Protection Agency (ANPD) is the federal government agency, tied to the presidency of Brazil, with jurisdiction to:

  • oversee the protection of personal data;
  • enact rules and procedures on personal data protection;
  • resolve the interpretation of the LGPD, its attributes/duties and events of silence in the administrative sphere;
  • request information from personal data controllers and perform personal data treatment operations;
  • implement digital mechanisms for the filing of complaints on personal data treatment;
  • inspect and apply sanctions in the event of any data treatment in violation of the law, by means of an administrative proceeding;
  • communicate to the competent authorities any criminal violations of which it becomes aware;
  • promote co-operation with both international and transnational personal data protection organisations of other countries, among other duties set out in Brazil’s LGPD.
Castro Barros Advogados

Av. Rio Branco, 110
14º Andar
Rio de Janeiro

+55 21 2132 1855

+55 21 2132 1856
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Law and Practice in Brazil


Castro Barros Advogados is one of Brazil’s most traditional and respected law firms. Although its lawyers are experts in the various areas in which they practice, the firm avoids excessive specialisation and prefers to invest in practitioners who are able to integrate different practices and offer the best and most creative solutions to their clients’ legal issues. After many decades of dealing with complex transactions and disputes, the firm has acquired valuable intellectual capital and experience, including substantial knowledge of the business environment, both locally and internationally. The firm is known for the quality of its work, its quick response time and the dedication of its lawyers. Its areas of expertise include: agribusiness, banking, commercial and government contracts, corporate and M&A, infrastructure, labour, litigation and arbitration, and tax, among others.