Brazil follows a civil law system influenced by Roman-Germanic legal tradition, with laws codified and applied through judicial interpretation. In this system, legislation is the primary source of law, which encompasses the Brazilian Federal Constitution of 1988 (the “Constitution”), laws, decrees, regulations, circulars, ordinances, and other normative rules issued by governmental authorities.

At the top of hierarchy of legal sources is the Constitution. All laws and regulations must comply with its provisions, and any that conflict with the Constitution may be deemed null and void.

There are additional sources of law, which include:

• analogy;
• customary practices;
• legal doctrine; and
• contracts or other instruments from private autonomous power.

Judicial decisions are not considered formal legal sources but they serve as a support for the interpretation of the law and for decision-making by the courts. Also, they generally do not have a binding precedent in the way common law systems do ‒ although higher court rulings may have persuasive or binding authority in certain contexts (eg, decisions of the Federal Supreme Court or the Superior Court of Justice in specific cases).

The judicial order in Brazil is divided into federal and state levels, which have their own courts that correspond with specific areas of jurisdiction defined by the Constitution. The judiciary operates independently from the executive and legislative branches.

Cases typically begin in first-instance courts and may be appealed to higher courts. At the state level, most civil and criminal cases are handled by state courts, whereas the federal courts deal with issues involving federal laws or government entities.

There are also special courts and tribunals such as small-claims courts (juizados especiais), military courts (at both state and federal levels), and electoral courts.

The superior courts are at the top of the hierarchy and do not review facts, only matters of law or constitutionality, ensuring uniformity in legal interpretation. The Superior Court of Justice (Superior Tribunal de Justiça, or STJ) is the highest court for non-constitutional federal matters (civil, administrative, criminal law, etc), whereas specialised courts such as the Superior Labour Court (Tribunal Superior do Trabalho, or TST), the Superior Electoral Court (Tribunal Superior Eleitoral, or TSE), and the Superior Military Court (Superior Tribunal Militar, or STM) handle specific areas of law.

The Federal Supreme Court (Supremo Tribunal Federal, or STF) is the highest court in Brazil and is responsible for safeguarding the Constitution. It deals with constitutional issues, especially those involving public authorities, laws, and fundamental rights, and handles Direct Actions for the Declaration of Unconstitutionality (Ações Diretas de Inconstitucionalidade, or ADIs), habeas corpus, and extraditions.

Foreign investments are generally not subject to prior approval by the government authorities, except in specific economic sectors. However, registration with the Central Bank of Brazil (Banco Central do Brasil, or “BACEN”) is mandatory for all foreign direct investments through the Electronic Declaratory Registration ‒ Foreign Direct Investment (Sistema de Prestação de Informações de Capital Estrangeiro de Investimento Estrangeiro Direto, or “SCE-IED”) system.

Although most foreign investments in Brazil do not require prior governmental approval, there are specific sectors and scenarios where foreign investors must obtain prior authorisation from the relevant authorities, as follows.

• The acquisition of rural properties by foreign individuals residing in Brazil, foreign legal entities, or Brazilian companies under foreign control is subject to specific legal requirements and prior authorisation, as established by applicable legislation (Law No 5,709/1971).
• The acquisition of real estate in border areas is subject to prior approval by the National Security Council.

There are also restrictions or limitations on foreign capital participation in various regulated sectors, including:

• financial institutions;
• aviation;
• ownership and management of newspapers, magazines, and other publications;
• radio and television broadcasting;
• telecommunications; and
• mining activities.

The approval process may vary according to the sector, but generally involves the following steps:

• preliminary legal and regulatory overview about the sector of investment and determination of the ownership structure and level of foreign participation;
• submission of an application to the competent authority to request prior authorisation from the regulatory body, presenting the necessary documents; and
• registration with the Central Bank of Brazil.

Foreign companies that do not obtain prior approval to operate in Brazil may face various consequences, including fines, confiscation of goods, and even a ban on operating in the country.

The specific penalties depend on the type of activity the foreign company is carrying out and the laws that regulate this activity in Brazil. For example:

• foreign companies that carry out imports or exports without the proper licence/authorisation can have their goods seized, be fined, and even have their products vetoed at customs, according to the Brazilian Federal Revenue Service;
• foreign companies that invest in activities that require prior registration and fail to do so can be fined and have their investments blocked; and
• foreign companies that provide services in Brazil without the appropriate registration/licence can be fined and banned from operating, in accordance with the applicable laws.

In general, the following consequences should be considered:

• administrative sanctions ‒ fines imposed by regulatory agencies, suspension or revocation of licenses/concessions;
• BACEN penalties ‒ failure to register foreign capital may result in fines, restriction on profit remittances or capital repatriation, exchange rate penalties or tax liabilities; and
• civil and criminal proceedings ‒ violations in sectors involving national security may trigger civil and criminal proceedings, including asset forfeiture, revocation of ownership rights, and court injunctions or bans on future participation.

It is essential that foreign companies wishing to operate in Brazil inform themselves in detail about the specific laws and regulations applicable to their type of activity and seek legal advice to ensure that they comply with Brazilian legislation. Non-compliance with laws can lead to serious consequences for the company, including being banned from operating in the country.

Foreign investors in Brazil are required to meet a range of commitments aimed at ensuring that their investments align with Brazilian’s economic, social and environmental goals. The following commitments are typically required from foreign investors in Brazil:

• creation of job for local workers;
• minimum capital investments may be required, especially in sectors of infrastructure, renewable energy, and manufacturing;
• conduction of environmental impact assessments (EIA) before investing in certain industries (eg, mining, energy, agriculture);
• investors in sectors such as oil, gas and construction are often required to use Brazilian goods, services and labour;
• in certain strategic or sensitive sectors (eg, defence, telecommunications, media), foreign investors may be required to form joint ventures with Brazilian companies;
• compliance with local laws (labour, anti-corruption and tax);
• licensing and approvals in sectors such as infrastructure, energy and mining;
• adherence to Brazilian corporate governance standards that prioritise accountability, transparency, and ethical business practices;
• submission of periodic reports to Brazilian authorities detailing its activities, financial performance, and compliance with commitments;
• investors may be encouraged or required to reinvest a portion of their profits into the Brazilian economy, particularly in ways that create additional jobs or enhance local development; and
• some investments may be subject to non-compete clauses that prevent foreign investors from engaging in direct competition with local businesses for a certain period or under specific conditions.

Foreign investors can challenge a denial of investment authorisation by the authorities in court. It is typically expected to exhaust administrative remedies, unless the refusal clearly violates a constitutional or legal right. The administrative review may involve requesting clarification by the regulatory authority and appealing within the agency or to a higher administrative body, if allowed in the circumstances.

In the event that administrative options are exhausted or deemed ineffective, the investor may file a lawsuit in Brazilian judicial courts. In general, common options include a civil lawsuit, writ of mandamus (mandado de segurança), and constitutional claims.

Although litigation in Brazil may take several years, the timing for challenging such decisions will depend on the type of legal action being pursued. If successful, these legal challenges can lead to the annulment of the decision and approval of the investment.

Under Brazilian law, economic activities involving the production or circulation of goods and services may be carried out through various forms of business associations. The most common structures are corporations (sociedades anônimas, or SAs) and limited liability companies (sociedades limitadas, or Ltdas).

Corporations require more formalities in their organisation and operation compared to limited liability companies. This includes mandatory publication of certain corporate acts and documents, which typically involves higher publication/operational costs than for limited liability companies.

Owing to their more sophisticated structure, corporations are often chosen for joint venture projects or investments that demand greater complexity, such as those involving access to public capital markets or the issuance of securities and bonds. On the other hand, for wholly owned subsidiaries, limited liability companies are generally preferred – given their simpler and more cost-effective structure.

There are no minimum capital requirements for the formation of limited liability companies or corporations, except in specific cases, such as for financial institutions and trading companies.

Corporations may be organised with authorised capital, which means the total capital authorised in the articles of association (AoA) may exceed the amount initially subscribed. In this case, any increase in subscribed capital up to the authorised limit requires an amendment to the AoA. Corporations must have a minimum of two shareholders and the capital may be formed through cash contributions or assets with measurable monetary value. In addition, at least 10% of the cash-subscribed capital must be fully paid in at the moment of incorporation and the remaining balance due within five years.

Just like a corporation, the capital of a limited liability company can also consist of cash or assets and can only be increased once the totality of the membership interests has been paid in, observing the pre-emptive right of the quotaholders to participate in the increase, according to their interest in the company’s capital.

On the other hand, limited liability companies may be formed by a single quotaholder and the payment of at least 10% of the subscribed capital is not required. Additionally, the capital of limited liability companies is divided into ideal parts (quotas), which are allocated among the quotaholders in percentages and are not represented by physical certificates. Given that the number of quotas held by each quotaholder is specified in the company’s AoA, any transfer or assignment of ownership of these quotas requires an amendment to the AoA.

To form a Brazilian limited liability company or incorporate a Brazilian corporation, the following steps must be taken.

• Granting a power of attorney to appoint a legal representative in Brazil ‒ each foreign-based shareholder must appoint a legal representative who resides in Brazil (either a Brazilian citizen or a foreigner with a permanent visa). This representative must be empowered to: receive process on behalf of the shareholder/quotaholder and represent them before the Brazilian company (eg, in quotaholders’ meetings) and before public authorities such as the Federal Revenue Service and the Central Bank of Brazil. The power of attorney (PoA) may be changed at any time by issuing a new one and revoking the previous one. The PoA must be signed, notarised, legalised in the country of origin via the Brazilian Consulate, and it will need to go through translation by a sworn public translator and registration with the Registry of Deeds and Documents in Brazil.
• Registration of Foreign quotaholders/shareholders with the Brazilian Federal Revenue Service to obtain a federal tax identification (Cadastro Nacional de Pessoas Jurídicas, or CNPJ) number ‒ after registration, the company has 90 days to inform the ultimate beneficial owner (UBO) abroad and submit the required documentation.
• Registration of the foreign quotaholders/shareholders ‒ foreign quotaholders/shareholders must register with the Brazilian Central Bank.
• Drafting the articles of association/incorporation ‒ this must include the company’s key details such as its name, capital, corporate purpose, and registered address.
• The AoA must be registered with the Commercial Registry and the Federal Revenue Service and a CNPJ number must be obtained for the Brazilian company.
• A bank account must be opened.
• Foreign capital must be registered with the Central Bank of Brazil.
• Enrolment with tax and labour authorities ‒ depending on the company’s activities and location, registration may also be required with federal, state and municipal tax authorities, the Employees’ Guarantee Fund for Length of Service (Fundo de Garantia do Tempo de Serviço, or FGTS), and social security authorities.

The incorporation/formation process usually may take 15 to 45 days, starting from the moment the powers of attorney are duly notarised and legalised and the final version of the AoA is approved. The whole process includes registering with the public authorities, issuing the necessary tax forms, opening the appropriate accounting books, and other actions aimed at making the company fully operational.

In Brazil, private companies are subject to several reporting and disclosure obligations.

Changes in management, such as the appointment or dismissal of directors, must be reported by companies to the Commercial Registry of the state in which the company’s head office is located. Any changes to the AoA ‒ including changes to the corporate purpose, address, capital, company name ‒ must also be registered with the relevant Commercial Registry in order to have legal effect.

The preparation of annual financial statements is also required and its approval must be done in the minutes of the annual shareholders’ meeting, which needs to be held within four months from the end of the fiscal year and filed with the Commercial Registry. For corporations and large-sized limited liability companies (defined as those with annual gross revenue exceeding BRL300 million or assets exceeding BRL240 million), the financials must be approved and also filed with the Commercial Registry.

In addition, companies with foreign members must register their UBO with the Brazilian Federal Revenue Service within 90 days after obtaining the CNPJ number. Any updates to the UBO must also be reported immediately and the failure to do so can lead to suspension of the CNPJ number.

Other obligations include the registration of foreign investments with the Central Bank of Brazil, the maintenance of corporate books, and the registration of legalised powers of attorney for foreign members with the Registry of Deeds and Documents.

Under Brazilian law, only individuals may be appointed as officers/directors or members of administrative bodies of a company.

In the case of corporations, management is structured into two main bodies:

• a board of directors (conselho de administração), which is mandatory for publicly held corporations and those with authorised capital; and
• a board of executive officers (diretoria), which is mandatory for all corporations, regardless of size or capital structure.

The board of directors is responsible for defining the company’s strategic business guidelines, whereas the board of executive officers handles day-to-day operations and is vested with the legal authority to represent and bind the corporation. The specific rules regarding representation must be detailed in the corporation’s AoA.

The board of directors must consist of at least three directors; the board of executive officers must have at least one officer. Notably, up to one-third of the directors of the board may also serve on the board of executive officers.

Additionally, corporations may have an audit committee, which can be established permanently or on a temporary basis, depending on decisions made during shareholders’ meetings.

In limited liability companies, a board of directors is optional, and the management is exercised by one or more executive officers, who may or may not be quotaholders. The officers must meet one of the following criteria:

• be Brazilian citizens;
• be foreign nationals with permanent residence visa in Brazil; or
• be foreign individuals residing abroad, provided they appoint a legal representative residing in Brazil with the authority to receive processes and notifications in judicial or administrative proceedings.

The appointment and election of officers/directors is governed by Brazilian law and is a decision of the quotaholders/shareholders. According to Article 997, item VI of the Brazilian Civil Code, only individuals can be responsible for the management of a company and the AoA must clearly define the number of officers/directors responsible for the company management, as well as their powers and responsibilities.

Brazil has a well-established legal framework governing the liability of directors and officers, including the concept of “piercing the corporate veil” (desconsideração da personalidade jurídica).

Directors and officers, whether in corporations or limited liability companies, are not personally liable for debts or obligations incurred on behalf of the company and in the ordinary course of management. However, directors may be held liable for damages caused to the company if – while performing their duties or exercising their powers ‒ they act:

• with negligence or wilful misconduct;
• in violation of the law or of the company’s AoA; and
• in a way that causes harm to the company or third parties.

The Brazilian Corporate Law (6,404/1976) and the Civil Code establish specific duties of conduct for directors, which include:

• diligence ‒ exercising the care and diligence that a prudent and honest individual would use in managing their own affairs;
• loyalty ‒ acting in the best interests of the company and demonstrating loyalty, meaning they must not use their position for personal gain or for the benefit of third parties; and
• transparency ‒ disclosing material facts to the shareholders.

The corporate veil may be pierced when there is abuse of legal personality characterised by fraud, mixing of personal and corporate assets, misuse of purpose, or an evasion of law or contractual obligations.

When the veil is pierced, directors, officers or shareholders/quotaholders may be held personally liable for the company’s debts – even if they did not directly commit wrongful acts ‒ if they benefited from or facilitated the abuse.

In the case of limited liability companies, the liability of quotaholders is limited to the value of their subscribed quotas, provided these have been fully paid in. Quotaholders are jointly liable for the unpaid portion of the capital. The rules governing shareholder liability in corporations generally apply equally to quotaholders in limited liability companies.

Many Brazilian companies offer directors’ and officers’ (D&O) insurance to protect executives from personal liability. Companies may also indemnify officers for costs incurred in legal proceedings, provided there is no misconduct.

The rules governing the employment relationship in Brazil are regulated by the Consolidation of Labour Laws (CLT) and the Constitution, as well as other ancillary rules, such as decrees and regulations issued by the Ministry of Labour and Employment.

Employment relationships are also regulated by collective bargaining agreements negotiated between unions representing employees and employers or directly between employees and their respective employers. These agreements typically establish salary increases by category and may also regulate employees’ benefits, which are usually renegotiated on a yearly basis.

It is important to note that the terms of offer letters, individual employment contracts or amendments, labour and social security laws, and the employer’s internal policies must also be complied with in Brazilian employment relationships.

In addition, direct negotiations between employers and employees with university degrees who earn a monthly base salary equal to or greater than twice the maximum social security benefit are permitted and are treated with the same legal standing as collective bargaining agreements. This type of employee is considered “hyper-sufficient” and has greater autonomy to negotiate the terms of their employment contract.

Employment contracts establish the employment terms, which must meet the following requirements:

• personal service ‒ the work must be carried out directly by the employee and cannot be delegated to third parties;
• subordination – the employee must be subject to employer’s instructions/control;
• for compensation – the work is remunerated; and
• non-casualness ‒ the work must be performed continuously and not occasionally.

They are generally executed in writing – although both forms (written and verbal) are permitted by the law. However, in the absence of a written employment contract, please note that the employment relationship will be governed by the labour laws and the interpretation of such laws will be made by the labour courts.

With regard to the duration of contracts, the CLT establishes that they may be indefinite, fixed-term, probationary, temporary or intermittent.

Contracts for an indefinite period are the most common type of contract, with no deadline for termination, which may be decided by either party – with or without cause – subject to the legal consequences in each case. Fixed‒term contracts may have a maximum duration of two years with the possibility of extension. Probationary contracts generally have a term of 90 days and may only be extended once, otherwise they are considered to be for an indefinite period. Temporary contracts meet the employer’s specific needs, such as increase in seasonal demand or the temporary replacement of employees. Intermittent contracts are characterised by their variable duration, consisting of the interruption and resumption of work, with proportional payment for the days worked.

It is important to highlight that the CLT establishes specific rules for each type of contract, including duties and rights of the parties involved, termination conditions, and other aspects related to the employment relationship.

The CLT establishes that the normal working time applicable to salaried employees cannot exceed eight hours per day and 44 hours per week. Overtime is permitted with a maximum limit of two hours per day, provided there is an agreement between employer and employee or a collective bargaining agreement.

Overtime must be remunerated with a minimum additional amount of 50% over the normal working hour or can be compensated in the form of time off through compensatory time (banco de horas), provided there is an agreement between employer and employee in this regard.

In general, dismissals may occur at any time with paid prior notice of 30 days, plus three days per year of employment with the employer (up to a total of 90 days). This situation is valid for dismissals without a cause and, in this case, the employee will be entitled to receive a severance payment, comprising salary balance, proportional Christmas bonus, indemnification for undertaken holidays, proportional vacation bonus, 40% fine of the total “FGTS” deposits, and compliance with any relevant conditions of a collective bargaining agreement.

Employees who are entitled to job security (eg, pregnant women) may only be dismissed for cause. A dismissal for cause may occur in the following situations:

• improper conduct/bad behaviour;
• dishonesty, theft, robbery, fraud or forgery;
• unauthorised trading for personal benefit or on behalf of a third party that competes with or harms the employer;
• an unappealable criminal conviction;
• negligence in performing duties;
• habitual or on-duty inebriation; and
• breach of company confidentiality/secrets.

In Brazil, employee representation is primarily organised through trade unions (Sindicatos), which automatically represent workers based on their job category and location. Trade union representation in Brazil is a way for workers organisations to protect their collective and individual interests in relation to labour conditions, salary, and labour rights.

Employers are required to negotiate with trade unions during collective bargaining and in matters involving labour agreements. Although employee representation is not mandatory, specific rules apply in certain contexts.

According to Article 510-A of the CLT, companies with more than 200 employees may elect workplace employee representatives to facilitate communication with management, help resolve workplace issues, ensure fair and impartial treatment of employees, and monitor compliance with labour and social security laws and collective bargaining agreements. This structure is optional but encouraged to promote direct dialogue.

In addition, for workplace safety, companies must establish an Internal Commission for Accident Prevention (Comissão Interna de Prevenção de Acidentes, or CIPA) when they reach a certain number of employees, depending on the sector. The CIPA was established by NR-5 (a regulatory standard that refers to CIPA, created by the Ministry of Labour and Employment). The CIPA includes employee representatives elected by the workforce and plays a key role in monitoring and improving health and safety conditions at work.

In summary, employee representation in Brazil is union-based and supported by mechanisms such as the CIPA and optional workplace representatives. Obligations for consultation or information-sharing depend on company size, sector regulations, and collective agreements.

As part of an employment relationship, employees and employers are required to pay various taxes and contributions in Brazil. These taxes are intended to finance social security, the health system, unemployment benefits, and other government programs.

Employees must pay income tax (imposto de renda retido na fonte, or IRRF), social security (Instituto Nacional do Seguro Social, or INSS) contributions, and FGTS contribution (which is not directly paid by the employee but is deducted from their salary). On the other hand, employers need to pay employer social security contributions, FGTS severance funds, labour accident insurance (Seguro de Acidente de Trabalho, or SAT), social contributions for third parties, and payroll taxes ‒ namely, the Social Interaction Programme (Programa de Integração Social, or PIS)/Civil Servant Asset Formation Programme (Programa de Formação do Patrimônio do Servidor Público, or PASEP) and the Contribution for the Financing of Social Security (Contribuição para o Financiamento da Seguridade Social, or COFINS).

In December 2023, Brazil’s Congress and Senate approved a constitutional amendment that marks a major step in the country’s tax reform. However, the transition to this new system will take place gradually, starting in 2026.

Considering the new rules, minor changes are planned regarding taxes currently paid by employers and employees, such as the following.

• The rate of the social security contribution on payroll has been reduced for certain sectors, with progressive rates until 2027. By way of example, for collective road passenger transport companies, the rate will be 10% in 2024, gradually increasing to 16.5% in 2027. For other sectors, the rates vary from 15% to 18.75% over the same period.
• Taxes such as PIS, COFINS, sales tax (Imposto sobre Circulação de Mercadorias e Serviços, or ICMS) and service tax (Imposto Sobre Serviços, or ISS) will be combined into two new taxes: the Contribution for Goods and Services (Contribuição sobre Bens e Serviços, or CBS) and the Tax on Goods and Services (Imposto sobre Bens e Serviços, orIBS).
• PIS and COFINS will be integrated in the CBS, whereas PASEP should remain for government entities.

A company is considered taxable if it is incorporated in Brazil or has a permanent establishment in the country. Although Brazilian legislation does not define the term “permanent establishment” for tax purposes, a permanent establishment is likely to be recognised in practice when certain conditions are met. These include:

• productive entity, with a fixed presence in Brazil, maintaining facilities and generating profit; and
• the ability to enter into contracts through agents or representatives in Brazil, conduct sales activities, and submit invoices directly to a Brazilian buyer.

Brazilian companies are subject to corporate income tax (Imposto de Renda Pessoa Jurídica, or IRPJ)and social contribution on net profits (Contribuição Social sobre o Lucro Líquido, or CSLL) on their worldwide income at a maximum combined tax rate of up to 34% (15% of IRPJ + an additional 10% on profits above BRL240,000 per year + 9% of CSLL).

The legislation allows Brazilian companies to deduct the income tax paid abroad from their corporate income tax in Brazil, up to the limit of the Brazilian corporate income tax levied on earnings, profits, or capital gains.

The tax bases can be calculated using the taxable profit (based on net accounting profit) or presumptive profit (fixed percentages applied to gross revenue) regimes. The tax rates are fixed as defined by the law, but the way they are calculated varies according to the regime chosen.

Brazilian legal entities (business/companies) are subject to a tax system that includes federal, state and municipal taxes. However, as mentioned in 5.1 Taxes Applicable to Employees/Employers, it is important to note that Brazil approved a tax reform and the transition to the new tax system will begin in 2026, being implemented gradually.

Under the new rules, there will be elimination of several existing indirect taxes ‒ namely, PIS/COFINS, ICMS, ISS, and the tax on industrial products (Imposto sobre Produtos Industrializados, or IPI) ‒ and the introduction of a new tax structure more aligned with the OECD’s VAT model.

The reform establishes the following new taxes:

• CBS ‒ replacing PIS/COFINS, this federal tax will be applied to goods and services;
• IBS ‒ replacing ICMS (state‒level) and ISS (municipal), this tax will unify indirect taxation at the subnational level; and
• IS (Imposto Seletivo) ‒ an excise tax targeting products and operations that pose risks to human health or the environment.

IBS and CBS will be calculated based on the transaction value. Contrary to the current regime, taxes will not be computed on their own calculation basis. Taxpayers will have more transparency with regard to the tax burden, with the elimination of the “gross-up methodology”.

These changes aim to simplify Brazil’s complex tax system and improve efficiency by adopting a structure closer to international best practices.

Finally, it is also important to note that at the end of 2024 Brazil enacted Law No 15,079, introducing the CSLL, which establishes a minimum rate of 15% on the profits of large multinational companies. The new rule applies to multinationals with annual turnover of EUR750 million (around BRL4.3 billion) or more in at least two of the four tax years immediately preceding the tax year being analysed.

The Brazilian Federal Revenue Service will be responsible for proposing and applying the necessary regulations that will define the essential rules for the implementation of the law, through normative acts. These acts will be based on international reference documents, such as the Model GloBE Rules and the Agreed Administrative Guidance. They will also include other rules and procedures approved by the OECD Inclusive Framework, which co-ordinates the application of minimum effective taxation at a global level.

Tax incentives, also known as tax benefits, are designed to stimulate specific economic activities and are granted to Brazilian companies. Therefore, in the event that a foreign investor incorporates a subsidiary or a branch in Brazil, there will be no difference in the tax benefit granted to a foreign or local investor.

There are two types of tax incentives, as follows.

• Regional – this type of incentive aims to attract and maintain companies in underdeveloped regions in order to help local growth and employability.
• Social ‒ this is the most common type of tax incentive, but only valid for companies opting for the taxable profit system. Organisations invest in actions to encourage sport, culture, innovation, and scientific research in order to receive tax rebates or exemptions. The logic is that the amount saved by the legal entity is applied to social development, with the advantage of being able to link the mark to the supported projects.

The current main incentives are:

• REPETRO ‒ a special customs regime for the export and import of goods used in the exploration and production of petroleum and natural gas, providing for the suspension of import duty, the federal excise tax, PIS-import, COFINS-import, and freight surcharge for merchant marine vessels.
• inclusion in the Manaus Free Trade Zone (Zona Franca de Manaus, or ZFM), which offers tax benefits, including a 75% reduction in income tax and exemption from PIS and COFINS contributions on imports; and
• a simplified tax regime for small businesses and presumed credit to purchasers of rural products from small rural producers.

The above-mentioned tax incentives have been maintained in the form of the current tax regime. But as part of Brazil’s ongoing tax reform, adjustments to other existing tax incentives are anticipated, including the following changes:

• IBS and CBS rates reductions of 60% will apply to key sectors, such as education, healthcare, medicine, agricultural, fishing, forestry, and extractive industries, agricultural inputs, food, hygiene products, and cultural activities;
• tax exemption will be granted for transportation services, medical and accessibility devices, medicine, vegetables, fruits and eggs, and integrated producer operations; and
• CBS exemption will be applied to the Brazilian public policy towards higher education, Programa Universidade Para Todos (Prouni),and services covered by the Emergency Programme for the Events Sectors (Programa Emergencial de Retomada do Setor de Eventos, or PERSE).

Brazil does not currently allow tax consolidation for income tax or social contributions. Each company in a corporate group is taxed independently. While there are some administrative simplifications and sector-specific programmes, true group taxation is not part of Brazilian tax law at this time.

However, Brazil is in the process of implementing a major tax reform, which includes the creation of a unified VAT system (CBS and IBS). Although this reform simplifies the indirect taxes, tax consolidation is still not explicitly introduced for corporate income taxes.

Thin capitalisation rules apply to loan transactions and other forms of indebtedness between a Brazilian-based company and a related party abroad. As a result, interest payments made to foreign related parties are tax-deductible under Brazilian law only if certain limits are respected, which vary depending on whether the interest recipient is located in a low-tax jurisdiction (LTJ) or benefits from a privileged tax regime.

Generally, for interest paid to related parties not based in LTJs or not benefiting from such regimes, the deduction for IRPJ and CSLL purposes is allowed only when specific thresholds are met.

In 2023, Brazil enacted Law No 14,596, introducing a new transfer pricing regime, which is aligned with the OECD guidelines followed by most jurisdictions worldwide. Under the new rules, cross-border transactions (import or export of goods, services, intangible properties, and loans) between related parties must follow the arm’s length principle, which replaces the previous system based on fixed margins.

The law incorporates a comparability analysis process, where controlled transactions are evaluated against those between unrelated parties. Internal comparables are preferred but, if unavailable, external comparables from commercial or international databases may be used, provided they are properly supported by documentation as required by the Normative Instruction of the Brazilian Federal Revenue Service ‒ IN RFB No 2,161/2023.

To address differences between markets, adjustments must be applied, including a country risk premium. The law also requires the use of the interquartile range to eliminate outliers when the comparability range is broad and contains uncertainties, except in specific situations such as international dispute resolutions or where the tax authority provides different guidance.

The legislation in force to combat tax evasion is made up of a set of rules aimed at punishing illegal practices and curbing abusive behaviour in the tax sphere. The main law related to this topic is Law No 8,137/1990, which defines crimes against the tax system, such as tax evasion, fraud, and omission of information to the tax authorities.

In addition, the National Tax Code (Código Tributário Nacional, or CTN) ‒ especially after Complementary Law No 104/2001 – introduced a general anti-avoidance rule, allowing the tax authority to disregard acts or legal transactions carried out with the sole purpose of concealing the occurrence of taxes.

Law No 9,430/1996 is also relevant, because it deals with tax planning mechanisms and combats practices such as under-capitalisation and transfer pricing manipulation.

There is also the Anti-Corruption Law (Law No 12,846/2013), which holds companies liable for acts harmful to the public administration, including tax fraud. Decree No 70,235/1972 regulates the tax administrative process, ensuring due process of law in the collection and penalisation of tax irregularities.

The above-mentioned laws, taken together, can be considered to form the legal framework for combating tax evasion in the country.

Brazil’s tariff regime is based on the Mercosur Common Nomenclature (Nomenclatura Comum do Mercosul, orNCM) and the Common External Tariff (Tarifa Externa Comum, or TEC). The system seeks to protect strategic sectors of the national economy, while at the same time allowing some flexibility for occasional adjustments. The higher tariffs are mainly levied on industrialised products with higher added value (eg, cars, electronics, footwear and textiles) that are generally imported from countries and regions with which Brazil does not have preferential trade agreements, such as China, the USA and the EU.

Among the most protected sectors are the automotive, textile, and clothing industries, as well as the technology and electronics sector ‒ all with a strong presence of tariff measures and incentives for national production. The agro-industry also receives protection in specific segments, such as dairy products and wheat. This tariff structure aims to preserve jobs, stimulate domestic industrialisation, and guarantee a degree of self-sufficiency in strategic areas.

However, the Brazilian tariff regime has been gradually pressurised by changes on the international stage ‒ such as global trade tensions (eg, China versus the USA) and their impact on the supply chain, pushing for greater openness or self-sufficiency in certain sectors ‒ and the Mercosur‒EU trade negotiations.

In December 2024, the negotiations on the partnership agreement between Mercosur and the EU were concluded. The announcement allows the text of the agreement to be prepared for subsequent signature and ratification when it enters into force.

The agreement should strengthen the diversification of Brazil’s trade partnerships ‒ a strategic asset for the country ‒ as well as promoting the modernisation of Brazil’s industrial park through integration into EU production chains. It is also expected that the agreement will further boost investment flows, which should reinforce the EU’s current position as the holder of almost half of the stock of foreign direct investment in Brazil.

In Brazil, M&A are subject to mandatory notification to theAdministrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica, or CADE) when they meet certain criteria set out in Law No 12,529/2011. CADE is an agency linked to the Ministry of Justice and Public Security (Ministério da Justiça e Segurança Pública, or MJSP). The obligation to notify applies to operations involving mergers between companies, the acquisition of control or a relevant shareholding, or even the setting-up of joint ventures and consortia with permanent effects on the market.

Notification is required when, in the year prior to the operation, at least one of the parties to the transaction had annual gross revenues of BRL750 million or more in Brazil and the other party had revenues of BRL75 million or more (also in the national territory). There is currently no specific criterion based on market share for mandatory notification ‒ although this factor is considered when analysing the operation.

Transactions must be notified before they are concluded and consummation without approval may result in a fine and eventual annulment of the transaction. The main objective is to prevent excessive market concentration and guarantee free competition.

The process of notifying M&A in Brazil to CADE follows well-defined stages. First, companies must file the notification before the transaction is concluded, submitting the required documents and information. CADE then carries out an admissibility analysis, within five working days, to check whether the documentation is complete. After this screening, the merits analysis begins, which can follow either the summary procedure (with a deadline of up to 30 calendar days) for simple operations with low competitive risk or the ordinary procedure (with a legal deadline of up to 240 days, extendable for another 90 days) for more complex operations. If necessary, the case is referred to the CADE Court, which can approve, approve with restrictions, or disapprove the transaction. Finally, the decision is published, formalising the result of the analysis.

The rules governing anti-competitive practices are established in the Law No 12,529/2011, which prohibits a series of behaviours that have the purpose or effect of restricting, distorting, or in any way harming free competition or free enterprise. The main ones include:

• cartel ‒ agreement between competitors to fix prices, limit production, divide markets or customers;
• predatory actions ‒ artificially reducing prices to eliminate competitors and then raising prices;
• resale price fixing (imposing minimum prices on distributors or retailers);
• tying ‒ making the sale of one product or service conditional on the purchase of another;
• abuse of dominant position ‒ use of market power to eliminate competition, hinder the entry of new players, or impose abusive commercial conditions; and
• unjustified refusal to contract ‒ when used to exclude competitors from the market.

CADE can investigate, prosecute and sanction anti-competitive conducts, applying fines that can reach 20% of the offending company’s gross revenue. The law also allows for leniency agreements, which benefit companies or individuals who collaborate with cartel investigations in exchange for a reduction or exemption from penalties.

Law No 12,529/2011 prohibits unilateral conduct that constitutes abuse of a dominant position, which is defined as the ability of a company or group of companies to control the relevant market for goods or services, restricting competition.

The most common abusive practices may include:

• imposing predatory or discriminatory prices;
• unjustifiably denying competitors’ access to essential inputs;
• hindering the entry or development of rivals in the market; and
• demanding exclusivity clauses without objective justification.

According to Brazilian law, CADE may investigate and penalise abusive conduct even if it takes place outside the national territory, as long as it produces effects in the Brazilian market.

With regard to cases of economic dependency, these may be analysed from the perspective of the Civil Code and CADE case law. Economic dependency may be defined as abuse in cases where there is exploitation of an asymmetrical relationship between companies, the practice of excessively onerous prices or contractual conditions, and the imposition of clauses that unfairly restrict the commercial freedom of the dependent partner.

Under Brazil’s Industrial Property Law (Law No 9,279/1996), a patent is a temporary title of ownership over an invention or utility model, granted by the State to inventors or authors or other individuals or legal entities holding rights over the creation. The inventor or patent holder has the right to prevent third parties, without their consent, from producing, using, offering for sale, selling or importing the product that is the object of their patent and/or the process or product obtained directly by a process patented by them. In return, the inventor undertakes to disclose in detail all the technical content of the matter protected by the patent.

There are three types of patents and each has its own term of validity, as follows.

• Invention Patent (IP) – applies to products or processes that meet the requirements of inventive step, novelty, and industrial application. This patent is valid for 20 years from the date of filing.
• Utility Model Patent (Modelo de Utilidade, or MU) – applies to an object of practical use (or part thereof) susceptible to industrial application, which presents a new form or arrangement, involving an inventive act that results in a functional improvement in its use or manufacture. This patent is valid for 15 years from the date of filing.
• Invention Addition Certificate (C) –  concerns improvement or development introduced into the subject matter of the invention, even if devoid of inventive step, but still within the same inventive concept. The certificate will be ancillary to the patent and will have the same end date as the patent.

Patents may be assigned either in whole or in part and they may also be licensed to third parties for use. Such licensing must be formalised through a contract entered into by the involved parties.

With regard to the patent application, the procedure is exclusively electronic. The application must be filed via the “e-Patents” online platform. Documentation protocols delivered on paper at the National Institute of Industrial Property (Instituto Nacional da Propriedade Industrial, or INPI) reception or sent by post were suspended by INPI Resolution No 251 of 2 October 2019.

The patent application must contain:

• technical content ‒ a descriptive report, a table of claims, a list of sequences (if applicable, for applications in the biotechnology area), drawings (if applicable) and an abstract;
• a filing request; and
• proof of payment of the filing fee (Guia de Recolhimento da União, or GRU).

In April 2024, the Foreign Relations and National Defence Committee (Comissão de Relações Exteriores e Defesa Nacional, or CRE) approved Bill No 2,210/2022, which proposes the revision of the procedures for filing and examining patents by the National Institute of Industrial Property (INPI). But it still needs to be enacted by the Brazilian Congress to come into force.

Under the proposed legislation, patent applications could be submitted in Portuguese, with supporting documents allowed in foreign languages, provided they are accompanied by a simple translation into Portuguese within 60 days. Additionally, the INPI would be permitted to consider patentability opinions issued by foreign patent offices and international or regional organisations.

The bill also relaxes the requirement for foreign applicants to appoint a Brazil-based attorney when submitting a patent application, provided international agreements exempt such a requirement. Another notable provision is the introduction of a provisional patent application, intended for applicants who do not yet have all the information necessary to file a complete application. Furthermore, the proposal allows applicants to amend their application up until the start of the technical examination by the INPI.

According to the Industrial Property Law, a trade mark is defined as a visually perceptible and distinctive sign used to identify and distinguish products or services or to certify that they meet specific standards or technical specifications. A trade mark may comprise words, phrases, letters, numbers, images, shapes, or any combination of these elements.

Once registered with the INPI, the trade mark grants its owner exclusive rights to use the sign across the Brazilian market within its field of activity for a period of ten years from the registration date, with the possibility of renewal for successive ten-year terms.

Trade marks may be transferred or licensed to third parties. Any such licence must be formalised through a contract entered into by the involved parties.

Trade mark rights may be lost through the expiration of the registration term, full or partial renunciation of the goods or services covered, forfeiture, or the absence of a properly qualified legal representative domiciled in Brazil in the case of owners based abroad.

The Industrial Property Law also provides enhanced protection for well-known and highly reputed trade marks. Trade marks recognised by the INPI as highly reputed are granted exclusive protection across all sectors of activity, regardless of their original market. Well-known marks, even if not yet registered in Brazil, receive special protection within their area of recognition.

Industry design is defined by the Industrial Property Law as the ornamental plastic form of an object or the ornamental set of lines and colours that can be applied to a product, providing a new and original visual result in its external configuration, and that can serve as a type of industrial manufacture.

In Brazil, industry design is protected by registration and not by patent, as is the case in other countries. The industrial design registration is intended to protect the appearance of the product and does not apply to the protection of the technical, functional or technological aspects of a product, nor to the protection of trade marks and logos. Therefore, registration protects the appearance that differentiates the product from others.

The application for registration must be made via the INPI’s website, by filling in the application form, paying the filing fee (GRU), and submitting the necessary documents and design, which must comply with the standards established by the regulation. Once granted, the industrial design registration is valid in national territory and gives the holder the right, during the term of validity, to exclude third parties from manufacturing, marketing, importing, using or selling the protected subject matter without prior authorisation. The term of validity is ten years from the date of filing, extendable for three further successive periods of five years.

In Brazil, copyright is governed by the Law No 9,610/1998 (the “Copyright Act”), which establishes the rights of authors over their literary, artistic and scientific works. However, it is important to note that ideas, mere discoveries, and methods are excluded from copyright protection.

To be eligible for copyright protection, a work must be original, enabling the owner to obtain temporary exclusivity over its economic use, in addition to the author’s moral rights. The economic rights generally last for 70 years, counted from January 1st of the year following the author’s death.

The author is defined as the individual who creates the work and may differ from the copyright holder when rights are transferred for commercial use. Only economic (proprietary) rights may be transferred; moral rights – such as the right to be recognised as the author, the right to keep the work unpublished, the right to preserve its integrity, and the right to prevent alterations that harm the author’s honour or reputation – are inalienable and non-transferable.

The Copyright Act also extends special protection to performers, phonogram producers, and broadcasting organisations. Foreign nationals and residents of countries that offer reciprocity to Brazilian citizens are entitled to the same copyright protections in Brazil.

Unlike industrial property rights, copyright protection arises automatically upon the creation and expression of the work, without the need for registration. Nevertheless, registration is recommended as a means of establishing authorship and providing legal evidence in case of future disputes.

Copyright infringement can lead to civil and criminal penalties. The courts and specialised agencies can act to seize pirated materials or stop unauthorised uses.

Brazilian legal framework also provides protection for software (Law No 9,609/1998), which establishes IP rights over computer programs, regulating their marketing and use. Protection arises automatically upon creation, without the need for registration ‒ although optional registration with the INPI is recommended for evidentiary purposes ‒ and the economic rights last for 50 years from January 1st of the year following the software’s publication or creation.

Trade secrets are legally protected in Brazil primarily through the unfair competition provisions of the Industrial Property Law, as well as contractual and civil liability frameworks. Although not regulated by a specific “Trade Secrets Act”, Brazilian law offers effective mechanisms for protecting confidential business information.

Moreover, certain agreements involving industrial property, technology transfer, and technical assistance must be registered with the INPI to authorise remittances abroad and to ensure legal effectiveness against third parties.

Data protection is recognised as a fundamental right in the Constitution, which establishes principles on privacy and data protection and states the inviolability of the privacy, private life, honour and image of individuals, ensuring the right to compensation for both economic and non-pecuniary damages resulting from violations.

Currently, the main regulation governing data protection in Brazil is the Brazilian General Data Protection Act (Law No 13,109/2018) (Lei Geral de Proteção de Dados Pessoais, or LGPD), which was enacted in August 2018 and became Brazil’s comprehensive data protection framework, similar in structure and purpose to the European Union’s General Data Protection Regulation.

The LGPD is built on key principles including purpose limitation, data security, transparency, free access for data subjects, harm prevention, and non-discrimination. It also imposes an obligation on data processing agents to appoint a data protection officer (DPO), whose contact information must be made publicly available to facilitate the exercise of data subjects’ rights.

In addition to the LGPD, Brazil has specific legislation addressing internet governance, which is the Brazilian Civil Rights Framework for the Internet (Law No 12,965/2014) (the “Internet Law”). The Internet Law establishes a legal foundation of principles, guarantees, rights and responsibilities for the use of the internet in Brazil.

Brazil has also other laws and regulations governing data protection, as follows:

• Decree No 8,771/2016 – regulates the Brazilian Civil Rights Framework for the Internet, dealing with issues such as data packet discrimination and data protection by connection providers;
• the Consumer Code (Law No 8,078/1990) – establishes principles of transparency, accuracy of information and quality of data in consumer relations;
• The Civil Code (Law No 10,406/2002) – provides general privacy rights and legal remedies for individuals whose privacy has been violated by third parties;
• Law No 14,129/2021 (the “Digital Government Law”) – sets forth principles, rules, and instruments for increasing the efficiency of public administration, emphasising the need for compliance with the LGPD for data protection and privacy in government operations while considering innovation, digital transformation, citizen participation, and the reduction of bureaucratisation;
• Law No 14,510/2022 – regulates telehealth services through patient’s consent; and
• Recommendation No 73/2020 and Resolution No 363/2021 of the National Council of Justice (Conselho Nacional de Justiça, or CNJ) – they guide the bodies of the Judiciary to adopt measures to comply with/adapt to the provisions of the LGPD.

The LGPD applies to Brazilian companies and also to foreign companies that process personal data of individuals located in Brazil, which means that foreign entities that offer goods or services to Brazilian citizens ‒ or that process their data ‒ must comply with the LGPD, regardless of where they are based.

Foreign companies must respect the rights of Brazilian data subjects, including the right to access, correct, delete and port their data. Even if the company is located outside Brazil, it must have appropriate mechanisms in place to allow Brazilian individuals to exercise these rights.

In addition, the LGPD permits the cross-border transfer of personal data from Brazil to other countries, but only under specific conditions. The recipient country must ensure an adequate level of data protection or the company must provide safeguards such as standard contractual clauses or obtain explicit consent from data subjects.

It is also important to note that Brazil’s Digital Government Law requires that government entities comply with the LGPD. This extends to any international data sharing with foreign governments or entities involved in public-sector operations.

In summary, foreign companies that process Brazilian data or target Brazilian customers must ensure compliance with the LGPD to avoid legal issues and potential penalties, as well as to protect their ability to operate in Brazil.

The National Data Protection Authority (Autoridade Nacional de Proteção de Dados, or ANPD) is responsible for ensuring the protection of personal data, guiding, regulating, and overseeing compliance with the Brazilian General Data Protection Act in the national territory.

The ANPD is an independent body within the indirect federal public administration and is connected to the Ministry of Justice and Public Security. The agency has technical and decision-making authority, with its own assets, and is responsible for the following functions:

• drawing up guidelines for the National Personal Data Protection and Privacy Policy;
• promoting the dissemination of knowledge about the rules and public policies related to the protection of personal data and security measures;
• promoting and preparing studies on national and international practices for the protection of personal data and privacy;
• encouraging the adoption of standards for services and products that make it easier for data subjects to exercise control over their personal data;
• supervising and applying sanctions in the event of data being processed in violation of the legislation.

Tax Reform

Brazil is in the process of implementing a major tax reform and the changes are supposed to occur gradually, starting in 2026, with integral enforcement of the new system expected for 2033. The changes include:

• simplification and unification of consumer taxes;
• progressive taxation on inheritance and donations, including a new tax on assets inherited abroad;
• establishment of a cashback system to return part of the tax collected to specific taxpayers;
• implementation of a progressive tax on vehicles, based on environmental impact; and
• consolidation of the various existing taxes and contributions (indirect taxes), creating a more efficient and transparent system.

To enable the start of the transition, over the course of 2024 and 2025, it will be necessary to approve the complementary laws that will regulate the IBS and CBS, the IBS Federative Council, the Regional Development Fund, and the reimbursement of accumulated ICMS credit balances, as well as structuring the new tax collection model.

AI

The use of AI has been steadily growing in Brazil, mirroring global trends. AI technologies, including machine learning and deep learning, have already been widely adopted across various economic sectors. This widespread integration has prompted discussions on how these technologies should be governed, highlighting the need for a dedicated regulatory framework.

In response, Brazil is currently debating Bill No 2,338/2023, known as the “Legal Framework for Artificial Intelligence”, in Congress. The bill aims to regulate the use of AI tools in advertising, particularly to curb deceptive practices. It is considered a legislative priority and is expected to be put to a vote soon.

Fake News

Combating the spread of fake news has also been the focus of several legislative initiatives. Significant developments are expected soon, such as the following.

• Bill No 2,948/2024 – this seeks to increase penalties for the dissemination of fake news during election campaigns and in the six months preceding them. The bill is awaiting designation of a rapporteur in the Senate Committee on Communication and Digital Rights.
• Bill No 2,051/2024 – this criminalises the creation and sharing of fake news on topics of significant public interest, such as health, education, environment, public security, and the national economy. The bill proposes imprisonment from six months to three years, in addition to fines, for knowingly spreading false information.
• Bill No 2,630/2020 (“Fake News Bill”) – this remains under review in the House of Representatives.