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CEO's Thoughts

Doing Business in Brazil

By April 11, 2014December 2nd, 2020No Comments

Doing Business in Brazil

Brazil is a unique place to do business.  With the upcoming World Cup and Olympics, as well as the hyper-growth economy putting recent unemployment rates at 5%, the world is looking to invest.  We always hear companies vent about – and experience ourselves – the bureaucracy and perceived (more like actual) worker-friendly/company un-friendly employment environment.  The opportunities are wide and deep in Brazil, so hopefully this quick blog entry will address some of the hesitations that are holding you back from doing business in Brazil.

Establishing an entity
It’s expensive and time consuming.  A Limitada can take 10-12 months and be prepared to spend $40K just to get it off the ground.  The bookkeeping and annual compliance requirements are also rather involved so be prepared to spend a bit more to keep your entity compliant.  S.A.’s are most often reserved for larger companies and Branch offices are very rarely used, so if entering the market for the first time most scenarios suggest the Limitada is the way to go.  Despite the cost and time, Brazil is a flourishing economic machine and the returns can be significant.

Employment
Even if the employees are “unionized”, they’re unionized.  One of the most important elements is the redundancy withholdings, which is currently set at 8% of salary per month.  This is in place for when an employee terminates and is required by law.  We most often see companies shirking this responsibility which gives all the advantages to the labor attorney representing the terminated employee.  Be sure to withhold this monthly and you’ll be in a better place at the culmination of the employment relationship.
Also be aware that, in order to get around some of the employment laws, companies have asked their employees to effectively form their own companies and “contract” the work to those “companies”.  This has become prevalent enough that the local authorities tend to seek out such arrangements and see right through them.  We don’t advise this approach given the focus on such alternate vehicles and increasing scrutiny and diligence by the authorities to crack down.

PEO
Utilizing an outsourced employment model is a tremendous solution for many companies in Brazil.  Again it can’t be used forever, you may need at some point to set up a Limitada to satisfy taxable nexus regulations.  But given the amount of time and cost it takes to set up your Limitada, and the unknowns about whether your overall strategy will work, try a PEO to start.  If the strategy is taking off after 6-12 months, then you can start setting up your Limitada and transfer the employment compliantly once the process is complete.  This works for both local nationals and expats, and culturally is a generally accepted way of entering a market.

São Paulo
The city of São Paulo is the financial, corporative and market center in Latin America and its metropolitan population is over 20 million people. The city´s GDP is equivalent to USD 184 billion, representing 12,2% of Brazil´s GDP and if it were a country São Paulo would be the 47th biggest economy in the world. The city is well known by its industrial potential, but in the last decade it has transformed itself into a business and services center. São Paulo is the headquarters to 63% of the multinationals companies installed in Brazil and it is acclaimed as a city of business tourism.

As always we hope this has been helpful and please call if we can guide you through this complex but high potential country.

– Ben