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Doing Business in Brazil: Considerations for Global Companies

Table of Contents

Many global companies expanding to the Latin America (LATAM) region focus on Brazil for good reason.

Brazil is home to the sixth-biggest population globally, giving international organizations access to an enormous consumer market. By doing business in Brazil, international organizations also enjoy trade with other Latin American countries through lucrative regional trade agreements.

However, global employers face significant challenges when entering this market on their own. Entity establishment in Brazil is a lengthy and costly process, and navigating the country’s complex tax and labor laws poses a serious compliance risk.

Read on for a list of key considerations for doing business in Brazil and the benefits and challenges to expect when entering this market. Plus, learn how partnering with a global expert can eliminate compliance risk and expedite time-to-market.

Business culture and etiquette in Brazil

Before entering the Brazilian market, foreign companies should familiarize themselves with the country’s standard business practices and cultural norms.

For example, Brazilians do business with individuals, not companies. Therefore, expect to engage in small talk to build positive relations with business partners and for relationships to become more relaxed as they evolve.

Men generally greet one another with handshakes, and during conversation, it’s best to avoid discussing politics, religion, and poverty.

Brushing up on the local customs goes a long way in helping you avoid surprises, reduce stress, and increase your chances of success as you enter this new market.

Employee entitlements in Brazil

Collective bargaining agreements (CBAs) regulate a significant portion of worker rights across each industry in Brazil. As a result, employers must remain up-to-date with relevant CBA regulations in their sector and ensure their work agreements are compliant

Additionally, Brazil’s Consolidation of Labor Laws (CLT) decree guarantees all employees several fundamental rights, including:

  • Annual salary increases, according to the rate specified in the relevant CBA
  • Christmas bonus amounting to one month's salary
  • Eight-hour workdays and 44-hour workweeks
  • 30 annual vacation days plus national holidays
  • Vacation bonus amounting to one-third of the employee’s monthly salary
  • Paid maternity leave
  • Employer compensation for commuting to and from work by public transportation
  • Additional payments outlined in relevant CBAs

Hire Employees in Brazil

Interested in hiring employees in Brazil? Learn how our Employer of Record (EOR) solution handles onboarding, payroll, benefits, and compliance so you can quickly expand into Brazil while mitigating risk.

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Visas and permits for foreign talent in Brazil

If you plan to hire foreign nationals or relocate employees to work for your company in Brazil rather than hire local talent in Brazil, you must apply for the appropriate residence permit and work visa for each employee before they enter the country.

The exact visa each worker must apply for depends on their specific circumstances. 

For example, the VITEM V visa is a standard work visa available to individuals from various industries. However, the Permanent Work Visa (Visto Permanente) is available only to professional researchers, investors, and scientists and offers its holders permanent residence in Brazil.

First, the employer must apply for a residence permit at Brazil’s Ministry of Justice and Public Security. Upon receiving the permit, the employee can apply for a visa at the nearest Brazilian consular authority in their country.

Residence permit processing times are roughly 30 days, while visa processing times vary depending on the consular authority where you lodge your application. 

Digital compliance rules in Brazil

Brazil’s Lei Geral de Protecao de Dados (LGPD) regulates how companies acquire, manage, and use their customers’ data. Personal data refers to anything related to names, health history, political opinions, sexual orientation, IP addresses, and more. 

According to LGPD regulations, companies must appoint a Data Protection Officer (DPO) to ensure their company meets LGPD standards. The DPO must maintain contact with Brazil’s compliance authorities (locally known as the Autoridade Nacional de Protecao de Dados) while ensuring the company compliantly manages its user data. 

Companies that fail to meet LGPD requirements receive fines of up to 2% of their annual turnover, capped at R$50 million (US$10.4 million).

Benefits of doing business in Brazil

By expanding to Brazil, global companies enjoy numerous benefits, such as access to a large consumer market, diverse market opportunities, advanced local infrastructure, and lucrative international trade opportunities.

Below, we outline each of these benefits in detail.

Largest economy in Latin America

Brazil has the fifth-largest population globally and a rapidly growing middle class, which means it has an enormous consumer market.

This large and diverse consumer market offers numerous exciting commercial opportunities for foreign companies from various sectors looking to reach new clientele in the country.

Diverse market opportunities

Brazil’s diverse market offers a variety of investment and business opportunities for foreign companies. 

For example, Brazil’s warm climate and natural resources have long made the country a global leader in agriculture. Plus, room for modernization within this sector has created unique opportunities for international companies with access to new technology to help modernize and improve industry efficiency.

Other national sectors present similar opportunities, such as energy, mobile app development, and financial tech, which are growing at impressive rates.

Advanced infrastructure and transportation facilities

Brazil’s robust infrastructure and transportation facilities provide excellent support for businesses transporting goods within the country and beyond. 

For example, local companies enjoy access to 175 maritime and river ports, large and developed roads, including one of the most extensive highway systems in the world, and numerous railway systems. 

This robust domestic transportation infrastructure simplifies doing business across the country and opens doors for trade with other countries in South America.

International trade access

Foreign companies operating in Brazil enjoy lucrative trade opportunities with ten other Latin American countries of the Southern Common Market (MERCOSUR) trade bloc. 

MERCOSUR facilitates duty-free goods exchange between the four founding member states (Argentina, Brazil, Paraguay, and Uruguay) and tariff reductions on trade with seven associated countries (Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname).

Brazil is also a member of the BRICS trade group (Brazil, Russia, India, China, and South Africa), which represents more than 25% of the global GDP and 42% of the world's population. 

While this alliance has yet to establish significant free trade initiatives between its member countries, it offers excellent potential for accessing the large member country populations should they successfully do so in the future.

Challenges of doing business in Brazil

Despite the numerous benefits of doing business in Brazil, foreign companies expanding to this market face significant challenges with skills shortages, high market entry costs, entity establishment processes, and a notoriously complex tax system.

Below we outline each of these challenges in detail. 

Skills shortage

According to Korn Ferry Institute, Brazil’s worker deficit across all skill levels will reach 15.8 million by 2030

While several initiatives are currently in place to fill the skills gap and boost Brazil’s growth potential, the skilled labor market in the country remains exceptionally competitive.

Many global companies doing business in Brazil invest additional effort into creating competitive, locally-tailored benefits packages to attract and retain top talent in their industry.  

High cost to start a business

While there is no minimum required capital for starting a business in Brazil, obtaining the necessary licenses, completing inscriptions, and acquiring verifications with local, state, and federal authorities is costly.

Initial company registration costs are relatively low, averaging about R$2,500 (US$520), depending on the location, industry, and entity type. However, foreign companies face significant costs in taxes, municipal licenses, and annual registry charges ranging from 4.9% to 13% of income per capita.

Additionally, the purchase, transfer, and registration of business property entail fees of up to 3% of the property value. When added together, total expenses related to entity establishment in Brazil are exceptionally high. 

Low ease of doing business

The reformation of entity establishment proceedings in Brazil has lagged behind the country’s impressive economic growth in recent years. As a result, incorporation processes remain a significant headache for foreign companies entering this market.

On average, starting a business in Brazil requires about 11 procedures and takes roughly 119 workdays. According to the World Bank’s Ease of Doing Business report, Brazil ranks 124th out of 190 countries for ease of starting and operating a local business. 

Complex tax system

Brazil is notorious for having one of the world’s most burdensome and excessively complex tax systems. 

Its decentralized structure causes extreme complexity in tax laws, with 26 states and over 5,000 municipalities each responsible for enacting their own tax rules.

This complexity has resulted in tens of thousands of regulations at each level of government. Companies that fail to meet their tax obligations face hefty penalties ranging from 20% to 150% of the unpaid tax amount, depending on the circumstances. 

Many foreign companies partner with a global expansion expert, such as an employer of record (EOR) in Brazil, to eliminate risk and ensure compliance with Brazilian tax law as they enter this market.

Read also: Complete Guide to Payroll Tax in Brazil

Simplify expansion into Brazil with a trusted partner

Navigating Brazil’s complex tax laws and entity establishment procedures is a major headache. Set yourself up for success by partnering with Velocity Global.

Velocity Global’s Employer of Record (EOR) solution simplifies global expansion to Brazil and beyond by ensuring compliance with evolving tax and labor laws and eliminating the need for entity establishment. 

Through our EOR solution, you can hire a local team quickly, relocate talent easily, generate new revenue streams, and reach new customers in Brazil without dealing with legal headaches and red tape.

Contact Velocity Global today to learn how to simplify your expansion to Brazil.

 

Disclaimer: The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. © 2024 Velocity Global, LLC. All rights reserved.


 

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