DOING BUSINESS IN BRAZIL. Legal guide for business operations 2015

Transcription

1 DOING BUSINESS IN BRAZIL Legal guide for business operations 2015

2 CONTENTS INTRODUTION... 3 LEGAL SYSTEM... 4 FOREIGN INVESTMENT Foreign Capital... 6 Investing Methods... 6 Exchange of Foreign Capital... 6 Profit Remittance... 7 Reinvestments and Repatriation... 7 CORPORATE LAW... 9 LABOR LAW Employment Relationship Employee s Rights VISAS INDUSTRIAL PROPERTY Patents Trademarks Industrial Designs TAX SYSTEM Federal Taxes State Tax Municipal Taxes

3 INTRODUCTION detailed and specific legal counsel in the event that concrete business operations in Brazil are being planned. Brazil is a Federative Republic, formed as an inseparable union of states, municipalities and the Federal District. This guide has been printed in February, It has a population of more than 200 million and an area of 8.5 million square kilometers, which makes it the largest South American country and the fifth largest country in the world. Being also Latin America s strongest economic power, it has a broad investment area. In order to facilitate doing business and making investments in Brazil, the main points of Brazilian legislation concerning business activities will be described in the following. It should be noted that this guide is only a brief overview of the general legislation of Brazil and cannot replace a professional legal advice. Moreover, Brazilian legislation is often subject to modifications. Therefore it is highly recommended to seek 3

4 LEGAL SYSTEM Brazil s legal system is a broad and complex subject consisting of a wide variety of statutes. The supreme law is the Constitution of the Federative Republic of Brazil. It is regarded as the Lei Maior, i.e. the Greatest Law and the actual version has been in force since The Federal Constitution provides the regulatory instruments of the Brazilian legal system, namely: provisional measures, which are edited by the President of the Republic in case of important and urgent situations; they have temporary nature and force of law and therefore have to be submitted to the National Congress in order to obtain legislative approval. The Brazilian judiciary is composed of the organs of the Federal Supreme Court (STF), the Superior Court of Justice (STJ), the federal regional courts (TRFs) and State Court (TJ). There are also specialized courts responsible for labor law, electoral issues, and military law. amendments to the Constitution comprising alterations of the constitutional text; complementary laws that supplement the Constitution in order to specify an issue without conflicting with the constitutional text; ordinary laws dealing with any matter, except those intended for the complementary laws; The judiciary can be divided into federal and state judiciary. The municipalities do not have a particular legal system; therefore they must exercise either the federal or the state s legal system depending on the nature of the case. The judicial system comprises several courts that are controlled by the Supreme Court, which is regarded as the final instance for trial. 4

5 The main purpose of the Supreme Court (STF) is to ensure compliance with the Constitution, but also has other obligations, for instance: declaring federal or state laws unconstitutional in the light of the Federal Constitution, commanding extraditions that have been requested by foreign states and deciding cases judged in tribunals with only one instance, when a violation of provisions of Constitution by the appeal is possible. The state judiciary in Brazil comprises State Courts and Judges of Law, also called judges of first instance. The Superior Court (STJ) is the court of last instance for appeal procedures concerning federal laws and international treaties. The five federal regional courts are responsible for appeal procedures relating to decisions of federal judges of first instance over lawsuits in which one of the parties is the Federal Government and over cases that involve foreign states or international organizations. 5

6 FOREIGN INVESTMENT Foreign Capital Foreign capital is being defined as any good, machinery and equipment that enter Brazil, for the purpose of production and creation of any goods and services, as well as any capital brought into the country to be invested in economic activities, belonging to local individuals or companies or headquartered abroad. Investing Methods There are two methods of investing, direct or indirect investment. A direct investment is made by companies in which the foreigner is a partner or by acquisition of real estate or other goods. An indirect investment is made by creating funds in Brazil, usually with several marketable securities created by the Capital Market. Exchange of Foreign Capital The legal tender in Brazil is the Real, abbreviated as R$. Investing in Brazil, foreign currencies have to be exchanged in national currency. This is done by making a foreign exchange contract with any financial institution that is authorized by the Central Bank of Brazil, whereas the Central Bank s foreign exchange requirements have to be respected. There are two types of official exchange markets, the commercial exchange rate and the tourism exchange rate. 6

7 Both of them operate with floating rates thatt can be negotiated freely among the exchanging parties. In foreign trade the commercial exchange rate forms the basis for official purchase operations and the sale of currencies. This includes foreign currency investments in national territory, trade-related transactions, foreign currency loans to Brazilian residents and other transactions of remittances abroad, whether prior permission of the Central Bank is needed or not. In the first place, the tourism exchange rate was established only for the tourist industry, but evolved to also being utilized for covering gaps caused by transactionss which do not fall under the commercial exchange rate. Profit Remittance Profits remittances must be registered with the Electronic Declaratory Registry of Direct Foreign Investment (RDE-IED) Module. There are no restrictions on distribution or remittance of profits abroad. Furthermore, the profits distributed to partners or shareholders of companies in Brazil have been excluded from being subject to withholding Income Tax. In order to avoid excessive taxation, Brazil has signed several double taxation treaties with other countries. Reinvestments and Repatriation Reinvestments are profits generated by a company in Brazil that are being reused in the very same company after having 7

8 assigned them to foreign entities. They also must be registered in the RDE-IED module. Repatriation of registered foreign capital to its country of origin is possible without any authorization needed. The quantity of the original investments can be repatriated without income tax being imposed. 8

9 CORPORATE LAW At least two people have to subscribe the issued shares of the capital and pay 10% of the share value to start the Company. Corporate Law in Brazil is considered as a specified area of Brazilian legislation, which regulates economic activities by providing rules for operations for business companies and entrepreneurs. The rules concerning Company Law are provided by the Civil Code of Brazil. Companies in Brazil can be established in one of the following six categories: Joint-Stock Company (sociedade anônimaa / companhia) The Joint-Stock Company ir regulated by the law 6.404/76. The capital of this business corporation is divided into shares, whereby each partner or shareholder commits himself to subscribe or acquire only the issue price. It is organized by Articles of Associations and General Meeting are mandatory at least one time of the year; Limited Liability Company (sociedade limitada) The value of the respective share of each partner determines his amount of liability, on condition that the subscribed capital has been paid completely beforehand. If the capital has not been paid completely each partner is liable for the company obligations. At least two people have to subscribe the issued share of the capital but in order to initiate company operation the hole amount does not have to be paid; General Partnership (sociedade por nome coletivo) It is a company where all partners are liable for the social obligations of the company unlimitedly and as joint debtors; 9

10 Limited Partnership (sociedade comandita simples) The Limited Partnership comprises two different types of partners: the general partner, who has unlimited liability concerning the corporate s obligations and the Limited Partner, who is only limitedly liable; Limited Partnership with Share Capital (sociedade comandita por ações) Its capital stock is divided into shares and its organization follows a set of rules resembling the ones regulating the Joint Stock Company. Only the shareholders are empowered to manage the company; Individual Limited Liability Company (Empresa Individual de Responsabilidade Limitada - EIRELI) Law 12441/2011 instituted Brazil s newest form of company organization, the EIRELI. The entrepreneur holds the entire capital stock himself, whereas his liability is limited to the capital value. 10

11 LABOR LAW stipulated for a determined period of time, whereas special requirements need to be fulfilled in order to be valid. Labor relations in Brazil are regulated by the Consolidated Labor Laws (CLT). Employment Relationship Employee s Rights Irrespective of any agreements the employee is entitled a series of rights by Law. The main rights are the following: In order to establish an employment relationship a contract needs to be concluded with the employee agreeing to work for the employer on a regular basis and under his direction. There is no obligatory form for this type of contract; therefore it does not have to be in writing to be valid. Nevertheless, it must be registered in the employee s Work and Social Security Card (CTPS) and in the employee register of the company. Ordinarily, the employment relationship lasts indefinitely, thus no explicit agreement concerning the duration of the employment relationship is needed. Exceptionally, it can be Working hours In general, the working hours must not exceed 44 hours a week, whereas the maximum workday is eight hours. However there are certain work areas with diverging regulations. During the workday one shift may not last longer than six hours. Therefore after six hours the employee has the right to a one- not exceed six hours at least hour-break. If the workday does 15 minutes of rest have to be granted. One day of paid rest period must be granted to the employee, if possible on Sundays; 11

12 Remuneration Since January 2015 the minimum wage in Brazil has been 788,00 R$. The stipulated remuneration has to be paid monthly or in shorter periods of time if stated in the employment contract. Any reductions of the employee s remuneration are strictly prohibited. In each year s December a thirteenth salary, which equals one twelfth of the annual payment for each month of service, has to be paid. At vacation time the employee has to be granted another bonus of one third of the monthly salary. Furthermore, transportation passes have to be provided and the daily meal has to be paid or granted; Additional Payments There are special working conditions thatt require additional salary: Night work (between 10:00 p.m. and 5:00 a.m.) has to be remunerated with an additional payment of at least 20 % over the day-time-income; If regulated by collective bargaining or agreement among the employment parties, overtime must be compensated with an amount of 50 % over the regular payment; Work in a hazardous environment requires an additional payment of 30%; Work in an unhealthy environment must be redeemed with an additional payment of 10%, 20% or 40%, depending on the degree of potential harm to the employee s health. FGTS FGTS is a Fund for Unemployment Compensation that is obligatory for employment relationships. Each month the employer has to deposit 8% of the employee s month s remuneration in a bank account in the name of the employee. If 12

13 the employee is being dismissed without just cause the employer must pay out the entire FGTS deposits plus interest and a fine of 50% of this amount; Termination An undetermined employment or without just cause. contract can be terminated with Family Allowance The employee has the right to a monthly allowance for each child less than 14 years of age. The amount of this allowance is dependent on the regular salary of the employee; Vacation After having completed one year of service the employer must grant 30 days of paid vacation, whereas a maximum of ten days may be compensated in payment; Maternity / Paternity Leave The mandatory maternity leave is 120 days. During this time period the employee receives her payment from the Social Security Institute (INSS). The paternity leave for fathers is five days; In order to terminate the contract without just cause the employer needs to give prior notice of 30 days to 90 days, depending on the complete period of service. In addition to the FGTS (described above) the employer has to pay out unused vacation days plus one third of this amount and a thirteenth month salary and vocations days proportionate to the months of service of the year of termination. After terminating the contract with just cause the employee is only entitled the compensationn for unused vocations and the additional payment of one third of this amount. If the employee terminates the contract himself he also has the right to receive unused vacation days plus one third of this amount and a thirteenth month salary and vocations days 13

14 proportionate to the months of servicee of the year of termination; 14

15 VISAS A visa is a document issued abroad by the by diplomatic and consular representations of Brazil which permits foreigners to enter into and stay inside national territory, provided that the requirements stipulated by the current legislation are being fulfilled. There are several types of visa provided by Brazilian legislation. The most relevant visas concerning business in Brazil are described in the following. Temporary Visas Holders of temporary visas may stay in Brazil for a determinate period of time, whereby any leaving or returning during this time period is admitted; However, a visa does not guarantee the entry of a foreigner into national territory but only holds out the prospect of the rights hereto. As the granting of visas is an act of the discretionary power in Brazil, the foreigner s entry can be restrained and the staying period inside national territory may be reduced in case of this being of national interest. Responsible for issuing visas is the Itamaraty, an organ of government, whereas the act of issuing itself is carried out by embassies, consulates general, consulates and Deputy Consulates of Brazil abroad. Short Term Business Visas This visa is intended for professionals coming to Brazil for business, without intending to immigrate. The maximum period of validity is five years, depending on the condition of reciprocity with the holder s country. The visa only permits single stays for up to ninety days which may extended once for an equal period of time. The extension of the visa must be requested to the Federal Police Department before expiry; 15

16 Visas for Artists or Athletes The visa may be granted to artists and athletes who aren t employed in Brazil coming to the country to participate in events related to their area of expertise. It is authorized to stay up to ninety days per year in Brazil, whereas this time period may be extended for another 90 days, provided that the extension has been requested at the Federal Police Department, before the expiration of the visa. However, it should be noted that the institution responsible for the entry and stay of foreigners in Brazil, is obliged to request authorization of the Ministry of Labor and Employment prior to issuing the visa; Labor and Employment previously. The visa can be issued for a maximum of two years extendable for an equal period of time apart from being transformable into a permanent visa. In both cases the legislation in force has to be respected; Journalist Visa The Journalist Visa is granted to correspondents of newspapers, magazines, radio, television or foreign news agencies, whilst their journalistic work is remunerated by a foreign company. A stay of up to four years is permitted being extendable for other four years, if an application is being made to the Ministry of Justice, beforee expiry of the visa; Temporary Work Visa This Visa is issued to those who come to Brazil in order to perform services together with or for national companies, with or without employment relationship in Brazil. In accordance with the Resolutions of the National Immigration Council (CNIg) the companies is responsible for the entrance and stay of the foreigner and has to request authorization at the Ministry of Permanent Employment Visa The permanent employment visa is intended for immigration, thus for those wishing to settle in Brazil for an indefinite period of time. It is issued by the Brazilian consular representation which is competent in the country of origin of the individual that intends to reside in Brazil. In order to be granted a permanent visa, the applicant has to fulfill certain qualifications. 16

17 Managers or Directors of companies from abroad who have a branch or a subsidiary in Brazil can only obtain a permanent visa when a sum of US$ 200, or at least US$ 50, has been invested in Brazil. In the second case, in addition to the investment, the Brazilian company must undertake to create at the minimum ten new jobs in the time period of two years after the foreign Manager or Director took his office in Brazil. 17

18 INDUSTRIAL PROPERTY The INPI (Instituto Nacional da Propriedade Industrial) is an organ of government responsible for improving, spreading and administering the Brazilian system of assigning and guaranteeing industrial property rights to the industry. Some of the services, offered by the INPI, are the registration of trademarks, industrial designs, geographical indications, software and integrated circuit topography, the grant of patents as well as the enrollment of franchise contracts and certain modalities of technology transfer. Summarizing, it formally examines the patentability of applications and the validity of trademark registrations. Patents A patent is a temporary legal title which is granted by the State to inventors, authors or other natural persons or legal entities in order to protect an invention or a utility model. Contrariwise the inventor commits to revealing the whole technical content of the protected matter in detail. The categories of patents, the requirements and the statutory periods are the following: Invention Patent PI It is needed for products or processes which fulfill the requirements of being a novelty, inventive and suitable for industrial application. The statutory period comprisess 20 years and begins when the prevailing deposit is made. Utility Model MU Utility models are objects of practical use or parts of these suitable for industrial application that present a new form or layout involving an act of invention, which results in better functionality in use or in its fabrication. 18

19 It has a statutory period of 15 years, whilst the priority date is the date of the deposit; right to use the trademark within national territory and within its line of business. Certificate of Addition to invention C It is granted in case of an advancement or development of an object of invention even if it itself is devoid of an act of invention as far as it is part of the same inventive concept. The certificate is accessory to the patent and therefore shares its statutory period. Trademarks According to the Brazilian legislation a trademark is every visually perceptible distinguishing mark, which identifies and distinguishes products or services and certifies the conformity of these with certain standards or technical specifications. When a trademark is registered, the owner has the exclusive The trademark protection remains for ten years being extendable successively for the identical period of time. Foreign trademarks can be registered by claiming priority six months after applying in the country of origin. The trade mark owner is obliged to carry out the activities for which the protection of goods or services is demanded lawfully and effectively and to prove their legitimacy on the basis of the legislation of the country of origin. Industrial Designs The registration of industrial designs protects the external shape of an object or the arrangement of lines and colors applied to a product; provided that an original result is being 19

20 presented and that this result is suitable for industrial production. twentieth year, an extension has to be requested jointly with the payment. This form of registration does not protect the functionality, dimensions, materials used or production processes of the object. The protection of up to 20 objects is contemplated by Brazilian legislation, provided that the presented versions preserve principally the same distinctive characteristics. The initial validity period comprises ten years, extendable for three subsequent five-year-periods. Registered industrial designs give the owner temporary property rights and exclusive rights to exclude the production, marketing, use, sale etc. of the design by any unauthorized third party within national territory. To maintain the registration a quinquennial maintenance fee has to be paid. The subsequent payment has to be made during the fifth year after the previous deposit. In this one-year- period (period between four and five years after the deposit) the fee has to be collected. Within the tenth, fifteenth and 20

21 TAX SYSTEM The Tax System in Brazil is based on the regulations of the Brazilian Federal Constitution and the National Tax Code. Being a federative Republic, Brazil has federal, state and municipal taxes. In the following the main taxes will be described. Federal Taxes Corporate Income Tax IRPJ The IRPJ is imposed on revenue or capital gains earned by a legal entity. The imposed tax rate is 15%, whereas in the case of an accumulation of a surplus capital of R$ 20, per month a surtax of 10 % will be levied. Taxable profits are ascertained by deducting the operating costs and expenses from the gross income originating from the company s core activity and incidental business. In some cases, a legal entity may opt for taxation on estimated profits, instead of actual profits. Using this form of taxation, a company s operating income is first applied a certain rate according to its activity, and then the tax basis is calculated. To be qualified to having the option of applying the estimated profit tax method, the legal entity must have had a total gross revenue equal or below R$ , 00 in the preceding calendar year; Tax on Manufactured Products IPI In addition to the sales price the IPI falls due when industrialized goods exit their industrial facility of origin or goods are being imported. The rate varies according to the product classification; 21

22 Social Contribution on Net Income CSLL This contribution applies to Brazilian companies and is calculated on the net profits before the allowance for income tax, adjusted by the additions, exclusionss and off settings stipulated by the law. It is levied on all profits, income and capital gains earned by Brazilian entities at a 9% rate, and it is not deductible in the process of calculating the income tax (actual profits); Tax for Social Security Financing COFINS It is imposed on the monthly gross revenue. The Tax rate for the cumulative-form is 3% (presumed profit) and tax rate for non-cumulative-form is 7,6% (real profit); PIS Imports and COFINS Imports It is imposed on imports of foreign products, at the rate of 2,1% for PIS and 9,65% for COFINS and for imports of services, at the rate of 1,65% for PIS and 7,,6% for COFINS. Contribution for de Social Integration Program PIS It is imposed on the monthly gross revenue and/or Payroll of the entity. Applicable are two different forms of tax rates. The cumulative-form, with a tax rate of 0,65%, is utilized for Companies that are levied with the presumed profit method; the non-cumulative-form, with a tax rate of 1,6%, concerns the real profit method; These contributions are caused by the Import of foreign products or by services from abroad performed in Brazil or performed abroad with the results being achieved in Brazil; Social Security Contribution Over Payroll INSS Employers must pay the contribution to Social Security referring to the employee s wage at a rate of 20%; 22

23 Import Tax II It is imposed on the product value of incoming goods. The rate varies according to the product classification; Export Tax IE The IE is imposed when a product produced in Brazil or with local contents is being dispatched abroad. Currently, most products are taxed at a zero rate; State Tax The intestate rate is 7% or 12%, depending on the region of origin and destination; Municipal Taxes Services Tax - ISS The ISS is imposed on services ruled by the Complementary Law n. 116/03. The tax rate varies from 0% to 5% in accordance with the Municipality. Value Added Tax - ICMS It taxes the circulation of goods, the establishment of interstate and intercity transportation and communication services, including import. Special emphasis should be placed on the fact that this is a non-accrued tax. The tax rate is variable in accordance to good. the State and the 23