DOING BUSINESS IN BRAZIL September, 2014 INDEX I. INTRODUCTION 5 1. POLITI CA L DIVISIO N 5 2. BRA ZILI AN ECONOMY 7 2.1. Agri cul ture 7 2.2. Indu st rial 7 2.3. Tran spor t 7 II. COMPANIES STRUCTURE 8 1. BUSI NESS CORPO RATIO NS 8 2. LIMITE D LIAB ILITY COMPANY (LL C) 9 3. JOI NT VENTUR ES 9 4. OPE NING OF BRANCH ES IN BRA ZIL BY FOREIG N COMPANIES 9 III. FOREIGN INVESTMENT 9 1. FOREIG N CAPITAL IN BRA ZIL 9 1.1. Rest ri ct ion s to Foreign Invest men t 10 1.2. Regi st ra tion of Foreign Capi tal 11 1.3. Invest men ts in curren cy 11 1.4. Invest men t through Expor t Credi t Con ver sion 11 1.5. Invest men t through Impor t of Good s withou t Foreign Exc hange Cover 11 1.6. Pro fit Remi tt an ce Tax Trea ty 12 1.7. Rein vest men t of Pro fits 12 1.8. Capi tal Repa tria tion 12 1.9. Remi tt an ce Abroad 12 1.10. Ext ernal Tran sf er of Invest men ts in Bra zil 13 2.. FOREIG N ENTITIES – REGIST RATIO N 13 2.1. CNPJ (Na tional Corpora te Taxpa yer s Regi st er) 13 2.2. Cademp 13 2.3. CVM (Bra zilian Securi tie s Exc hange Commi ss ion) 13 3. INC ENTIVES 14 4. AMA ZO N, NORTHEAST AND ESPÍ RITO SAN TO 14 5. IMPO RT AND EXPO RT 15 IV. THE BRAZILIAN TAX SYSTEM 16 V. THE TAXES 17 1. STRUC TUR E IN BRA ZIL 17 2. TAXES IN KIND 17 2.1. Municipal taxe s 17 2.1.1. ISS - Ser vices Tax 17 2.1.2. ITBI - Tax on Real Est ate Con veyan ce 18 2.1.3. IPT U - Tax on Urban Land and Proper ty 18 2.2. State taxes 18 2.2.1. ICM S - Value-Added Tax on Sale s and Ser vices 18 2.3. Federal taxe s 18 2.3.1. IPI - Exci se Tax 18 2 2.3.2. Impor t Duty 19 2.3.3. Income Tax and Salarie s of Any Nature 19 2.3.3.1. IRPJ - Corpora te Income Tax 19 2.3.3.2. Tax Incen tives 23 2.3.4. CSLL - Social Con tribu tion on Net Income 24 2.3.5. Trans fer Pri cing 25 2.3.6. IOF - Tax on Finan cial Tran sact ion s 27 2.3.7. ITR - Rural Land Tax 27 2.3.8. PIS - Emplo yee s’ Pro fit Par ticipa tion Program 28 2.3.9 . COFI NS - Tax on Social Securi ty Finan cing 28 3. ACCESSORY OBLIGATIONS 29 3.1. Safeguarding of Boo ks and Tax Documen ts 29 3.2. Elec tronic Data Pro cess ing 32 3.3. Value-Added Tax Informa tion and Compu tation Form s (GIA ) 33 3.4. Quar terly Compu ter File - List of Inter st ate Opera tion s and Ser vices 33 3.5. Compu ter File 34 3.6. Tax Books - General Obser vation s 35 3.6.1. Entry Record Boo k (model 1-A) 35 3.6.2. Exi t Record Boo k (model 2-A) 35 3.6.3. Record Boo k for the Use of Tax Documen ts and Occ urren ce Term s (model 6) 36 3.6.4. Inven tor y Record Boo k (model 7) 36 3.6.5. IPI Cal cula tion Record Boo k (model 8) 36 3.6.6. ICM S Cal cula tion Record Boo k (model 9) 36 3.6.7. Asse ts ICM S Credi t Con trol – CIAP 36 3.7. Invoices - General Obser vation s 36 3.8. LALUR (Taxable Income Con trol Regi st er) 37 3.9. Dail y Journal 38 3.10. Acc oun ting Ledger 39 3.11. DIPJ (Income Tax Return) 39 3.12. Declara tion of Federal Con tribu tion and Taxes – DCTF 40 3.13. DIRF (De clara tion of Income Tax at Sour ce) 41 3.14. DARF (St atemen t of Social Con tribu tion Tax Determina tion) 41 3.15. PER/DC OMP (Ele ct roni c Reque st for Return s or Reimbur semen ts and for the Compen sation Declara tion) 42 4. LABOR LEGISLATION 43 4.1. Type s of Hiring 43 4.1.1. Con tra ct for an Unde termined Period 43 4.1.2. Con tra ct for a Determined Period 44 4.1.3. Temporar y Con tra ct 46 4.2. Labor and Social Securi ty Charges 47 5. FOREIGNERS EMPLOYMENT 49 5.1. Visa Type s 49 5.1.1. Shor t-term busine ss trip visas 49 5.1.2. Temporar y Work Visa 49 5.1.3. Temporar y Visa for pro fess ional s 49 3 5.1.4. Foreign journali sts 49 5.1.5. Permanen t Work Visa 50 5.2. Entran ce Regi st ry for Bra zil 50 5.3. Prepara tor y trip s for permanen t or temporar y wor k 50 5.4. Work of spou se and children 50 5.5. Foreigner s’ wor k boo kle t 50 5.6. Work of foreigner s in Bra zil 51 5.6.1. Foreigner with a permanen t visa 51 5.6.2. Pro fess ional with temporar y wor k visa 51 6. MERCOSUL WORK VISA 51 VI. BIBLIOGRAPHY 52 4 I. INTRODUC TIO N Diversity is the ess ence of Brazil. In 500 years of history, a nation has bee n formed of many types of people, owner of a variation of cultures and a large terr itory, currently divided in 26 States, a Federal District and 5,563 municipalities. As a democracy, the exercising of Power is att ributed to distinct and independent organizations, each with its own function, observing a system of control among them in a wa y that not a single municipality may act in disagree ment with the law and constitution. The ge ography of the country shows a strong concentration of economic activity and a population residing in a small section of the land; factors which influence in the concentration of income, wealth and social exclusion. Interfering with this scene and create a country of equal opp ortunities are the challenge s that establish the practice of citizenship and public policies. 1. Poli tical division The Federal Republic of Brazil is currently politically and ge ographically divided in five distinct reg ions that have comm on features in terms of physical, human, economic and cultural aspects. The limits of each reg ion - North, Northeast, Southeast, South and Central West, alwa ys coincide with the borders of the States that comp ose them. Brazil is divided in 26 States, 5,563 municipalities and the Federal District, in Brasília headquarters of the federal, leg islative and judicial government. 5 The North reg ion occ upies the large st portion of the Brazilian terr itory with an area that corresponds to 45.27 % of the 8,547,403.5 km2 in the country’s total area. Made up of seven States, its area is nearly totally dominated by the Amazon River basin. The Northeast reg ion may be considered as the most heteroge neous of the country. Divided into four large zones - midd le- north, jungle zone, the “areste” and “sertão” - it occ upies 18.26 % of the national terr itory and has nine States. The Southeast is the reg ion that has the most economic imp ortance in the country and also concentrates the large st population index - 42.63 % of 157,079,573 Brazilians - and the large st industrial production. It is made up of four States and presents vast physical differences, with coastline, mountains and plains. The South, the coldest reg ion of the country, which has periods of frost and snow, represents the smallest area, occ upying 6.75 % of the Brazilian terr itory and has only three States. The rivers that cut through the area form the Paraná basin covering nearly the entire area and are of great imp ortance to the country, mainly for their hydroelectric potential. Finally, the Central-we st reg ion is dominated mainly by the Brazilian Central Plateau and may be divided in three areas: dense forest (Maciço goiano-mato-gross ense), Paraná sedimentary basin and the depress ions. Made up of four States, this reg ion is suffering significant alterations in its vegetation coverage, with the savannah being gradually substituted by plantations and cattle bree ding due to the occ upation process of this part of Brazil. 6 2. Brazili an Econo my 2.1 . Agriculture Brazilian agriculture is one of the most strategic economic sectors for the consolidation of the economic stabilization program initiated with the Plano Real (introduction of the new currency “Real”) in 1994. The significant participation and strong multiplying effect of the agro industrial complex in the GDP, the large influence of products of agricultural origin (basics, semi-prepared and industrialized) in the list of exports and the contribution to inflation control are examples of the importance of agriculture to the development of the Brazilian economy in the following years. Farming and catt le-raising represents app roximately 12 % of the national GDP, only taking into acc ount the production amount. When modern concepts for agribusiness are used (which cover the total amount of production operations and input distribution and new agricultural technology, app ropriately succ ess ful production, wa rehousing, transport, process ing and distribution of agricultural products and their derivates), the participation of the comp lex agro industrial reaches more than 35 % of the GDP, proving the multiplying effect that this sector exercises upon the economy as a whole and in the inland of the country in particular.