PORTFOLIO

Business Operations in Brazil (Portfolio 954)

Tax Management Portfolio, Business Operations in Brazil, contains information designed to enable foreign interests to consider the requirements and principal problems encountered in conducting business or making investments in Brazil.

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DESCRIPTION

Among other subjects, the Detailed Analysis discusses the various types of business organizations in Brazil, and the taxation of corporations and individuals, both resident and nonresident, in particular, the transfer pricing rules and the various measures for the avoidance of double taxation. To assist in researching specific issues, the Portfolio contains a Bibliography.
The Worksheets in this Portfolio include a table of the double taxation agreements and related protocols signed by Brazil. An excerpted tax return form for corporations is also included.


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AUTHORS

Business Operations in Brazil is authored by the following experts.
SYLLAS TOZZINI, ESQ.
Syllas Tozzini, partner, TozziniFreire Advogados, São Paulo, Brazil; University of São Paulo School of Law (LL.B., 1972); Parker School of Foreign and Comparative Law, Columbia University (1987).

JOSÉ LUIS DE SALLES FREIRE, ESQ.
José Luis de Salles Freire, partner, TozziniFreire Advogados, São Paulo, Brazil; University of São Paulo School of Law (LL.B., 1971); Southwestern Legal Foundation (Academy of American and International Law, 1975) and New York University School of Law (M.C.J., 1976). Member of the Advisory Board of the International and Comparative Law Center of the Southwestern Legal Foundation.

RENATO BERGER, ESQ.
Renato Berger, partner, TozziniFreire Advogados, São Paulo, Brazil; University of São Paulo School of Law (LL.B., 1995); Georgetown University Law Center (LL.M., 1997).

ANA CLÁUDIA AKIE UTUMI, ESQ.
Ana Cláudia Akie Utumi, partner, TozziniFreire Advogados, São Paulo, Brazil; Member of the Board of Directors of Brazilian Branch of IFA (International Fiscal Association); University of São Paulo (Ph.D, 2006; LL.B., 1994), Catholic University of São Paulo (LL.M, 2001), Brazilian Institute of Financial and Capital Markets (”IBMEC/SP”, MBA in Finance), Getulio Vargas Foundation School of Business Administration (BBA, 1992).

TABLE OF CONTENTS

Detailed Analysis

I. Introduction

A. The Country

B. Language

C. Population

D. Political Organization

E. Government

F. Legislative Power

G. Executive Power

H. Judicial Power

II. Operating a Business In Brazil

A. Currency and Exchange Controls

1. Currency

2. Indexing

3. Exchange Controls

4. Foreign Exchange Market

B. Immigration Regulations

1. Transit Visa

2. Tourist Visa

3. Temporary Visa

4. Permanent Visa

5. Diplomatic, Official, and Courtesy Visas

6. Other Relevant Provisions

C. Foreign Capital Regulations

1. Definition of Foreign Capital

2. Registration of Foreign Capital

3. Loan Regulations

4. Registration of Loans

5. Restrictions on Foreign Investment

6. Restricted Activities

a. Banking

b. State Monopolies

c. Mineral Resources

d. Newspaper and Broadcasting Companies

e. Rural Property

f. Transport

g. Privatization

h. Health Care

7. Concessions and Permissions with Respect to Public Services and Public and Private Partnerships

8. Registration of Foreign Entities and Individuals with the Tax Authorities

D. Export and Import Controls

1. Import Controls

a. Importer Registration with SECEX

b. Import License

c. Customs Clearance

(1) Import Declaration

(2) Import Declaration Register

(3) Bill of Lading Write-off

(4) Check-in Channels

(5) Issuance of Customs Clearance

2. Controls on Exports

E. General Regulation of Business

1. Restrictive Trade Practices

a. Interest Rates

b. Trade Practice Crimes

c. Antitrust Provisions

(1) Mergers and Acquisitions

(2) Anti-Competitive Practices

d. Consumer Protection

e. Payments in Foreign Currency

f. Crimes Against the National Financial System

2. Securities Regulation

F. Protection of Trade Secrets, Patents, Trademarks, Licensing Agreements and Topographies of Integrated Circuits

1. Protection of Trade Secrets

2. Patents

a. Patent Applications

b. Patent Enforcement

3. Trademark Protection

4. Licensing

5. Protection of Layout-Designs (Topographies) of Integrated Circuits

G. Environmental Protection

H. Labor Relations

1. Definition of Employee

2. Labor Contract

3. Remuneration and Minimum Wage

4. Child Labor

5. Salary Increases

6. Working Hours

7. Vacations and Leaves of Absence

8. Duration of Individual Labor Contracts

9. Termination of Individual Labor Contracts

a. Employer's Initiative

(1) Termination Without Just Cause

(2) Termination with Just Cause

b. Employee Resignation

c. Expiry of Employment Term

d. Constructive Dismissal

10. Job Security

11. Transport Tickets

12. Unions and Strikes

13. Social Security and Pension Funds

14. Severance Pay Fund (FGTS)

15. Program of Social Integration (PIS)

16. Health and Work Safety Programs

a. Work Health Medical Control Program

b. Environmental Risks Prevention Program

c. Internal Commission for the Avoidance of Accidents

17. Health Hazard Allowances

18. On-the-job Risk Allowance

19. Summary of Employer and Employee Payments/Contributions

III. Forms of Doing Business in Brazil

Introductory Material

A. Branch of a Foreign Company

B. Limited Liability Company

1. Formation of the Company

2. Articles of Association

3. Capital

4. Protection of the Corporate Name

5. Rights and Obligations of Partners

6. Management

7. Miscellaneous

C. Corporation

1. Corporate Purpose

2. Corporate Name

3. Distinction Between Publicly Held and Closely Held Corporations

4. Incorporation Procedures

5. Corporate Capital

6. Securities

7. Shareholders’ Rights and Duties

8. Shareholders’ Agreements

9. Shareholders’ General Meetings

10. Corporate Management

11. Fiscal Board

12. Financial Statements

13. Distribution of Profits

14. Dissolution and Termination

15. Change in Corporate Form, Merger, Consolidation and Split-off

16. Wholly Owned Subsidiary

17. Group of Companies

18. Consortium

IV. Principal Taxes

A. General

B. The National Tax System

1. Union Taxes

2. State Taxes

3. Municipal Taxes

C. Audits, Statute of Limitations, Fines and Penalties

V. Taxation of Domestic Corporations

A. Taxes on Income

1. Definition of Corporate Taxpayer

2. Corporate Income Tax and Social Contribution on Profits

3. Assessment and Filing

4. Calculation of Taxable Base

a. Actual Profit Method (Lucro Real)

(1) Calculation of Gross Income

(a) General

(b) Realized Capital Gains/Losses

(c) Unrealized Capital Gains/Losses

(2) Business Expenses

(a) Organizational Expenses

(b) Management Remuneration

(c) Interest

(d) Royalties

(e) Taxes and Fines

(f) Depreciation

(g) Maintenance of Equipment and Plant

(h) Donations

(i) Losses on Receivables

(j) Inventory

(k) Rent

(l) Salaries and Wages

(m) Tax Loss Carryforward

(n) Reorganization

b. Estimated Profit Method (Lucro Presumido)

5. Income Tax Withholding - Payments to Residents

a. Professional Services and Commissions

b. Financial Investment Income

c. Undocumented Disbursements

d. Dividends

e. Interest on Shareholders’ Equity

B. Taxes on Revenue

C. Taxes on Property

1. Tax on Rural Property

2. Tax on Urban Land or Buildings

3. Tax on Ownership of Automotive Vehicles

4. Tax on Inheritances and Gifts

5. Tax on Onerous Transfers of Real Property

D. Taxes on Production, and on Domestic or Cross-border Transactions

1. Excise Tax

2. Value-Added Tax

3. Service Tax

4. Import Tax

5. Export Tax

E. Taxes on Financial Transactions

F. Accounting

1. Bookkeeping

2. Accounting Period

3. Accounting Methods

a. Investments

b. Current and Long-Term Liabilities

Content

VI. Taxation of Foreign Corporations

Introductory Material

A. Taxation of Brazilian-Source Income

1. Capital Gains

2. Dividends

3. Interest

4. Royalties and Technical Assistance (Transfer of Technology)

5. Services Without Transfer of Technology

B. Doing Business in Brazil Concept

VII. Taxation of a Branch

VIII. Taxation of Partnerships

IX. Taxation of Resident Individuals

X. Taxation of Nonresident Individuals

XI. Mercosur (Mercosul)

XII. Transfer Pricing Rules

Introductory Material

A. Related Persons

B. Tax Haven Jurisdictions and Favorable Tax Regimes

C. Import Transactions - Customs Valuation and Transfer Pricing Rules

1. Customs Valuation Rules

2. Transfer Pricing Rules for Import Transactions

D. Export Transactions - Transfer Pricing Rules

XIII. Avoidance of Double Taxation

A. Unilateral Measures

B. Tax Treaties

1. Introduction

2. Taxation of Business Income

3. Taxation of Investment Income

4. Relief from Double Taxation


WORKING PAPERS

Working Papers

Table of Worksheets

Additional Resources

Worksheet 1 Corporate Income Tax Return - Portuguese Language Version (Excerpt)

Worksheet 2 Double Taxation Agreements and Related Protocols Signed by Brazil as of March 1, 2007

Bibliography

OFFICIAL

UNOFFICIAL

Treatises

Articles

2002

2003