brazilian company types presentation 19 09 2011

8/3/2019 Brazilian Company Types Presentation 19 09 2011

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So Paulo - SP September 2011

ADVOGADOS ASSOCIADOS

Corporate Structure for the Brazilian Operation


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HENARES ADVOGADOS ASSOCIADOS

1. Company Types1.1 Limited Liability Company Limitada

1.2 Corporation Sociedade Annima (S.A.)

1.3 Usual Structures

Summary

Corporate Structure for the Brazilian Operation

Henares Advogados Associados 1

2. Requirements2.2 Documents From the Shareholders

2.2 Brazilian Elements

2.3 Registries

2.4 Management and Permanent Visa

3. General Taxation

3.1 Income Tax

3.2 Indirect Taxes


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1. Company Types

1.1 Limited Liability Company Limitada

1.1.1 Capital Stock divided in Quotas, instead of Shares;1.1.2 A minimum value is not required

1.1.3 At least 2 Quotaholders, which can be individuals or legal entities,


1.1.4 Corporate Document: Articles of Association

1.1.5 Liabilities are limited to the amount of the Capital Stock paid in

1.1.6 Control of the company: holder of 75% of the Quotas

1.1.7 Publication of Minutes and Financial Statements is not required,unless the company has revenues over R$300 million or Net Equityover R$240 million


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1. Company Types

1.3 Usual Structure:

PARENT

COMPANY 1

PARENT

COMPANY 2


BRAZILIANBUSINESS 1

BRAZILIANBUSINESS 2

BRAZILIANBUSINESS 3

BRAZILIANHOLDING

Headquarters

Brazil


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2. Requirements

2.1 Documents From the Shareholders

2.1.1 Copy of the Articles of Association/By-laws2.1.2 Copy of the Minutes nominating the representatives of the legal entity

2.1.3 Evidence of existence, place of incorporation, business address, business


,

by the Commercial Registry shall be accepted;

2.1.4 Name, nationality, marital status, profession, passport number (ifforeigner)


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2. Requirements

2.1 Documents From the Shareholders

2.1.5 Copy of the Identity Card and/or the Valid Passport (if Brazilian resident:copy of the Brazilian Individual Taxpayers number and Identity CardNumber)


2.1.6 Power of Attorney granting powers to a Brazilian resident to represent theforeign entity or individual, with special powers to receive service of justiceor summons on behalf of grantor.

Very important note:

All copies shall be notarized and legalized before the nearest Brazilian Consulateand, once received in Brazil, shall also be translated to Portuguese by a sworntranslator.


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2. Requirements

2.2 Brazilian Elements

In order to incorporate the Brazilian Subsidiaries, some definitions are required:

2.2.1 Local Company Business Name


. . us ness ress

2.2.3 Business Purpose: must be very specific and precise; the inclusion ofobjectives which the company does not intend to engage in is also notadvisable because this usually results in unfavorable tax consequencesand/or paperwork

2.2.4 Initial capital stock investment amount and shareholding participation (inreais) of each quotaholder

2.2.5 Form (cash or assets) and date of capitalization;


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2. Requirements

2.3 Registries

2.3.1 Brazilian National Corporate Taxpayers Number (CNPJ):

The main registry for the company, to enable other registries, opening the


,

Central Bank

2.3.2 State Tax Authority necessary for selling goods

2.3.3 Brazilian Central Bank (BACEN):

Mandatory to allow the remittance of money as initial capital stock fromthe Shareholders and for the repatriation of the capital back to theheadquarters.


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2. Requirements

2.4 Management and Permanent Visa

2.4.1 The management of the Brazilian Subsidary shall be done by a Braziliancitizen or a Foreign Individual holder of a Permanent Visa


2.4.2 In order to obtain the Permanent Visa, the Parent Company should makean investment of the equivalent to US$200,000. Another possibility is tomake an investment of US$50,000 with the commitment to create 10 newjobs within a period of two years


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3. Taxation

3.1 Income Tax

3.1.1 Individuals: 15% or 27,5% assessed on revenues; 15% on capital gains3.1.2 Corporations there are 2 different taxation methods:

3.1.2.1 Lucro Real (Net Profit Method): After the deductions and


, ,

the Social Contribution on the Net Profit (CSLL) at a rate of 9%

3.1.2.2 Lucro Presumido (Presumed Profit Method): A presumed profitmargin is calculated over the revenues of the company 32% and theIncome Tax is assessed over such margin. The rate is variable, from 15%to 40%, plus the CSLL at a rate of 9% over the presumed profit margin


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3. Taxation

3.1.3 Withholding tax: is due on income paid, credited, remitted, or deliveredto non-residents, at the rate of 15% or 25% depending on the beneficiarys

country of residence and the nature of the income. As of January 1, 2001,a Contribution on the Economic Domain Intervention (CIDE) is due, at therate of 10%, over remittances of royalties or compensation deriving fromtechnolo transfers, in cases where the withheld income tax rate is 15%.


This does not apply to profits and dividends, which are exempt fromwithholding income tax

3.1.4 Transfer Pricing: Regulation on the transfer pricing in businesstransactions by resident individuals or corporations with non-resident

parties for import and export, and interest payments abroad up to a basic20% rate. These rules apply (i) when a corporation domiciled in Brazilconducts business with non-domiciled related parties; (ii) when adomiciled individual or corporation carries out business with a partydomiciled in a tax heaven.


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3. Taxation

3.2 Indirect Taxes: a brief description of the taxes assessed directly in relationto production and commercialization of goods:

3.2.1 ICMS Tax on circulation of goods, interstate and inter-municipaltransport, and communications: similar to VAT, this is the main State tax,


and is due on operations involving circulation of goods (includingmanufacturing, marketing, and imports) and on interstate and inter-municipal transport and communications services. ICMS is non-cumulative and it may be set-off by credits arising from such tax from thepurchase of raw materials, intermediary products and packaging

materials. Tax credits for goods destined to become fixed assets may beaccepted, subject to certain restrictions. Intrastate rates normally varyfrom 7% to 25% (the average rate is 18%). Export goods are exemptedfrom ICMS.


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3. Taxation

3.2 Indirect Taxes

3.2.2 COFINS Social contribution for funding Social Security: such tax islevied monthly on the gross income. Current rates are 3% (presumedprofit) and 7.6% (net profit, but non-cumulative) over the invoiced amount.Export goods are exempted from COFINS.


3.2.3 PIS Social Integration Program: such tax is levied monthly on the grossincome of corporate entities. Current rates are 0.65% (in the case ofpresumed profit) and 1.65% (net profit, but non-cumulative) over theinvoiced amount. Export goods are exempted from PIS.

Both COFINS and PIS are also assessed over the import of goods.


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3. Taxation

3.2 Indirect Taxes

3.2.4 IPI: The tax on industrialized goods is levied on output and on the importof industrialized goods. IPI is a non-cumulative tax and thus it may be set-off by credits arising from the purchase of raw materials, intermediaryproducts and packaging materials. However, no credits are granted for


.

industrialized goods, as they are cleared from customs or from theproducer premises. Rates varies according to the nature of the goods andalso is applicable as extra-fiscal function. The average rate is 10%.Export goods are exempted from IPI.

3.2.5 ISS: Services Tax is levied on services listed in a federal law, overt thevalue of the services invoiced and the average rate is 5%. SomeMunicipalities has a lower rate (2%).


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3. Taxation

3.2 Indirect Taxes

3.2.4 Social Security Contribution: 11% withheld from the employeesearnings and 20% paid by the employer.

3.2.5 FGTS: due to the Unemployment Guarantee Fund, 8% of the employeesearnings are withheld to a special account; the deposited amounts may


be used by employee to buy his own house.


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3. Taxation

Important Note:

The assessment of several taxes in a single operation is not an uncommonsituation. For example, IPI, ICMS, PIS and COFINS may be levied over the saleof industrialized goods all together.


In the remittance of royalties, Withholding Tax and CIDE are both assessed, aswell.


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