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DOING BUSINESS IN BRAZIL

August 2012

MAZARS IN BRAZIL
Present in Brazil since 1995, Mazars counts almost 500 employees in 4 offices: So Paulo,
Rio de Janeiro, Campinas and Ribeiro Preto. Our services include:

Accounting & Outsourcing


Services

Audit
> Independent Audit of Financial Statements
> Audit for Consolidation Purposes
of Multinational Groups
> Limited Review of Financial Statements
> Agreed Upon Procedures
> Assurance Services

> Accounting & Financial Outsourcing


> Direct & Indirect Tax Outsourcing
> HR Outsourcing
> Secretarial Services
> Accounting Tax Reconciliation

Consulting
> Strategy
> Benchmarking
> Marketing & Sales
> Operational Excellence
> Information Technology
> Sustainability & Human Rights
> Asset Management
> Conduct & Human Resources
> Risk Management

Added
value

Tax
> Transfer Pricing Services
> Tax Planning
> Accessory Obligation Review
> Tax & Labor Due Diligence
> Tax Advisory for Expatriates
> Tax Review for Direct & Indirect Taxes
> Succession & Corporate Planning for
Owner Managed Business

Financial Advisory
Services
> Transaction Services
(Acquisition & Vendor Due Diligence)
> Valuation
> Litigation & Arbitration
> Project Finance & Modelling

MAZARS IS AN INTERNATIONAL, INTEGRATED AND INDEPENDENT ORGANIZATION SPECIALIZED IN AUDIT,


CONSULTING, ACCOUNTANCY, TAX, LEGAL AND ADVISORY SERVICES.
MAZARS CAN RELY ON THE SKILLS OF 13,000 PROFESSIONALS IN THE 69 COUNTRIES WHICH MAKE UP ITS
INTEGRATED PARTNERSHIP ACROSS THE CONTINENTS. MAZARS ALSO HAS CORRESPONDENTS AND JOINT
VENTURES IN 15 ADDITIONAL COUNTRIES.

Niteri Contemporary Art Museum (Museu de Arte Contempornea de Niteri MAC).

CONTENTS
Why invest in Brazil?
Key facts and figures
How to invest?
Accounting and Audit Standards
Tax Environment
Labor Environment
Appendices

2
3
14
20
24
44
52

This guide has been prepared for the assistance of those interested in doing business in Brazil.
It does not cover exhaustively the subjects it treats, but it is intended to answer some of the important
broad questions that may arise. When specific issues arise in practice, it will often be necessary
to consider the relevant laws and regulations and to obtain appropriate professional advice.

DOING BUSINESS IN BRAZIL 2012

WHY INVEST IN BRAZIL?


At the end of December 2011, it was officially announced that Brazil had overtaken United Kingdom as the 6th largest economy
in the world. As Douglas McWilliams1 then said, Brazil had already beaten European countries at soccer for a long time, but the
new phenomenon is that the South-American giant is now going to outperform them economically.
Since 1994, Brazil succeeded in reducing inflation and progressively initiated a steady growth that had been expected for many
years but always postponed due to a lack of economic and political stability. After the effects of the 1997/1998 Asian crisis disappeared, Brazil entered a new era of economic development and multiplied its Gross Domestic Product (GDP) by five since 2002.
Economy is now largely based on services (67%) and industry (27%) while agriculture remains one of the most productive in
the world. The country is a top producer, manufacturer and/or exporter of aircrafts, automobiles, electronics, textiles, footwear,
ethanol, steel, sugar, coffee, orange juice, soybeans and corned beef among others.
Abundant natural resources are also a key to its economic success. Brazils area ranks 5th in the world and its soil is rich in
bauxite, iron ore, timber, tin, manganese, natural gas, aluminum, nickel, gold and petroleum. In addition, more than 85% of its
electricity production comes from renewable sources (hydropower, biomass, wind, solar).
To assume this growth, Brazil benefits from a large and young population (5th in the world with 192.4 million individuals2,
26% are under 15 years old) and a fast growing middle-class.
Despite all these positive aspects, Brazil also faces challenges in its development momentum. Informal activities are still
apparent, bureaucracy slows down administrative processes and the tax environment is unstable and complex (federal, state
and municipal levels for instance). There is a large social gap between the rich and the poor and the geographical imbalance
between the North and South has not disappeared. Indeed, Southern states of So Paulo, Rio de Janeiro and Minas Gerais
represent more than 50% of Brazilian GDP.
Nonetheless, South-Americas greatest economy presents far more opportunities than threats. Incoming events (World Cup
2014, Olympic Games 2016), good macro-economic conditions and forecasts, strong domestic market and the need for investments in infrastructure and skilled people as well as the political stability shall be sources of confidence and interest for
potential investors.
Sejam bem vindos!
Eduardo Cabrera, Managing Partner of Mazars in Brazil

1.
2.

CEO of CEBR: Center for Economics and Business Research British independent commercial economics consultancy
Source: Brazilian Geography and Statistics Institute (IBGE), 2011

DOING BUSINESS IN BRAZIL 2012

Bahias Wish Ribbons.

KEY FACTS AND FIGURES

DOING BUSINESS IN BRAZIL 2012

INSTITUTIONAL
After a XXth century marked by a military domination over Brazilian politics and periods
of dictatorship, the return of the civilians to power in the mid-1980s paved the road to
political stability and economic success with the implementation of the Plano Real in
1994, a set of measures controlling inflation and equilibrating the balance of payments.
Brazil is a federal republic whose political system is based on the union of three
independent political entities (the Federation, the States and the Municipalities) and
three government branches (executive, legislative and judicial). The President, elected
for 4 years, is both the head of state and head of government. Following the 2 periods
of the popular President Luiz Incio Lula da Silva (also known as Lula), Dilma Rousseff
was elected at the end of 2010.
Constitutional Form

Federal Republic

Area

8,515,692 km - 5th in the world

Population

192.4 million - 5th in the world

GDP (US$)

2,493 billion

Capital

Braslia (2.6 million people)

Other main cities


(million people)

So Paulo (11.3), Rio de Janeiro (6.3), Salvador (2.7), Fortaleza (2.5), Belo
Horizonte (2.4), Manaus (1.8), Curitiba (1.8), Recife (1.5), Porto Alegre (1.4),
Belm (1.4)

Official language

Brazilian Portuguese

National currency

Real (BRL)

President

Dilma Rousseff

Main International
Organizations

UN, WTO, Mercosul, FAO, UNESCO, IBRD, IMF, G15, G20, CPLP

Religions

Roman Catholics (73.6%), Protestants (15.4%), Spiritualists (1.3%),


Others (9.7%)

Ethnic groups

White (53.7%), Mulatto (38.5%), Black (6.2%), Japanese/Arab/


Amerindian (1.6%)

KEY FACTS AND FIGURES

- 6th in the world

Source: IBGE, CIA, IMF

Brazils population is a mosaic built over the centuries by various waves of voluntary or
forced immigration (mainly Portuguese but also Italian, Spaniards, German, Japanese,
Middle-Eastern and African slaves), who intermixed with indigenous populations.

DOING BUSINESS IN BRAZIL 2012

Key facts and figures

POPULATION & EMPLOYMENT INDICATORS


Brazilian life expectancy is the highest among the BRICS (Brazil, Russia, India, China
and South Africa). It still currently remains behind Western standards but the evolution
of its Human Development Index shows that the country benefits from one of the
highest development trends. The country counts on a young and relatively employed
population ready to take on the future challenges that a fast developing country such
as Brazil inevitably faces.
Brazil

Russia

India

China

South
Africa

USA

Life expectancy

73.5

68.8

65.4

73.5

52.8

78.5

Literacy rate (15 years old and above)

90%

99%

63%

94%

86%

99%

Median age

29.3

38.7

26.2

35.5

25.0

36.9

Urban population

84%

73%

30%

47%

62%

82%

Human Development Index (HDI)

0.718

0.755

0.547

0.687

0.619

0.91

HDI evolution since 1995 (%)

13%

12%

25%

27%

-4%

3%

Unemployment rate (%)

6,0%

6,5%

n/a

4,0%

23,9%

9,0%

0-14 years old

26%

15%

31%

19%

29%

20%

15-64

67%

72%

64%

72%

66%

67%

65-

7%

13%

5%

8%

6%

13%

Age structure

Source: UNDP, CIA, IMF, World Bank, CCFB

Brazilian social classes 2003 - 2014 (% of the population)


Brazilian society is moving fast. Indeed, from 2010 to 2020, 8.8 million people are expected
to migrate from the low income brackets, classes E and D, to the middle class (class C).
Classes and Monthly revenues

2003

2009

2014

Class A & B (> R$ 4,635)

8%

11%

16%

Class C (R$ 1,159 to 4,635)

37%

50%

56%

Class D (R$ 701 to 1,159)

27%

24%

20%

Class E (< R$ 701)

28%

15%

8%

Source: FGV, IBGE, LCA, Bradesco

DOING BUSINESS IN BRAZIL 2012

Key facts and figures

ECONOMIC AND FINANCIAL INDICATORS


Gross Domestic Product - current US$ billion

14000

9000
8000
7000
6000
5000
4000
3000
2000
1000
0

2000
USA
China

Source: IMF

DOING BUSINESS IN BRAZIL 2012

2005
Japan
Germany

France
Brazil

2011
UK
Russia

India
South Africa

Key facts and figures

While the USA, China and Japan continue to dominate GDP ranking, Brazil became the
6th largest economy in 2011, ahead of UK.
The 4 emerging giants (Brazil, China, Russia and India) proved their economic miracle
is based on long term sound foundations: since the BRIC concept was created in
2001 by Jim ONeill3, China is almost on the same path as the USA and Brazil, Russia
and India are expected to overtake European powers by 2020.
2020 GDP Projections in US$ billion

Position Change from 2011

#1 USA

21278

#2 China

17888

#3 Japan

7630

#4 Russia

4584

+5

#5 India

4501

+5

#6 Brazil

4262

#7 Germany

4187

-3

#8 UK

3975

-1

#9 France

3689

-4

648

+1

#28 South Africa


Source: CEBR

Although GDP growth slowed down to 2.7% in 2011, compared to 7.5% in 2010, the world
continued to put its confidence in the Brazilian economy since the country remained as
one of the most successful places to invest in, behind China, but ahead of Russia and
India. Indeed, inbound investments have almost doubled since 2007.
Brazil

Russia

India

China

South
Africa

USA

2,7%

4,3%

7,8%

9,2%

3,4%

1,5%

12789

12993

1389

5414

8066

48387

Inflation (Consumer Prices - 2011)

6,6%

8,4%

8,6%

5,4%

5,0%

3,1%

FDI Net Inflows 2011 (US$ billion)

66,7

50,8

34,0

124,0

4,5

210,7

Stock of FDI 2011 - At Home (US$


billion)

426

343

225

776

125

2874

World rank for FDI stock

#13

#16

#20

#7

#29

#1

GDP Growth rate 2011


Per Capita GDP 2011 (US$)

Source: World Bank, CIA, CEBR, IMF, UNCTAD

3. Chairman of Goldman Sachs Asset Management. South Africa, whose economy still remains smaller than the others, is included in the group since 2010 to form
the BRICS.

DOING BUSINESS IN BRAZIL 2012

Key facts and figures

Gross Domestic Product by state and sector


Geographical disparities are still strong among the 26 states and the Federal district;
Southern states remain the most populated and the drivers of an economy now led by
services. States of So Paulo, Rio de Janeiro and Minas Gerais represent more than
40% of the population and 50% of the GDP.

Other 19 states 22%

So Paulo 33%

Federal
District 4%
Bahia 4%
Santa Catarina 4%
Rio de Janeiro 11%
Paran 6%
Rio Grande do Sul 7%

Minas Gerais 9%

Services 67%

Agriculture 6%

Industry 27%

Source: CIA, CCFB, IBGE

DOING BUSINESS IN BRAZIL 2012

Key facts and figures

Nominal interest rates (SELIC) evolution (%)


Brazilian inflation 1995-2011 (%)
Brazilian Central Bank has been taking measures to reduce interest rates and lowered
them several times in 2011 and 2012. Indeed high rates attracted substantial foreign
capital flows leading to an overvalued currency unfavorable to exportations. It also
generated a higher risk of non-payment from borrowers to banks and limited the level
of lending to customers.

20
18
20
16
18
14
16
12
14
10
12
8
10
6
8 jan/00

NOMINAL INTEREST RATES


Source: Bradesco, CCFB, BCB

jan/07

jan/08

jan/09

jan/10

jan/11

jan/12

apr/12

may/12

6
jan/00
25

jan/07

jan/08

jan/09

jan/10

jan/11

jan/12

apr/12

may/12

20
25

BRAZILIAN INFLATION
Source: BCB

15
20
10
15
105
50
0

1995

2000

2005

2011

1995

2000

2005

2011

DOING BUSINESS IN BRAZIL 2012

Key facts and figures

INDUSTRY
Thanks to recently discovered offshore black gold, Brazil became an important oil
producer. The country is also a leader in renewable energy, as hydropower and
biomass account for more than 85% of total electricity output.
Brazil

Russia

India

China

USA

14288

79432

5820

18000

19121

2,7

10,3

1,0

4,1

9,7

#13

#2

#24

#5

#3

Proven natural gas reserves


(billion of cubic meters)

434

46000

1085

2751

7075

Natural gas production - in cubic meters


(million)

24,1

588,9

52,8

102,5

611,0

#24

#3

#21

#5

#2

230

1182

502

2085

1741

Proven crude oil reserves


(million of barrels)
Oil production - in barrels per day (million)
Production world rank

Production world rank


Production of energy (Mtoe)
Energetic dependance (% of imports in energy used)

4%

0%

26%

8%

22%

Electricity production - in kilowatt-hours (billion)

509,2

925,9

835,3

4604,0

3953,0

Production world rank

#10

#5

#6

#1

#2

Part of electricity production from renewable


sources (%)

85%

15%

15%

19%

11%

Motor vehicle production (million)

3,4

2,0

3,9

18,4

8,7

#7

#12

#6

#1

#2

Production world rank


Source: CIA, IMF, EDF, World Bank, OECD, OPEC, ANP

Brazilian structure of electricity production


5%

12%
3%
Hydraulic
Biomass
Fossil
Nuclear

Source: CCFB, EDF

10

DOING BUSINESS IN BRAZIL 2012

80%

Key facts and figures

INTERNATIONAL TRADE
Brazilian Export: main partners
China 17%

USA 10%

Others 44%

Argentina 9%
Netherlands 5%
Japan 4%
Germany 3%
Italy 2%
South Korea 2%

Chile 2%
UK 2%

Brazilian Import: main partners


USA 15%

China 15%

Others 37%

Argentina 7%
Germany 7%
South Korea 4%
India 2%

Japan 4%
Nigeria 3%

France 3%

Italy 3%

Source: Ministrio das Relaes Exteriores (MRE)

DOING BUSINESS IN BRAZIL 2012

11

Key facts and figures

Debt and credit ratings


Brazilian public gross debt only represents 54.3% of GDP in 2011 (compared to more
than 100% in many developed countries) with a projection of 40.4% by 2016. This
improvement is supported by the continuous increase in the countrys international
credit ratings.
Sovereign Credit Ratings

apr/10

sept/11

dec/11

mar/12

Outlook

Moodys

Baa3

Baa2

Baa2

Baa2

Positive

Fitch

BBB-

BBB

BBB

BBB

Stable

S&P

BBB-

BBB-

BBB

BBB

Stable

Source: The Guardian

Exchange rates
Exchange rate fluctuation is still a major issue for both local companies in their import
and export operations and for foreign investors in their long term cash management
strategies.
3,4

BRL per 1 EUR


BRL per 1 USD

3,0

2,6

2,2

12

DOING BUSINESS IN BRAZIL 2012

12

11

y-1
Ma

nJa

1
y-1

ptSe

10

11
n-

Ma

Ja

0
y-1

10

09

ptSe

Ma

nJa

ptSe

09

y-0
Ma

n-

08

Source: Natixis, BCB

Ja

8
y-0

ptSe

Ma

Ja

n-

1,4

08

1,8

Key facts and figures

MISCELLANEOUS INDICATORS
Transportation infrastructure is still in its early development stage compared to mature
economies. Access to new technologies is widespread but still at a prohibitive cost.

Roadways (km)
paved (%)

Brazil

USA

France

1751868

6506204

1050117

13%

67%

n/a

87%

33%

n/a

4072

15079

475

paved (%)

18%

34%

63%

unpaved (%)

82%

66%

37%

unpaved (%)
Airports (number)

Nb of mobile phones lines (million)

251

328

64

Cellphones per habitant ( > 15 years old)

1,8

1,3

1,2

% of population using the Internet

39%

78%

69%

Source: CIA, CCFB, ANATEL

Number of operating vehicles (million)


More than 70 million vehicles operate in Brazil. Local production amounted to 3.4
million units in 2011 (+0.7% compared to 2010) whereas imports represented c. 20.0%
of total licensing in the last 2 years.
80
70

Brazil
State of So Paulo

60
50
40
30
20
10
0

2000

2005

2010

2011

Source: DENATRAN

DOING BUSINESS IN BRAZIL 2012

13

Night view of Copacabana beach in Rio de Janeiro.

HOW TO INVEST?

14

DOING BUSINESS IN BRAZIL 2012

ENTERING THE MARKET


Legal Entities
The incorporation of a subsidiary is the most common way for foreign investors to enter the
market. Registration with the Social Security System and the Federal, State and Municipal
Tax authorities is compulsory and all types of legal entities may be adopted.
In particular, the two most common legal structures used in Brazil are the LLC (Limitada) and
Corporation (Sociedade Annima), whose main characteristics are briefly presented below:
Limitadas (Ltda)
Limited Liability Companies

Corporate
Capital

Sociedades Annimas (SA)


Corporations

No minimum capital requirement *


Original full subscription and paying-up of 10% or more in cash
Full paying-up within 5 years or sooner in case of capital increase
Divided into quotas with fixed
price or different unit prices

Divided into negotiable shares

At least 2 original quota/share-holders (resident or non-resident individual or entity), but the


second can hold a minimal interest

Partners

Liability limited to contributions after full


paying-up of the capital

Liability limited to contributions

Investors must empower a resident legal representative and get a taxpayer


registration number (CPF for individuals and CNPJ for entities)
Supervisory Board (Conselho Fiscal) is optional
Management

Board of Directors (Conselho de


Administrao) is optional

Board of Directors (Conselho de Administrao


3 members at least, resident individuals and
shareholders) is mandatory for publicly held
corporations only
Management Board (Diretoria) with 2 members
at least (resident individuals, not necessary
shareholders)

Under the Brazilian Civil Code, non proportional distribution of profits is authorized
According to specific disclosure in the bylaws,
shareholders have the right to receive a
compulsory minimum amount of dividends

Dividends

Common choice for firms with few owners and


no intention to raise public funds

Others

Fewer administrative processes are required


than for a corporation

May be privately or publicly held


Supervised by the CVM (Securities and Exchange
Commission) in case of a SA publicly held
SA is necessary for financial institutions

* Except for specific sectors (financial sector) or situations (obtaining a permanent visa for an entity managed by a non resident person)

Source: CCBF

DOING BUSINESS IN BRAZIL 2012

15

How to invest?

These legal structures give the foreign investor the opportunity to keep more control
on its activities in comparison to commercial agreements (see hereafter) and to limit
shareholders responsibility for Brazilian operations (which is not the case for a branch
establishment, considered as a dependent entity from the foreign parent company).
Furthermore, special authorization from the Ministry of Development, Industry and
Commerce (MDIC) is necessary in order for a foreign firm to establish a branch in
Brazil. As it involves many administrative processes, few companies opt for this direct
but time-consuming solution.

Commercial agreements
Out of legal structures, commercial agreement options such as distribution or sales
representation present the advantage of time saving and reducing initial investments,
in comparison to creating or acquiring a legal structure.
For legal purposes, distribution agreements, in which the distributor takes possession
of the products, should disclose: a precise definition of the products, the delimitated
area and exclusivity conditions, the duration of the commercial relationship and the
advertising and trademark licenses issues. According to the Brazilian Civil Code, if
no term has been agreed and disclosed initially, the agreement will be considered as
having an indefinite duration and could only be terminated with a 90-days prior notice
period.
In sales representation agreements (without transfer of ownership), foreign companies
should protect any know-how, patent or trademark at the National Institute of Industrial
Property (INPI).
In both situations, these agreements may present legal risks, which shall be addressed
at the beginning of the commercial relationship by both parties, as well as operational
issues as the foreign entity may not have efficient control on the distribution policies
locally applied by its distributor.

16

DOING BUSINESS IN BRAZIL 2012

How to invest?

FOREIGN DIRECT INVESTMENT


No nationality or minimum capital investments are required in order to start a
business in Brazil. However, there are some exceptions, such as respecting some
liquidity and solvency ratios for public tender or when a foreign individual is appointed
as a Brazilian entitys manager, administrator or executive director.
In this latter case, a minimum capital investment will be required (for both SAs and
Limitadas), following the Normative Resolution n95 released on August 10th 2011:
investment in foreign currency of an amount equal or higher than R$ 600,000 per
foreign worker, or R$ 150,000 per foreign worker along with the commitment of
creating at least 10 new jobs (per foreign worker) over the following 2 years.
Foreign investments are authorized in many activities: mining, oil & gas, agriculture
& forestry, light manufacturing, telecommunications, electricity, banking & financial
institutions (with prior authorization from the Brazilian government), insurance (limited),
tourism or retail. Foreign equity ownership is limited to 20% in air transportation and
30% in media industries (TV broadcasting & newspapers).
Some sectors are also prohibited: nuclear energy, mail & telegraph services, public
health services, aerospace industry and sanitation. However, such sectors may remain
accessible in some cases through local investment vehicles.

FIP AND FMIEE


Both regulated by the Securities and Exchange Commission (CVM), the Fundo de
Investimento em Participaes (Private Equity Fund or FIP) and the Fundo Mtuo de
Investimento em Empresas Emergentes (Emerging Companies Investment Fund or
FMIEE) are not legal entities but funds held by financial investors. They have rapidly
become attractive venture capital and private equity investment vehicles, as they are not
subject to corporate and gross revenue taxes (IRPJ, CSLL, PIS/COFINS).
Some terms and conditions are to be respected. Any participant cannot hold 40% or more
of the funds quotas and income. Furthermore, the portfolio must not be composed with
debt securities exceeding 5% of the funds net equity, and if a foreign investor resides in
a low tax jurisdiction, he will not benefit from any exemption.

DOING BUSINESS IN BRAZIL 2012

17

How to invest?

ANTI-TRUST AUTHORITIES
If any participant of a M&A contract presents an annual gross revenue higher than R$
750 million in Brazil and another participant an annual gross revenue above R$ 75
million in Brazil, then the whole case must be presented for approval or rejection to
the Federal Antitrust Agency (Conselho Administrativo de Defesa Econmica or CADE),
which will investigate for a maximum of 240 days. This period may be extended to 300
days upon request of the participants or to 330 days by the CADE.

THE SUPER CADE


Until the end of 2011, contracts could be presented within 15 days after completion,
but after the law change in 2012, all projects signed after May 31st, 2012 must now be
submitted prior to their execution (Lei n 12.529/11). This Super CADE law brings about
some uncertainties to the business community regarding the potential delays that it will
bring and the operational implication of this on-hold period (communication of the
transaction, management during the interim period, business implications). However,
non-complex operations are expected to be cleared within 60 days maximum, according
to the CADE. Furthermore, authorities diminished the constraints on M&A deals by
raising the thresholds for prior analysis, which were increased from R$ 400 million and
R$ 30 million initially to R$ 750 million and R$ 75 million respectively (Interministerial
Ordinance n994 of May 30th, 2012). This will reduce the number of cases to be studied
and should hopefully accelerate processes.

18

DOING BUSINESS IN BRAZIL 2012

How to invest?

REGULATORY AGENCIES
In order to control potential transfer of public entities to the private sector, and to keep
regulating and supervising economy, the Brazilian State created various regulatory
agencies for each branch.
Banking and insurance sectors are respectively regulated by the Brazilian Central
Bank (BACEN - Banco Central do Brasil) and the SUSEP (Superintedncia de Seguros
Privados), while Brazilian Stock Exchange is under the authority of the CVM (Securities
and Exchange Commission - Comisso de Valores Mobilirios).
The IBAMA was created to deal with environmental issues, such as elaborating
standards to limit pollution, making decisions on the localization of industries and
authorizing various types of projects (hydroelectric dams for instance).
ANEEL (Electricity), ANATEL (Telecommunications), ANP (Oil and Natural Gas), ANTT
(Transport), ANAC (Civil Aviation), ANVISA (Sanitation), ANS (Health), ANA (Water
resources) and ANCINE (Cinema industry) are the other main Brazilian agencies.

CONTROL OF INTERNATIONAL FINANCIAL OPERATIONS


The Brazilian Central Bank (BACEN) is responsible for controlling financial relations with
other countries. Any inbound or outbound financial operation must be registered in the
dedicated Electronic Declaratory Registry (Registro Declaratrio Eletrnico or RDE):
Foreign Direct Investments in the RDE-IED (Investimentos Estrangeiros Diretos), foreign
investments on capital and financial markets in the RDE-Portflio and debtor financial
operations towards other countries in the RDE-ROF (Operaes Financeiras). Debtor
financial operations include financial loans, rent of equipment, chartering of vessels, etc.
Individuals and legal entities intending to perform such operations must be registered
at the Brazilian Central Bank (BACEN) themselves, in the Cademp (Cadastro de Pessoa
Fsica/Jurdica, Residente/no Residente no Pas).

DOING BUSINESS IN BRAZIL 2012

19

CHAPTER HEADLINE ON
ONE OR TWO LINES MAXIMUM

City of So Paulo, economic heart of Brazil.

ACCOUNTING AND
AUDIT STANDARDS

20

DOING BUSINESS IN BRAZIL 2012

BRAZILIAN GAAP VS. IFRS


Brazilian accounting and audit standards have progressively been converging with the
International Financial Reporting Standards (IAS/IFRS) for the last half decade, even if a
few differences remain (disclosure required, options allowed).
The Brazilian Committee of Accounting Pronouncements (CPC), in charge of the conversion
plan, translated almost integrally the international standards to create the new Brazilian
standards (Brazilian GAAP or CPCs).
In order to get legal effects, these standards are presented for approval or rejection to the
Federal Board of Accountancy (CFC) and the regulation main agencies (CVM, SUSEP, ANEEL).
Depending on the decision of these entities, rules shall apply to a sector or not. Furthermore,
standards cannot be in contradiction with the Corporate Law.
For example, in order to converge respectively with IAS 16 and 38, CPC 27 and 4 allowed the
revaluation of fixed assets to fair value to the extent permitted by law, whereas the Brazilian
Corporate Law no. 6.404, amended by Law no.11.638, excluded the revaluation from its context,
thereby leaving room for interpretation and consideration of the accounting principles.
Note that the conversion plan is still in progress and that further evolutions should occur.
For instance CPC 19 recently changed in order to adapt to IAS 31, by allowing both the
proportionate consolidation and the equity method in Joint Ventures consolidation. Before
that, only the proportionate option was permitted in Brazil. However IFRS 11 intends to
replace IAS 31 from January 2013 and would only recognize the equity method. As a
consequence, Brazilian standards could also evolve.

THE EQUITY METHOD


Equity method should be used in individual financial statements as well, and not only
as a consolidation method, when the investor has a significant influence on investees
management and the investment is relevant.

All Brazilian financial statements must be prepared in compliance with Brazilian GAAP
whatever the companys size, which shall give a true image of the companies.
More specifically, listed companies, financial institutions and insurance companies
must prepare their consolidated financial statements in full compliance with IFRS and
their statutory reports in accordance with Brazilian GAAP.

DOING BUSINESS IN BRAZIL 2012

21

Accounting and Audit Standards

AUDIT REQUIREMENTS
Small and medium-sized enterprises (SMEs) financial statements are not required to be
audited by an independent auditor whenever the SME is not a listed company, insurance
company, investment fund or financial institution over the jurisdiction of the Central
Bank. A SME is a legal entity or a group of entities under common control whose total
assets are below R$ 240 million or presenting an annual revenue below R$ 300 million.
Annual financial statements of large companies must be audited by an independent
auditor. Publication is only mandatory for corporations (SA), not limitadas (Ltda). A large
company is a legal entity or a group of entities under common control whose total assets
are over R$ 240 million or presenting an annual gross revenue over R$ 300 million.
Audit and publication requirements are compulsory for all listed companies, insurance
companies, investment funds and financial institutions over the jurisdiction of the
Central Bank. Quarterly financial reports are required for listed companies, financial
institutions and insurance companies and biannual audit reports are compulsory for
financial institutions and insurance companies.
Furthermore, SMEs whose annual revenue is below R$ 48 million can opt for a simplified
corporate income tax regime, the Presumed Profit Regime. Under this regime, the
income tax is calculated on the basis of the gross revenue. To this extent, the quality and
update of the profit and loss below gross revenue is not a major stake for the income
tax declaration.
It is important to note that tax authorities do not require audited financial statements,
but some fiscal obligations must of course be respected, as detailed below.

BUSINESS VS. CONTROLLING CULTURE


The culture of financial control is usually very limited in SMEs which are generally business
focused family companies. Official financial statements are often prepared for tax purposes
only and should be considered with caution in a transaction context. It is not unusual to find
management information which differs from the official one, and the risk of unrecorded
transactions does exist.

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Accounting and Audit Standards

FISCAL OBLIGATIONS
Brazilian companies are subject to multiple electronic and paper filings:
SPED: public system of digital bookkeeping, which aims at replacing
paper copies of invoices and tax records for electronic files. SPED can be
defined as an instrument that unifies reception, validation, storage and
legalization of records and documents that are part of the accounting and tax
bookkeeping of companies, through a single computerized flow of data.
Such documentation is comprised of several accounting and tax books, such as the
general ledger, the general journal, balances and trial balances, inflow and outflow
books, inventory book, ICMS and IPI calculation registers, DIPJ, DACON, GIA, etc. The
general ledger, the general journal, balances and trial balances referred to above
must be annually transmitted by taxpayers to the SPED system by means of Digital
Bookkeeping (ECD).
Brazilian legal entities must file an annual corporate income tax return (DIPJ)
generally by June 30th of the following calendar year (which includes information
about the IRPJ, CSLL and IPI). In case the IRPJ and the CSLL are calculated monthly,
prepayments must be paid by the last working day of the following month. Any
amounts of IRPJ and CSLL due for the year (exceeding the prepayments performed)
must be paid by the last working day of January of the following year.
GIA (ICMS Calculation Information Form) and SINTEGRA (Integrated Goods and
Services Interstate Operations Information System) must be filed monthly by the
taxpayer. In the State of So Paulo, the GIA is due from the 16th up to the 19th day of
the following month, depending on the final number of state registration (inscrio
estadual). The SINTEGRA must be remitted to the State tax authorities up to the 15th
day of the following month.
DACON (Demonstrative of Calculation of Social Contributions PIS/COFINS) must
be filed monthly or twice a year by the taxpayer. The monthly DACON is due by the
fifth day of the second month following the month of reference. The DACON must be
delivered twice a year; once in October (in relation to the first semester), and once in
April of the following year (in relation to the second semester).
The taxpayer must also annually file the DIRF (Declaration of Withholding Income
Tax - Declarao do Imposto de Renda Retido na Fonte). For the 2011 calendar-year,
the DIRF had until February 29th, 2012 to be delivered.
Penalties will apply in the failure to comply with these obligations.

DOING BUSINESS IN BRAZIL 2012

23

CHAPTER HEADLINE ON
ONE OR TWO LINES MAXIMUM

Rio Negro bridge at night.

TAX ENVIRONMENT

24

DOING BUSINESS IN BRAZIL 2012

The Federal Tax Code of 1966 and the Federal Constitution of 1988 define the main
principles of the Brazilian tax system, which is composed of 3 levels of jurisdiction:
federal, state and municipal.
The Brazilian Federal Revenue Bureau (RFB) is an entity of the Ministry of Economy
(Ministrio da Fazenda) and supervises the federal tax system. Smaller, similar
agencies monitor the tax system in all states and main municipalities.
Brazilian legislation is quite complex regarding various collection levels, many rules
frequently changing and a relatively high taxation. Accurate information, advisory and
planning are essential in order to benefit from investment opportunities.

GENERAL PRINCIPLES
The fiscal year always corresponds to the calendar year (1st of January until 31st of
December). It is enforced by tax law regardless of the corporate year chosen by the
company for reporting purposes.
Apart from the case of fraud where it does not apply, the statute of limitation for
most taxes and social charges in Brazil is 5 years. Federal, state and municipal tax
authorities may perform inspections regardless of whether certain taxes or periods
were already inspected.
Tax legislation and jurisprudence give the owner of the operating assets responsibility
to pay current and previous taxes, as long as he retains the capacity to generate
earnings from these assets. Thus, entities resulting from transformation, merger
and spin-off or exploiting a continuing business (although under a different name or
proprietorship) shall be liable for past tax obligations of the original entity or business.

5 YEARS, NO LESS, NO WAY OUT


The tax clearance concept does not exist and the risk is only extinguished at the end of
the statute of the 5-year limitation period. Responsibility is generally transferred with the
transfer of activity, irrespective of the legal form of an investment (asset deal vs. share deal).

DOING BUSINESS IN BRAZIL 2012

25

Tax Environment

Unpaid tax liabilities are subject to interest generally based on the SELIC rate (Special
System for Settlement and Custody) defined by the Central Bank of Brazil (c. 8.5%
annually in May 2012), especially for Federal Taxes. For State and Municipal tax liabilities,
interest is usually based on the IPCA rate (Amplified Consumer Price Index) defined by
the IBGE (Instituto Brasileiro de Geografia e Estatstica c. 5% annually in May 2012).
They are also subject to penalties between 20% (voluntary payment before tax inspection)
up to 150% (in fraud cases), with an intermediary rate of 75% in case of an assessment in
the absence of fraud. The 75% and 150% rates can be halved if the taxpayer pays without
any challenge and within a 30 days period following the assessment notification.

MAIN REGIMES & TAXES


Corporate Income Taxes
The Brazilian legal entities operating for profit are subject to corporate income taxes that
include the corporate income tax IRPJ, and the social contribution on net profit - CSLL,
at following rates:
Income tax rates

IRPJ

CSLL

Total

Applicable on the whole taxable income

15%

9%

24%

Applicable on taxable income above KR$ 240

10%

Total

25%

There are four taxation systems of net income:


Actual Profit tax regime (annually or quarterly based);
Presumed Profit tax regime (quarterly based);
Arbitrated Profit tax regime (quarterly based);
SIMPLES Simplified tax regime (monthly based).

26

DOING BUSINESS IN BRAZIL 2012

10%
9%

34%

Tax Environment

Actual Profit tax regime


The Actual Profit system is the general rule of profit taxation. It corresponds to the
taxation of the accounting net profit after adjustments defined by the tax legislation
(elimination of non-taxable revenues and reintegration of non-deductible expenses).
For Brazilian corporate regulation, expenses must necessarily be related to the
companys operations in order to be subject to deductibility. Most of provisions for
expenses or losses are not deductible upon booking, with the exception of provisions
for vacation pay or 13th salary.
All accounting records and details of the tax calculation must be kept in the Taxable
Income Control Register (LALUR). Payments in the annual regime shall be done on
monthly basis (estimate), except if accumulated payments until the prior month exceed
the amount due in the current year.

UNLIMITED CARRY FORWARD


The Actual Profit tax regime allows the compensation of tax losses carry forward, which
have no time restrictions, but a limit of 30% of the taxable income of the year. Carrybacks
are not permitted in Brazilian tax legislation.

Presumed Profit tax regime


Companies with annual gross revenues below R$ 48 million (among other terms and
conditions) can opt to tax a presumed net profit determined as a percentage of the
gross revenue earned, such percentage being dependent on the nature of the activity
performed by the company, independently if the company has registered a net profit
or net loss in the financial statements.
Presumed Profit as a percentage of revenues
Revenues

Presumed Profit for IRPJ

Presumed Profit for CSLL

Sales of goods

8%

12%

Services rendered

32%

32%

Others revenues

100%

100%

DOING BUSINESS IN BRAZIL 2012

27

Tax Environment

After application of the above percentages on revenues, the corporate income tax
rates are applied to the presumed profit amount (25% for IRPJ and 9% for CSLL).

Arbitrated Profit tax regime


If the accounting registers are not reliable, the tax authorities may arbitrate the taxable
income applying the revenue percentages similarly to the Presumed Profit method
increased by 20% for IRPJ, resulting in the following percentages:
Arbitrated Profit as a percentage of revenues
Revenues

Arbitrated profit for IRPJ

Arbitrated profit for CSLL

9,6%

12%

Services rendered

38,4%

32%

Others revenues

100%

100%

Sales of goods

After application of the above percentages on revenues, the corporate income tax
rates are applied to the arbitrated profit amount (25% for IRPJ and 9% for CSLL).

SIMPLES (simplified tax regime)


The SIMPLES is a unified regime for the payment of Federal, State and Municipal tax and
labor taxes, which replaces all other payment regimes, except taxes on imports and
financial operations. It varies from 4.0% to 22.9% depending on activity and revenues.
Only companies with annual gross revenues below R$ 3.6 million and operating in
specific industry sectors, such as small businesses, small service providers, small
industries and family companies may opt for this simplified tax system.
Export companies that opt for SIMPLES may have up to R$ 7.2 million of gross
revenues, as long as the domestic revenues fall under the R$ 3.6 million limit.

GOODWILL AMORTIZATION
For Corporate Income Tax purposes, under certain terms and conditions, goodwill
generated by an acquisition and related to expected future profitability can be amortized
over 5 years (or more) after the merger or reverse merger between the acquirer and
acquired company. Before the merger, the goodwill is non-deductible. Intangible assets
are not subject to amortization for tax purposes and are only tax deductible on sale of the
respective asset or return to the shareholder.

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Tax Environment

Social Contributions on revenues (PIS /COFINS)


The PIS and COFINS are federal social contributions due on the monthly gross
revenues, except export revenues (among other benefits provided for by law). Rates
and systems of PIS/COFINS determination vary in accordance with:
The regime of the corporate income taxes which the company is subject to (Actual Profit
/ Presumed / Arbitrated / SIMPLES);
The nature of good, trading operation or business performed by the company.

The PIS/COFINS system can be cumulative or non-cumulative:


The cumulative system, generally applicable to companies that opted for the Presumed/
Arbitrated profit, is based on a default tax rate of 3.65% (0.65% for PIS and 3.00% for
COFINS) without the possibility of credits on purchases.
The non-cumulative system, generally applicable to companies that adopt the Actual
Profit regime, is based on a default tax rate of 9.25% (1.65% for PIS and 7.60% for COFINS),
with the possibility of credits at the same rate on purchases, services acquired and some
expenses defined by legislation.

Moreover, there are some increased tax rates for some industry sectors and reduced
tax rates to incentivize other sectors defined by the government. PIS/COFINS are also
due on import of goods and services with a tax rate of 9.25% independent of the regime
of taxation of income adopted by the company.
Except in sectors with specific treatment, the application of PIS/COFINS to gross
revenues by Corporate Income Tax option can be summarized as follows:
Regime of taxation of
income
Domestic gross revenues

Actual Profit (PIS/COFINS


non-cumulative)

Presumed/Arbitrated Profit
(PIS/COFINS cumulative)

9,25%

3,65%

Export gross revenues

0%

0%

Financial revenues

0%

0%

Interests on net equity

9,25%

0%

Other revenues (nonoperational revenues)

9,25%

0%

0%

0%

Allowed

Forbidden

Sale of fixed assets


Calculation of credits on
acquisition of goods for
resale or inputs

DOING BUSINESS IN BRAZIL 2012

29

Tax Environment

Illustrative impact of the tax regime on IRPJ/CSLL & PIS/COFINS


P&L (services company)
KR$
Gross Sales (A)
Rates

Actual Profit

Presumed Profit

1000

1000

9,25%

3,65%

(93)

(37)

(700)

(700)

42

Forbidden

250

264

20

20

270

284

34,00%

34% x 32% x (A)

(92)

(109)

178

175

142

145

PIS/COFINS
Operating Costs
PIS/COFINS credits
EBIT
Financial Income
Income Tax
Rates
IRPJ/CSLL
Net income
Tax Charge

Regardless of gross sales thresholds or tax exemptions, the choice of the optimized
tax regime can only be made while considering both PIS/COFINS and IRPJ/CSLL
differentiated rates in each scenario.
Indeed, higher PIS/COFINS rates in the Actual Profit tax regime may be counterbalanced
by tax credits and a more beneficial income tax exposure depending on profitability
perspectives. Such option can be updated in the beginning of each fiscal year based on
an assessment of the sales and profitability levels depending on the companys activity.

Tax on Industrialized Products (IPI)


The Federal tax on industrialized products (IPI) is levied on sales of industrialized
products in the country, or on the importation of raw material, semi-finished or
finished goods for production or resale.
All types of products are classified in the TIPI (IPI tax rates Table). Rates applied on
IPI tax base go from 0 to 300% (tobacco for example). Considering that this tax has
a regulatory characteristic, the rates can be reduced by the government with more
flexibility (by Decree) to incentive determined industries.

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DOING BUSINESS IN BRAZIL 2012

Tax Environment

The IPI tax payer usually can calculate IPI credits on expenses related to the production
costs (raw material, intermediate material and packaging material).

Contribution for Intervening in the Economic Domain (CIDE)


The CIDE is a Federal contribution levied on the importation of services with technology
transfer or specialized technical or administrative services. Usually CIDE is due by Brazilian
entities that hold license of use or are acquirer of technological knowledge (including
agreements related to exploitation of patents, brands use and technology supplying and
technical assistance services). The regular CIDE tax rate is 10% on the amounts paid or
credited to beneficiaries abroad and tax charge is due by the Brazilian entity.

Tax on Financial Operations (IOF)


This Federal tax applies to credit & securities transactions (0 to 1.5% a day), exchange
& insurance transactions (0 to 25% but 7.38% in most of insurance operations) and
gold transactions (1%) performed trough financial institutions. Intercompany loans are
subject to IOF as well (up to 1.5 % of the nominal amount).

State Tax on Circulation of Goods (ICMS)


The ICMS is a State tax levied on imports of products and circulation of goods,
interstate and inter-municipal transportation and communication services. As a State
tax, the rates and its rules may vary in each State of the Federation (26 States and the
Federal District of Brasilia).
ICMS internal tax rates range from 7 to 19%, and can be increased to 25% in certain
situations (communication services for instance), depending, among other aspects,
on the type of good, its origin and destination, and on regional tax incentives (see
ICMS map below). Almost every situation is specific and has to be checked before
importation and/or circulation of goods and services in Brazil.
Note that ICMS applies to internal state as well as interstate operations (imported and
non-imported) and that ICMS credits may be obtained by the company on raw materials
and goods acquired for resale. It is possible to offset this credit against future amounts
of ICMS to be paid. In the case that a company purchased goods including ICMS without
being an ICMS taxpayer, it will not be eligible for corresponding tax credits.

DOING BUSINESS IN BRAZIL 2012

31

Tax Environment

17%
18%
18%

18%
19%
17%

ICMS

Mainly applied internal and inter-state rates


Inter-state rates on importations
4%

Inter-state rates
12%
12%
7%

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DOING BUSINESS IN BRAZIL 2012

Tax Environment

THE WAR OF HARBORS


The Brazilian government recently unified Brazils taxes on interstate trade of imported
goods. The Senates Committee for Economic Affairs (Comisso de Assuntos Econmicos
- CAE) approved on April 17th, 2012 the unification proposal (Resolution 72), and the
Senate agreed on April 24th. The government aims at applying a unified 4% interstate
ICMS to imports (internal state rates remain unchanged and the law does not concern
non-imported products) with an objective of reaching 2% by 2015.
Indeed, because of high ICMS rates, several states created local benefits to grant tax
reductions and boost imports performed through their airports and harbors. It led to the
so-called War of Harbors. By imposing a unified interstate rate, the governments goal
is to avoid such local incentives.

Import Tax (II)


The Import Tax is due by the importer and calculated on the Cost, Insurance and
Freight (CIF) value of the goods. The amount of Import Tax paid is non-reimbursable
and represents a cost to the importer.
The tax rate applicable to imported goods ranges in accordance to the Common
External Tariff (Tarifa Externa Comum or TEC) defined by the Harmonized Tariff
Schedule (HTS / NCM: Nomenclatura Comum do Mercosul). There are more than
10,000 different items and II rates vary from 0% up to 35%; the average is 10%.
Besides the Import Tax, the importation of goods is also subject to the other Federal
(IPI and PIS/COFINS) and State taxes (ICMS).

Municipal Service Tax (ISS)


The tax on services of any nature (services tax ISS) is a Municipal and cumulative
non-deductible tax levied on gross revenues of services rendered (except for
communication services and inter-municipal transportation).
The tax rate ranges from 2% to 5%, depending on the Municipality in which the company
is established and on the type of services rendered. Under certain conditions, ISS
may be due to the municipality where the service is effectively performed (on site
works, for instance). Cities decide to apply a rate or another depending on services, but
always from 2% to 5%. In municipalities of So Paulo and Rio de Janeiro, for example,
ISS is calculated at a standard rate of 5% for most of the services.

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33

Tax Environment

Revenues obtained from exported services usually are exempt from ISS, since the
economic outcome or the benefit of the services rendered should be observed abroad.
Imported services are subject to the taxation of ISS with a tax rate that ranges from
2% to 5% in accordance to the Municipality in which the company is established.

The gross-up taxation system


Most taxes are computed on a tax base including the tax itself (the gross value
including taxes). Therefore, as illustrated below, the effective tax rates if computed on
the net value are higher than the officially announced rates. Moreover, the tax base of
ICMS may be dependent on the identity of the purchaser as the rate is applied on the
value including IPI in case of sale to a final user.
Sale to an intermediary user
Rate
Total for the client
IPI

10%

Value

Rate

110

Total for the client

10

IPI

100

Product value (invoice)

18%

18

ICMS

PIS

1,65%

1,65

COFINS

7,60%

7,6

Product value (invoice)


ICMS

34

Sale to final user / consumer


Value
110
10%

10
100

18%

19,8

PIS

1,65%

1,65

COFINS

7,60%

7,6

Net value

72,75

Net value

70,95

ICMS rate compared to Net Value

24,7%

ICMS rate compared to Net Value

27,9%

PIS rate compared to Net value

2,3%

PIS rate compared to Net value

2,3%

COFINS rate compared to Net value

10,4%

COFINS rate compared to Net value

10,7%

DOING BUSINESS IN BRAZIL 2012

Tax Environment

TRANSACTIONS WITH RELATED PARTIES


Transfer pricing
Brazilian tax legislation related to transfer pricing (TP) requires demonstrating the
adequacy of the prices with foreign related parties for the following operations:
Import of goods, services and rights;
Export of goods, services and rights;
Payment of interests on loan agreements not registered with the Brazilian Central Bank.

TP rules are applicable to international transactions with related parties and to


transactions with entities established in privileged tax jurisdictions (see list in
appendix). A privileged tax jurisdiction is defined (i) by not taxing income and earnings
from abroad (or taxing them at 20%), (ii) by not permitting access and limiting
transparency on transactions, structure, ownership, and (iii) by offering tax privileges
to nonresident individuals or entities without any economic activity.
The Brazilian TP rules show substantial differences compared to the OECD transfer pricing
standards: instead of the arms length principle which is not provided for, fixed profit margins
should be used to determine the transfer price. Main methods used to demonstrate that the
price is appropriated (or to calculate the amount of the adjustment fixed by law) are:
Importation:
Compare with the acquisition price practiced with independent parties (PIC);
Demonstrate that in the resale operation there is a minimum profit of 20% (resale of goods) to 60% (sales
of manufactured goods made in Brazil with imported inputs) (PRL);
Demonstrate that the profit obtained by the related company in the country of the origin of the good does
not exceed 20%.

Exportation:
Demonstrate that the export price is equivalent to 90% or more of the price practiced in the internal market;
Compare with exportation prices in operations with independent parties (PVEx);
Demonstrate that the price practiced in the wholesale market in the country of destination of the goods
includes a maximum profit of 15% (PVA);
Demonstrate that the price practiced in the retail market in the country of destination of the goods
includes a maximum profit of 30% (PVV);
Demonstrate that, in Brazil, a markup of at least 15% is applied on the cost of production or acquisition.

Payment of interests:
a maximum interest rate equivalent to Libor (6 months) plus a spread of 3% per year is allowed.

DOING BUSINESS IN BRAZIL 2012

35

Tax Environment

Tax treaties
Brazil agreed on Double Taxation Treaties (DTT) with the following countries. Most of
these agreements contain tax sparing clauses.
Argentina, Austria, Belgium, Canada, Chile, China, Czech Republic, Denmark, Ecuador,
Finland, France, Hungary, India, Israel, Italy, Japan, Luxembourg, Mexico, Netherlands,
Norway, Peru, Philippines, Portugal, Slovakia, South Africa, South Korea, Spain,
Sweden, Ukraine.

Consolidation or group taxation


There are no rules about tax consolidation. Federal, State and Municipal authorities
apply separate taxations to each company and branch/establishment of the same
company.

Dividends & Interests


Dividends are currently not subject to withholding taxation, while interests paid to
non-residents are generally subject to a 15% withholding tax or 25% if they are based
in a tax haven jurisdiction.

Thin capitalization
On December 16th, 2009, the Government published Provisional Measure (PM) 472
which, among other provisions, includes new thin capitalization rules that can be
summarized as follows:
Interest paid or credited by a Brazilian entity to a related party (individual or legal entity),
not resident or domiciled in a tax haven jurisdiction, may only be deducted for income
tax purposes if (i) the interest expense is viewed as necessary for the activities of the local entity and (ii) the amount of debt granted by the related party does not exceed twice
the amount of its participation in the net equity of the Brazilian entity. A second test also
needs to be performed including the total amount of debts with any foreign related party.
If under either debt/equity test a 2:1 ratio is exceeded, the portion of interest related to
the excess debt amount will not be deductible for Brazilian income tax purposes.
Similar provisions are also applicable to interest paid or credited by a Brazilian entity to
an individual or legal entity (whether or not a related party) resident or domiciled in a tax

36

DOING BUSINESS IN BRAZIL 2012

Tax Environment

haven or favorable tax regime jurisdiction. In these cases, the interest expense will only
be deductible for Brazilian income tax purposes if (i) the expense is viewed as necessary
and (ii) the amount of the debt does not exceed 30% of the Brazilian entitys net equity.
A second test also needs to be performed including the total amount of debts with any
foreign party resident or domiciled in a tax haven jurisdiction. If under either debt/equity
test the 30% of net equity threshold is exceeded, the excess interest will not be deductible for
Brazilian income tax purposes. All provisions apply to debt financing transactions, whether
or not registered by the BACEN.

Interests on net equity


The Brazilian tax legislation allows the calculation of interests on net equity to be paid
to shareholders, instead of dividends. These interests are determined based on the
Long Term Interest Rate (TJLP, issued by the Brazilian tax authorities, 6% annually in
May 2012) applied to the net equity of the Brazilian entity.
Moreover, interests on net equity are deductible expenses for IRPJ and CSLL
purposes, reducing the income tax burden and consequently, the effective tax rate.
The deductibility of the amount of these interests is limited to 50% of the net income
of the period or 50% of the accumulated profits plus the reserves (the larger sum out
of the two). Unlike the treatment of dividends, the Brazilian entity is obliged to collect
15% withholding tax at the time of payment of interest on capital abroad.

DOING BUSINESS IN BRAZIL 2012

37

Tax Environment

TAX INCENTIVES
Foreign investors may benefit from all tax incentives, and there is no nationality
restriction to benefit from these incentives. Tax benefits may be granted by the States
(a total number of 26 + Federal District of Braslia), the Municipalities or by the Federal
organizations, for each specific sector.
Note that it is mandatory to be established as a registered company in order to benefit
from any kind of tax benefit. Tax Authorities usually grant the tax benefit to the main
Federal Tax Number (CNPJ), i.e. the parent company.

Special Zones
Investments may be performed in Free-Trade Zones (Manaus FTZ, North and
Northeast regions among others) in order to benefit from exemption or reduction of
corporate income tax (IRPJ), import duties, excise tax (IPI), sales tax (ICMS) and taxes
on gross revenues (PIS/COFINS) depending on certain conditions (local components/
production/consumption).
Many governmental incentive programs also provide low cost financing, which has
been very important regarding Brazils chronic inflation and high bank interest
rates. The main governmental financing entity is the BNDES (Banco Nacional de
Desenvolvimento Econmico e Social).
Manaus Free-Trade Zone (MFTZ): 75% of reduction of IRPJ for 10 years (currently limited
until 2023), reduction up to 88% of Import Tax (II), exemption of IPI if locally consumed
and/or produced, reduced ICMS tax rate, exemption of PIS/COFINS when importing in
MFTZ, no PIS/COFINS on raw, intermediate and packing materials when buyer and supplier are located in MFTZ and acquired materials are used in a local manufacturing process, limited PIS/COFINS (mostly 3.65%) on sales of locally produced goods.
Superintendence for the Development of Amaznia (SUDAM) & Northeast (SUDENE):
Independent agencies affiliated to the Federal government and providing reduction or
exemption of income taxes depending on their appreciation of projects in the North and
Northeast regions.

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Tax Environment

Special Customs Regimes


A few examples of special customs regimes in Brazil:
Temporary Admission program allows some imported goods to stay for a determined
time and purpose on the territory without paying import taxes (mostly useful for exhibitions, commercial, cultural and sports events, rental transactions).
Drawback regime involves various benefits. For instance, payment of import taxes such
as II, IPI, ICMS, and AFRMM (Merchant Marine Renewal Tax) can be partially or totally suspended on goods which will be re-exported after being transformed, repaired or manufactured locally. The amount of exemption depends on the level of local manufacturing.
Instead of being suspended, taxes may alternatively be paid first and then restituted
after re-exportation. Imported items must be limited to 40% of exported goods.
Raw materials and components mainly parts for aircrafts, vehicles and electronics
importation may also be exempt from federal (II, IPI and PIS/COFINS) and state taxes
(ICMS) thanks to the RECOF program, if products are to be exported or sold on the domestic market. More specifically for vehicles, RECOM regime allows importation without
IPI and foreign exchange coverage of materials and components destined for custom industrialization of products ranked from 8701 to 8705 in the IPI rates Table (TIPI): chassis,
car body, spare parts and subassemblies such as motors, components and accessories.
REPETRO is a special custom regime dedicated to the import and export of goods involved in the prospection and exploration of oil and natural gas deposits. It allows importation without IPI, PIS and COFINS of raw materials, parts and pieces used in the production of such goods which are to be re-exported (drawback) or presumed so. Another
benefit is the exemption from IPI, PIS and COFINS on importation of foreign equipment
for a temporary stay. Companies holding permits and authorization for exploring oil and
natural gas deposits may benefit from REPETRO.
Another regime suspending the payment of taxes is the REPEX, which allows the import
of crude oil and its derivatives when they are exported or re-exported. This program is
dedicated to firms allowed by the National Petroleum Agency (ANP Agncia Nacional
do Petrleo) to import and export oil products.
A last example of special tax regime is the REIDI, related to the Growth Acceleration
Program (PAC Programa de Acelerao do Crescimento) and aiming at fostering

DOING BUSINESS IN BRAZIL 2012

39

Tax Environment

investment and development of infrastructures by exempting the purchase of goods and


services from PIS and COFINS. Entities involved in such projects must first be legally approved as part of the PAC (transports, harbors, energy, sanitation and irrigation sectors).

FOSTERING EXPORTS
Importation of goods which are not available in the Brazilian market may be subject to a
reduction of import duties.
Exports are encouraged through the lack of taxation on sales and, upon request
and depending on the activity, exemption, deferment or suspension on taxes paid on
purchases. The support to export sales can also take the form of specific credit lines at
beneficial rates.

R&D and Green Technologies


Activities related to Research & Development may lead to some incentives such
as IPI reduction, accelerated depreciation for new equipment destined to R&D and
accelerated amortization for capitalized R&D expenses and some intangibles.
Concerning investments in green technologies, companies may benefit from tax
exemptions or reductions (PIS/COFINS, IPI, ICMS) on industries, operations or
processes involving biodiesel, ethanol, solar & wind energy.
Exceptionally, land can be obtained as capital grants from local governments.

A BOOST FOR INFORMATION TECHNOLOGIES


According to the Laws n 8.248, 10.176 and 11.077 (Lei de Informtica), legal entities
involved in production of computer hardware may benefit from a tax incentive reducing
IPI of some goods by 80 or 95%, depending on the localization of the company. Indeed,
the North, Northeast and Central-West regions offer higher percentage of reduction. To
keep this benefit, firms must invest in R&D from 4.00% to 4.35% of the annual revenues
generated by the eligible products.

40

DOING BUSINESS IN BRAZIL 2012

Tax Environment

OTHER TAX ISSUES


Asset deal vs. Share deal
Main tax aspects of an asset deal:
Income tax and social contribution apply to both operational and non-operational gains resulting from
the sale of assets (usually 34%)
PIS/COFINS may apply depending on the type of asset
ICMS applies to the transfer of inventory and generates tax credits but does not generally apply to fixed
assets
IPI applies to both transfer of inventory and fixed assets in the case of direct importation or manufacturing
by the seller
A real estate tax (ITBI) may also apply for property transfers

Share deals occur more frequently as they require less documents and are less taxed:
Income tax and social contribution apply on sales net profits for Brazilian entities
PIS/COFINS, ICMS and IPI do not apply, neither do stamp duties or transfer taxes
A 15% withholding tax applies if the seller is an individual; the rate may increase to 25% in the case of a
nonresident entity
Gains from sale of publicly traded shares get a 20% tax but are exempt to nonresidents, unless they are
listed in a privileged tax jurisdiction.

Royalties & Copyrights


A 15% withholding tax as well as the 10% CIDE generally apply to royalties and
copyrights paid to non-residents. If the beneficiary resides in a tax haven jurisdiction,
the rate raises to 25%.

Importation of services
Taxation of services rendered by a foreign company (importation of services) depends
on their nature. Technical services (involving special knowledge and performed by
independent professionals or artists) lead to a withholding 15% tax and a 10% CIDE tax,
whereas non-technical services get a 25% withholding tax. PIS/COFINS at the full rate
(9.25%) and ISS are applied on all types of services.

DOING BUSINESS IN BRAZIL 2012

41

Tax Environment

DO YOU REALLY NEED YOUR IMPORTED SERVICE?


For a technical service fee invoice of US$ 1,000 issued by a foreign company, under the
assumption of a 5% ISS rate, the Brazilian entity will withhold 15% of IRRF (therefore only
US$ 850 will be paid to the foreign entity) and will pay US$ 257 of ISS, PIS/COFINS and CIDE.

NB: For both Royalties and Service Fees involving transfer of technology, specific
conditions of remittance and deductibility may be respected.

CFC Rules
Controlled Foreign Company (CFC) rules differ from those applicable in other countries
as they are relatively new in Brazil.
Financial statements of the foreign entity must be translated into Brazilian currency
and profits generated must be included in the December 31st financial statement of the
Brazilian firm; they may be subject to taxation in certain circumstances liquidation
for instance.
Consolidation of profits and losses of foreign subsidiaries is generally not permitted
for Brazilian tax purposes.

Capital gains taxation


Following the sale of an asset located in Brazil, capital gains of residents get the usual
corporate income tax rate of 34%, while capital gains of non-residents are subject to a
15% withholding tax (25% if a tax haven resident).

Nonresidents investing in financial & capital markets


Nonresidents face various withholding income tax rates on their revenues coming
from Investments in Financial and Capital Markets:
10% when investing in swap operations, stock funds and future market operations
carried out apart from stock or mercantile exchange markets;
15% in other cases including fixed income investments;
0% in case of capital gains (earnings linked to stock, commodities and other similar
transactions) or gold traded apart from commodity exchange markets and gained and
distributed by foreign investment funds;

42

DOING BUSINESS IN BRAZIL 2012

Tax Environment

0% as well for income obtained through Brazilian government bonds since February
2006 and for mutual funds whose portfolio is constituted with 98% or more of these
bonds;
0% for investment in FIPs (Fundos de Investimento em Participao) and FMIEEs (Fundos
Mtuos de Investimento em Empresas Emergentes) or funds investing in these funds
quotas.

Declaration of Brazilian Capital Abroad for residents (DCBE)


All individuals and entities based, domiciled or resident in Brazil must declare at the
Brazilian Central Bank all values (currency assets, investments, property, rights)
equal or greater than US$ 100K owned out of the national territory. This obligation is
fulfilled by filling out the Declaration of Brazilian Capital Abroad form (DCBE) on an
annual basis.

DOING BUSINESS IN BRAZIL 2012

43

CHAPTER HEADLINE ON
ONE OR TWO LINES MAXIMUM

Samba drums.

LABOR ENVIRONMENT

44

DOING BUSINESS IN BRAZIL 2012

In 1943, Brazil initiated a general consolidation of labor laws that led to the CLT decree
(Consolidao das Leis do Trabalho). This system has governed most labor relationships
until now, despite some specific regulations applying to some workers categories.

HIRING, DISMISSAL AND LITIGATION


In Brazil, the trial period cannot exceed 90 days. Contracts are based on 44 hours a week.
In case of dismissal, the employer must respect a prior notice of 30 days. If not, he faces
a one month salary penalty, which corresponds to the minimum amount an employee can
receive. This indemnity may go up to 3 months if the employee has worked in the company
for 20 years or more. The employer must also pay the eventual holiday and 13th salary to
the employee.
As explained below, the employee gets the totality of his Severance Indemnity Fund
account (FGTS account) plus an additional 40% if he gets dismissed without any good
reason (justa causa). In case of justified dismissal or resignation, the employee does not
receive this amount.
Note that in any case, there is no obligation for the employer to reclassify dismissed
employees.
In order to hire a foreign employee as a manager or director, a permanent visa will
be required, in addition to capital investment requirements. For a foreign employee,
a renewable work visa of 2 years must be obtained. Foreign workers may be hired as
expatriates or with local contracts.

HEALTH INSURANCE
In case of illness, salary is paid by the company for up to 15 days. The payment is then made
by social security.
There are two systems of Health Insurance: public and private. The public one is

DOING BUSINESS IN BRAZIL 2012

45

Labor Environment

mandatory and financed by employees and employers and every employee has access
to it. Employers have to pay up to 28.8% on payroll to social security authorities and
withhold from 8% to 11% of gross wages from the employees (limited to R$ 430.78 per
month in 2012).
In the private system, usually established by collective labor agreements or granted
by the employers, the payment is made by the company and may be partially financed
by the employees, depending on the policy adopted by the employer.

REMUNERATION AND BONUSES


In 2012, minimum wage was increased from R$ 545 to R$ 622 (+15%).
Each year, every employee has to receive one additional salary (13th salary or Christmas
bonus) at the end of the civil year (half before the end of November and half before
Christmas day).
Overtime hours are paid 50% to 100% more than normal hours and dangerous or night
shift work gets 20% to 40% more.
In terms of profit sharing, a law does exist but no precise instruction is given. As a
consequence, not all companies distribute this kind of advantage, but they may be
forced to do so if profit sharing agreements were negotiated by branch.

PENSION AND VACATION


Every employee has a vacation period of 30 calendar days per year; during holiday,
salary is increased by 1/3.
The mandatory defined public pension contribution system is valid for all employees
and there is a voluntary supplementary scheme offered by employers. The contribution
is included in the INSS tax payments.

46

DOING BUSINESS IN BRAZIL 2012

Labor Environment

LABOR UNIONS & COLLECTIVE AGREEMENTS


Collective Labor Agreements generally exist for each branch and category of employee.
Labor Unions are more important and powerful in industries (transport, automobile,
steel). The main entities are CGT (Central Geral dos Trabalhadores), CUT (Central
nica dos Trabalhadores) and Fora Sindical.
Employees are free to choose whether to join a union or not, but in any case must
pay an annual contribution which is directly withheld by the company once a year
(equivalent to one days salary).

LABOR AND SOCIAL SECURITY CONTRIBUTION


To finance the Brazilian Social Security system (INSS), companies pay a monthly fee
equivalent to 20% of employees gross salaries. This percentage may be increased
by other rates: 1 to 3% of insurance for work accidents (RAT), and up to 5.8% for
other entities and funds (Education allowance, INCRA, SENAI, SESI, etc.). Employees
contribution (8% to 11% of the gross salary) is directly withheld by the employer.
Furthermore, employers have to make a monthly deposit equivalent to 8% of the
employees gross salaries in order to finance the Government Severance Indemnity
Fund for Employees (FGTS). The money is blocked on a personal account at the Caixa
Econmica Federal but the employee may withdraw it if he retires, intends to buy a
real estate property or suffers from a serious disease. He also gains access to it in the
case of any lawful unjustified dismissal made by the company. In this last case, the
employer will also pay the employee an additional 40% penalty (of the correspondents
FGTS account) and an additional 10% penalty to the government.

DOING BUSINESS IN BRAZIL 2012

47

Labor Environment

Main charges and taxes on payroll are:


Description

Rate (%)

INSS

20,0

SESI

1,5

SENAI

1,0

INCRA

0,2

RAT

1.0 to 3.0

Education allowance

2,5

SEBRAE

0,6

FGTS

8,0

Depending on the sector and activity, some taxes may not apply except for the
compulsory INSS and FGTS.
Alternatively, if the employee is a director or manager who receives a pr-labore
and not a standard salary, the company has to only pay INSS (20%).

48

DOING BUSINESS IN BRAZIL 2012

Labor Environment

WITHHOLDING TAXES
The monthly withholding income tax is based on salary and advances paid over the
month. It is calculated on the gross salary minus INSS with some deductions fixed by
law (see example below).
Note once again that dividends are not subject to withholding taxation.
Withholding Tax (IRRF) 2012
Salary Base (R$)

Rate (%)

Deduction (RS$)

Up to 1,637.11

1,637.12 to 2,453.50

7,5

122,78

2,453.51 to 3,271.38

15,0

306,80

3,271.39 to 4,087.65

22,5

552,15

from 4,087.65

27,5

756,53

INSS 2012 - Employees Contribution


Salary Base (R$)

Rate (%)

Up to 1,174.86

8,0

1,174.87 to 1,958.10

9,0

1,958.11 to 3,916.20

11,0

INSS maximum base: R$ 3,916.20


Source: Ministrios da Fazenda e da Previdncia Social

LABOR COST OPTIMIZATION, AN UNFORTUNATE DRIFT


Payment of salaries and bonuses out of payroll and use of full time service providers (PJ:
Pessoa Jurdica) with employment characteristics are examples of existing practices. In
case of tax or labor inspection, these operations may be reclassified as labor contracts
(CLT) and authorities may request the payment of unpaid charges (up to the last 5 years)
and interests in addition to penalties up to 150%.
In the case of labor claims brought by the employee, the latter may request the payment of
employment benefits (extra hours, holidays, Christmas bonus) in the 2 years following
the occurrence of the employment relationship.

DOING BUSINESS IN BRAZIL 2012

49

Labor Environment

ILLUSTRATIVE LABOR COST CALCULATION


In case of a classic employee remuneration (CLT contract)
(R$)
(a) Monthly gross salary
Base INSS
(b) INSS Employee (11% on base INSS)

3916,20
430,78

INSS Company (20% on gross salary)

2611,11

SESI (1.5%)

195,83

SENAI (1.0%)

130,56

INCRA (0.2%)

26,11

RAT (3.0%)

391,67

Education allowance (2.5%)

326,39

SEBRAE (0.6%)

78,33

FGTS (8%)

1044,44

(c) Total payroll charges (36.8% on gross salary)

50

13055,56

4804,45

Number of dependents

Deduction per dependent

164,56

(d) Total dependents deduction

329,12

(e) Base IRRF (a - b - d)

12295,66

(f) IRRF (e * 27.5% - 756.53)

2624,78

Net Salary (a - b - f)

10000,00

(g) Christmas bonus cost (8.33%)

1087,53

(h) Holiday additional cost (2.77%)

361,64

Total cost for the company (a + c + g + h)

19309,17

DOING BUSINESS IN BRAZIL 2012

Labor Environment

In case of a Pr-labore remuneration (Managerial functions)


(R$)
(a) Monthly gross salary
Base INSS

13055,56
3916,20

(b) INSS Manager (11% on base INSS)

430,78

(c) INSS Company (20% on gross salary)

2611,11

Number of dependents

Deduction per dependent

164,56

(d) Total dependents deduction

329,12

(e) Base IRRF (a - b - d)

12295,66

(f) IRRF (e * 27.5% - 756.53)

2624,78

Net Salary/Pr-labore (a - b - f)

10000,00

Total cost for the company (a + c)

15666,67

DOING BUSINESS IN BRAZIL 2012

51

CHAPTER HEADLINE ON
ONE OR TWO LINES MAXIMUM

Night view of Rio de Janeiro from Sugarloaf Mountain.

APPENDICES

52

DOING BUSINESS IN BRAZIL 2012

PRIVILEGED TAX REGIMES


Denmark

Holding companies without economic activity

Hungary

Offshore KFT companies

Iceland

International Trading Companies (ITC)

Malta

International Trading Companies (ITC) and International Holding


Companies (IHC)

Uruguay

Sociedad Anonima Financiera de Inversin (SAFI) incorporated until


December 31st, 2010

USA

Limited Liability Companies (LLC) with participation of non-resident


investors and not subject to Federal Income Tax in the USA

NB: Holding Companies from Luxembourg and the Netherlands were removed from the list, as well as the Entidad de Tenencia de Valores
Estranjeros (ETVE) from Spain.

DOING BUSINESS IN BRAZIL 2012

53

Appendices

TAX HAVEN JURISDICTIONS

54

Alderney

Madeira Islands

American Samoa

Maldives

Andorra

Marshall Islands

Anguilla

Mauritius

Antigua and Barbuda

Monaco

Aruba

Montserrat

Ascension Island

Nauru

Bahamas

Netherlands Antilles

Bahrain

Niue

Barbados

Norfolk Island

Belize

Oman

Bermuda

Panama

British Virgin Islands

Pitcairn Island

Brunei

Queshm Island

Campione dItalia

Saint Helen Island

Cayman Islands

Saint Kitts and Nevis

Cook Island

Saint Lucia

Costa Rica

Saint Pierre and Miquelon

Cyprus

Saint Vincent and The Grenadines

Djibouti

San Marino

French Polynesia

Sark

Gibraltar

Seychelles

Grenada

Singapore

Guernsey

Solomon Islands

Hong Kong

Swaziland

Isle of Man

Switzerland

Jersey

Tonga

Kiribati

Tristan da Cunha

Labuan

Turks and Caicos Islands

Lebanon

United Arab Emirates

Liberia

U.S. Virgin Islands

Lichtenstein

Vanuatu

Macau

Western Samoa

DOING BUSINESS IN BRAZIL 2012

Appendices

GLOSSARY
AFRMM

Adicional ao Frete para Renovao da Marinha Mercante

Merchant Marine
Renewal Tax

ANA

Agncia Nacional de guas

National Water Agency

ANAC

Agncia Nacional de Aviao Civil

National Civil Aviation


Agency

ANATEL

Agncia Nacional de Telecomunicaes

National
Telecommunication
Agency

ANCINE

Agncia Nacional do Cinema

National Cinema
Agency

ANEEL

Agncia Nacional de Energia Eltrica

National Electric Power


Agency

ANP

Agncia Nacional do Petrleo, Gs Natural e


Biocombustveis

National Agency of
Petroleum, Natural Gas
and Biofuels

ANS

Agncia Nacional de Sade Suplementar

National
Supplementary Health
Agency

ANTT

Agncia Nacional de Transportes Terrestres

National Ground
Transportation Agency

ANVISA

Agncia Nacional de Vigilncia Sanitria

National Health
Surveillance Agency

BACEN / BCB Banco Central do Brasil

Central Bank of Brazil

BCC

Cdigo Civil Brasileiro

Brazilian Civil Code

BNDES

Banco Nacional de Desenvolvimento

Brazilian Development
Bank

Brazilian
GAAP

Princpios Contbeis Brasileiros Geralmente Aceitos

Brazilian Generally
Accepted Accounting
Principles

CADE

Conselho Administrativo de Defesa Econmica

Federal Antitrust
Agency

CFC

Conselho Federal de Contabilidade

Federal Board of
Accountancy

CFC

Sociedade Estrangeira Controlada

Controlled Foreign
Company

CIDE

Contribuio de Interveno no Domnio Econmico

Contribution for
Intervention in the
Economy

DOING BUSINESS IN BRAZIL 2012

55

Appendices

56

CIF

Custo, Seguro e Frete

Cost, Insurance and


Freight

CLT

Consolidao das Leis do Trabalho

Consolidation of Labor
Laws

CNPJ

Cadastro Nacional de Pessoa Jurdica

National Registry of
Legal Entities

COFINS

Contribuio para o Financiamento da Seguridade


Social

Social Security
Contribution

CPC

Comit de Pronunciamentos Contbeis

Committee of
Accounting
Pronouncements

CPF

Cadastro de Pessoa Fsica

Individual Taxpayers
Registry

CSLL

Contribuio Social sobre o Lucro Lquido

Social Contribution Tax


on Profits

CVM

Comisso de Valores Mobilirios

Securities Exchange
Commission

DACON

Demonstrativo de Apurao de Contribuies Sociais

PIS and COFINS Return

DCBE

Declarao de Capitais Brasileiros no Exterior

Brazilian Capital
Abroad Return

DCTF

Declarao de Dbitos e Crditos Tributrios Federais

Federal Tax Settlement


Return

DIPJ

Declarao de Informaes Econmico-Fiscais da


Pessoa Jurdica

Corporate Income Tax


Return

DIRF

Declarao do Imposto de Renda Retido na Fonte

Declaration of
Withholding Income Tax

DTT

Acordos de Bitributao

Double Taxation
Treaties

FDI

Investimento Direto Estrangeiro

Foreign Direct
Investment

FGTS

Fundo de Garantia por Tempo de Servio

Government Severance
Indemnity Fund

FIP

Fundo de Investimento em Participaes

Investment Fund in
Partnerships

FMIEE

Fundo Mtuo de Investimento em Empresas


Emergentes

Investment Fund in
Emerging Entities

GDP

Produto Interno Bruto

Gross Domestic
Product

IBGE

Instituto Brasileiro de Geografia e Estatstica

Brazilian Institute
of Geography and
Statistics

DOING BUSINESS IN BRAZIL 2012

Appendices

ICMS

Imposto sobre Circulao de Mercadorias e Servios

Tax on Circulation of
Goods and Services

IFRS

Normas Internacionais de Informao Financeira

International Financial
Reporting Standards

IHC

Empresa Controladora Internacional

International Holding
Company

II

Imposto de Importao

Import Tax

INCRA

Instituto Nacional de Colonizao e Reforma Agrria

National Institute of
Land Colonization and
Reform

INPI

Instituto Nacional da Propriedade Industrial

National Institute of
Industrial Property

INSS

Instituo Nacional do Seguro Social

Social Security
Contributions

IOF

Imposto sobre Operaes Financeiras

Tax on Financial
Operations

IPI

Imposto Sobre Produtos Industrializados

Excise Tax

IRPJ

Imposto de Renda Pessoa Jurdica

Corporate Income Tax

IRRF

Imposto de Renda Retido na Fonte

Withholding Tax

ISS

Imposto Sobre Servio

Service Tax

IT

Tecnologia da Informao

Information Technology

ITBI

Imposto sobre a Transmisso de Bens Imveis

Property Transfer Tax

ITC

Empresa Exportadora Internacional

International Trading
Company

LALUR

Livro de Apurao do Lucro Real

Taxable Income Control


Register

Ltda

Sociedade Limitada

Limited Liability
Company (LLC)

MDIC

Ministrio do Desenvolvimento, Indstria e Comrcio

Ministry of
Development, Industry
and Commerce

MFTZ

Zona Franca de Manaus

Manaus Free Trade


Zone

OECD

Organizao de Cooperao e de Desenvolvimento


Econmico

Organization for
Economic Cooperation
and Development

PAC

Programa de Acelerao do Crescimento

Growth Acceleration
Program

PIS

Programa de Integrao Social

Social Integration
Program

PVEx

Preos de Vendas na Exportao

Export Sales Price

DOING BUSINESS IN BRAZIL 2012

57

Appendices

58

R&D

Pesquisa e Desenvolvimento

Research and
Development

RDE-IED

Registro Declaratrio Eletrnico de Investimentos


Externos Diretos

Electronic Declaratory
Registration of Foreign
Direct Investments

RDE-ROF

Registro Declaratrio Eletrnico de Operaes


Financeiras

Electronic Declaratory
Registration of
Financial Operations

RECOF

Industrial Warehouse
Regime Aduaneiro de Entreposto Industrial sob Controle Regime under the
Customs Computerized
Informatizado
Control

RECOM

Regime Aduaneiro Especial de Importao de Insumos

Special Customs
Regime for Imports of
Inputs

REIDI

Regime Especial de Incentivos para o Desenvolvimento


da Infraestrutura

Special Incentive
Regime for
Infrastructure
Development

REPETRO

Special Custom
Regime for Exports
Regime Aduaneiro Especial de Exportao e Importao
and Imports of Goods
de Bens Destinados Explorao e Produo de
Destined to Exploration
Petrleo e Gs Natural
and Production of Oil
and Natural Gas

REPEX

Regime Aduaneiro Especial de Importao de Petrleo


Bruto e seus Derivados

Special Custom Regime


for Imports of Crude Oil
and its Derivatives

RFB

Receita Federal do Brasil

Brazilian Federal
Revenue

SA

Sociedade Annima

Corporation

SEBRAE

Servio de Apoio s Micro e Pequenas Empresas

Service of Support
to Micro and Small
Companies

SELIC

Sistema Especial de Liquidao e de Custdia

Special System of
Settlement and Custody

SENAI

Servio Nacional de Aprendizagem da Indstria

National Service of
Industry Apprenticeship

SESI

Servio Social da Indstria

Industry Social Service

SME

Pequenas e Mdias Empresas

Small and MediumSized Entities

SPED

Sistema Pblico de Escriturao Digital

Electronically
Commercial and Fiscal
Bookkeeping

DOING BUSINESS IN BRAZIL 2012

Appendices

SUDAM

Superintendncia de Desenvolvimento da Amaznia

Superintendence for
the Development of
Amaznia

SUDENE

Superintendncia de Desenvolvimento do Nordeste

Superintendence for
the Development of
Northeast

SUSEP

Superintedncia de Seguros Privados

Superintendence of
Private Insurance

TEC

Tarifa Externa do Mercado Comum do Sul

Mercosul Common
External Tariff

TIPI

Tabela de IPI

IPI Tax Rates Table

TJLP

Taxa de Juros de Longo Prazo

Long-Term Interest
Rate

DOING BUSINESS IN BRAZIL 2012

59

Appendices

SOURCES
Agncia Nacional de Telecomunicaes (ANATEL)
Agncia Nacional do Petrleo, Gs Natural e Biocombustveis (ANP)
Banco Central do Brasil (BCB)
Bloomberg
Bradesco
Cmara de Comrcio Frana Brasil (CCFB)
Chambre de Commerce du Brsil en France (CCBF)
Central Intelligence Agency (CIA)
Centre for Economics and Business Research (CEBR)
Departamento Nacional de Trnsito (DENATRAN)
Electricit de France (EDF)
Emerging Markets Private Equity Association (EMPEA)
European Commission
Instituto Brasileiro de Geografia e Estatstica (IBGE)
Instituto de Pesquisa Econmica Aplicada (IPEA)
International Monetary Fund (IMF)
International Organization of Motor Vehicle Manufacturers (OICA)
Ministrio da Fazenda
Ministrio da Previdncia Social
Ministrio das Relaes Exteriores (MRE)
Oil and Gas Journal (OGJ)
Organization for Economic Co-operation and Development (OECD)
Organization of the Petroleum Exporting Countries (OPEC)
The Guardian
Thomson Reuters
United Nations Conference on Trade and Development (UNCTAD)
United Nations Development Programme (UNDP)
US Energy Information Administration (EIA)
Venture Equity Latin America
World Bank

60

DOING BUSINESS IN BRAZIL 2012

Mazars worldwide presence

Integrated countries
Non-integrated countries: Mazars correspondents, country local correspondents, joint ventures
and representative offices

The content of this document is provided for information only. Mazars accepts no responsibility for this information
and/or any use to which it might be put. Property of Mazars all rights reserved August 2012

Mazars is present in 5 continents.

CONTACTS
Mazars in Brazil
Eduardo Cabrera

Managing Partner
Email: eduardo.cabrera@mazars.com.br
Tel: +55 11 3524 4577

Eder Mutinelli

Consulting
Email: eder.mutinelli@mazars.com.br
Tel: +55 19 3368 7811

Dominique Nezan

Audit
Email: dominique.nezan@mazars.com.br
Tel: +55 11 3524 4582

Firas Abou Merhi

Financial Advisory Services


Email: firas.abou-merhi@mazars.com.br
Tel: +55 11 3524 4577

Uipiquer Dos Santos

Tax
Email: uipiquer@mazars.com.br
Tel: +55 11 3524 4539

Ricardo Aquino

Accounting and Outsourcing Services


Email: ricardo.aquino@mazars.com.br
Tel: +55 11 3524 4578

Layout: Mazars, Communication


Ref BROCH 82 - 08/12 - Photos Thinkstock - Fotolia
Cover photography : So Paulo.

Detailed information available on


www.mazars.com.br - www.mazars.com