Brazil BIZ info
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 Posted: Thu Feb 02, 2006 5:01 am Post subject: DOING BUSINESS IN BRAZIL / BRAZIL BUSINESS GUIDE |
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BRAZIL BUSINESS : DOING BUSINESS IN BRAZIL
Labour laws
Whether you are just exporting to Brazil or setting up an office, it is advisable to hire local expertise to avoid language problems and lack of knowledge of local business practices. However, there is no requirement for a minimal number of local workers.
In addition to an employee’s salary, an employer must pay the following costs (which are calculated as a percentage of the salary and come to a total of approximately 52 per cent):
1. Guaranteed Severance Fund Contribution (FGTS) equal to 8 per cent per month, plus 3.2 per cent if the employee is dismissed without just cause.
2. Social Security Contribution (INSS) of approximately 26 per cent.
3. Vacation bonus of one-third of a monthly salary per year, which corresponds to 4.22 per cent (FGTS and social security contributions included).
4. Annual Christmas bonus corresponding to 11.31 per cent (FGTS and social security contributions included).
As the Brazilian Government adopts a fairly comprehensive taxation system, it is important to seek a legal opinion as well as the information above.
Investment
When thinking of investing in Brazil, the following points should be considered:
1. Both the Federal and State Governments generally support free trade and have an open attitude toward foreign investments.
2. Local and foreign investors are treated relatively equal, and in general terms, 100 per cent foreign ownership is possible.
3. Registration of foreign investments with the Brazilian Central Bank is a condition for repatriation of capital and remittance of dividends.
4. A permit from the Central Bank is required to operate a financial institution.
Investment incentives
1. Many states and local governments offer incentives to attract investment.
2. Foreign investors are generally eligible for any available incentives.
3. The Federal Government offers fiscal benefits in certain less-developed areas.
4. Discussions with state development agencies are recommended, which Austrade São Paulo can help you organise, if required.
Setting up an office
It is important to seek further legal opinion for the following information:
* For foreign investors, the most common form of doing business in Brazil is through an incorporated subsidiary, as distinct from a branch.
* The minimum capital that is required to open a subsidiary in Brazil is US$200,000.
* Joint venture operations in Brazil do not require participation by a local venturer, however, it is recommended.
* If the CEO of a foreign company is not a Brazilian citizen, he/she must apply for a permanent visa before being authorised to represent the company in Brazil in any capacity, eg. open bank accounts and apply for loans.
* Acquisition of existing companies is monitored by the Central Bank.
Infrastructure
The privatisation of the telecommunication industry in Brazil was initiated in 1997 with the break-up and auction of the government’s controlling stake in Telebras, the telecommunication monopoly. It was the largest privatisation in Latin America’s history and sold for US$19 billion.
The end of the telecommunications monopoly opened private investment opportunities worth US$10 billion per annum over the next five years. The supply and operation of data networks and other specialised data services was completely deregulated and is now accessible to any private enterprise operator. ANATEL is the regulator agent that coordinates the privatisation process.
Taxation
General tax information:
* Foreign-controlled companies and foreign residents generally receive the same treatment with taxation in Brazil as local companies and residents.
* The Industrialised Products Tax (IPI) is levied on most goods and is applied on the duty-paid value. The most common rate is between 10 per cent and 20 per cent, assessed on the duty-paid value. However, certain goods, such as alcoholic beverages are subject to rates of up to 150 per cent (tariff 20 per cent + IPI 130 per cent).
* Merchandise and Services Circulation Tax is also levied and varies from state to state. In Sao Paulo, for example, it is 18 per cent levied on the aggregate of the duty-paid value plus the IPI.
* Merchant Marine Commission of 25 per cent of freight cost.
* Warehousing charges begin at one per cent for five days and increase progressively up to 1.5 per cent for each period of 10 days after 20 useful days of storage.
* Port and dock charges vary based on the types of goods and their FOB value (Incoterms 2000), rates range from 3 per cent to 12 per cent.
* SISCOMEX Fee: fixed fees in Reals for each import declaration, averaging US$20.
* A bank charge must be paid at the Bank of Brazil. The rate averages US$50.
* Clearance agent's charge of two per cent, levied on the CIF value (Incoterms 2000).
* Bank fees covering letter of credit emissions and document handling may reach three per cent of the FOB price.
* Imports into the Free Trade Zone of Manaus (State of Amazonas) are exempt from import duty.
Finance
Brazil has a sophisticated financial market and a strong national banking system. The Brazilian Government endorses the free transit of money and supports the activities of the several multinational banks that have become established.
Although possible to access good local financing lines, which are specially designed to suit foreign companies needs, direct foreign investment is encouraged in Brazil. The following are important to consider:
* Foreigners are expected to import funds for major fixed capital requirements.
* Debt-equity swaps have been a favoured method of importing funds.
* Foreign-controlled companies can list on the stock exchanges and raise capital through public subscriptions or debenture issues.
* A wide range of credit and financial services is available from foreign and domestic banks operating in Brazil - Banco do Brasil, Bradesco, Unibanco, Banco Santander, and Itau.
* Long-term financing is available from investment companies and state investment banks, such as the Brazilian Development Bank (BNDES). |
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