Brazil is one of the most promising emerging markets in the world. A high degree of diversification in its product exportation base, a diversified list of trading partners, internal economic stability, increasingly large work force and good social standards are helping to attract more and more global investors. In addition to this, the forthcoming 2014 Soccer World Cup and 2016 Olympics are generating a large number of infrastructure investment opportunities.
The Brazilian Government and Congress have made a concerted effort to improve the economic stability of the country and have implemented changes in Brazil’s tax legislation, governance, and regulatory background. There are still a few reforms to be implemented by the new Government, but Brazil is demonstrating that it is becoming increasingly connected with the international business network.
The purpose of this publication is to provide foreign investors with a broader view of the current economic, legal and business environment, to be faced when doing business in Brazil.
Key points for foreign investors to consider when looking at this territory:
- Brazil is the biggest country in Latin America, occupying almost half of South America.
- The basic legal concepts regulating foreign capital in Brazil are defined in Laws 4131 of 1962 and 4390 of 1964, which were regulated by Decree 55762 of 1965. The legal concept of foreign capital includes tangible and intangible assets.
- In Brazil there is a wide variety of federal programmes designed to encourage national economic development and also to promote regional development. They tend to favour operations in the poorer Northeast (SUDENE) and Amazon (SUDAM) regions. Several programmes provide export incentives.
- Relevant benefits are granted to foreign investors not domiciled in tax havens and who invested in Brazil pursuant to the regulations established by Resolution 2.689.
- There are no legal minimum share capital requirements for a corporation, except for financial institutions and insurance companies, and certain other legal entities with specific business purposes.
- Dividends remitted to non- resident shareholders or quotaholders are not subject to any withholding tax.
- Capital gains earned by local resident entities are taxed at a higher rate than the capital gains of non-residents.
- Payments of any type made to tax havens are generally subject to withholding at a higher rate.
- As a general rule, foreign exchange transactions made in order to allow payments to non-residents, considering royalties, technical services, technical, administrative and any other assistance or any other revenue, including the reimbursement of any costs, are subject to specific financial tax (IOF – see page 14 for more information).
- On 16 December 2009, the Brazilian government started to establish minimum capital requirement to invest through or ’the thin cap rules’, through Provisional Measure 472, with immediate effects.