The sixth largest country in the world by population, Brazil is home to the most species of plants and animals in the world. As one of the world’s most diverse countries, Brazil is a hub for talented workers from all backgrounds. Known as a melting pot, the country has some of the largest Italian, Arab, and Japanese communities in the world.
Setting up a subsidiary in Brazil has some key advantages, especially if you’re trying to have a more hands-on experience with your customers in the country.
However, the process can be expensive and time-consuming. Further, Brazil has a complex tax system and strong employee protections that make companies looking to set up a subsidiary in the country liable for lawsuits.
In Brazil, there are 9 different types of corporate structures. The two most common structures are the Sociedade Anoma, which is similar to a corporation in the United states, and the Sociedade Limitada, which is similar to an LLC. The Limitada is the most commonly used structure for foreign companies looking to establish a subsidiary in Brazil.
To set up a subsidiary in Brazil you will need to:
File articles of organization
Register with the Board of Trade
Get a Tax ID
Establish a visa
Establish a bank account
File a business license to operate within a given municipality
Register with Brazil’s Insricao Estadual to pay taxes
New companies should apply for authorization to use Notas Fiscais, which proves that your company actually exists. This allows you to file tax documents, security forms, and more.
Within the first 30 days of operations, you must register with Brazil’s Social Security Institution, even if you don’t have employees. You must also contact Social Security to register the company to get a CNPJ, or company ID number.
To comply with local laws surrounding setting up a subsidiary or Sociedade Limitada, you need to have at least two shareholders or “quotaholders” at all times.
You can incorporate your business using articles of association, or “contracto socia.” This approach complies with regional registration requirements.
For a Limitada, you must have at least 1 Brazilian resident managing the local business branch at all times, and quotaholders should appoint this person in the Articles of Association.
The quotaholders are responsible for holding an annual meeting, where they will approve key changes to the organization. Notes for this meeting must be filed publicly at the commercial registry in Brazil.
In Brazil, setting up a subsidiary is much less complex than establishing an entity. Any foreign company can invest, be a shareholder, or partner with the local branch. Once incorporated, subsidiaries are fully covered by laws and can operate as normal businesses.
On the other hand, opening up an entity requires special authorization from the Ministry of Development, Industry of Foreign Trade. The Department of Trade Registration must evaluate the request and approve the entity, which can take even longer to set up.
For subsidiaries, there are liability laws that make the parent company responsible for compliance and legal issues. Once incorporated, the subsidiary can tailor their business to Brazilian culture and maintain a degree of independence from the parent company.
However, setting up a subsidiary takes around 3 months for all of the necessary approvals. You will need to devote significant time and resources to learn about taxes, labor laws, and employee rights.
Further, it is fairly expensive to operate and open a new business branch. It can cost anywhere from 3,000-10,000 USD. Once established, you must pay BRL 800 a month.
When thinking about your time and resources, and the country’s complex tax and compensation systems, you might want to consider using an EOR service like Via if you’re simply looking to hire talent in Brazil.
By partnering with an EOR service like Via, your company can hire employees in the country without having to establish a subsidiary or entity.
Via’s easy-to-use platform helps you manage the HR process. We handle all of the benefits, payroll and legal compliances. Our local labor lawyers and experts in-country that ensures that your company is compliant when hiring and expanding abroad. Via assumes all legal responsibility, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Brazil with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.