Understanding your corporate compliance requirements in Brazil is crucial to the success of your expansion. Multinational executives will expect corporate regulations to differ across the countries they have established their companies in. However, if this is your first commercial expansion to Latin America, you’ll find corporate compliance can vary greatly from other regions.
It is necessary to understand all your obligations for corporate compliance in Brazil, and the regulations influencing this active business environment.
Overview: corporate compliance in Brazil for your Limited Liability Company (LLC)
Any company in Brazil, regardless of the type of legal entity, must comply with a series of obligations over a calendar year. Fulfilling your corporate compliance requirements in a timely manner is vital to manage risk for your company, and avoid any liabilities arising from non-compliance (such as blocking a bank register).
Below, we outline the main compliance rules applicable for Brazil’s Limited Liability Company (LLC) structure, known as the Sociedade Limitada.
1. Corporate obligations for the Brazilian LLC
If your Limited Liability Company (LLC) in Brazil has a foreign shareholder, it is mandatory to register the capital invested by that shareholder. You must register this capital before the system of the Brazilian Central Bank (Banco Central do Brasil).
For this, you’ll need to provide the complete shareholder data, the amount invested in the Brazilian LLC, and supporting documents regarding the company’s operations.
In addition, you must file the minutes of your LLC’s shareholder meeting by 30 April each year. These minutes should include the following:
- review of the management accounts
- the balance sheet plus results of economic performance
- designated administrators, where applicable
- decisions on any other matter that has been included on the agenda.
You must ensure that all books are updated in accordance with the current situation of the company. Please note that part of managing the accounting books is 100% online.
Note: Some companies must publish their financial statements (i.e. balance sheet, statement of retained earnings or accumulated losses, income statement for the year, and cash flow statement) publicly. This is applicable for companies that possess more than 240 million Brazilian Reais in assets or had a gross revenue over 300 million Brazilian Reais.
It pays to check with a trusted legal services provider whether public statements form part of your company’s corporate compliance requirements in Brazil.
2. Taxes and fiscal obligations
Brazil, throughout its republican history, has battled with the best way to optimize its tax system.
The Brazilian tax system is regulated by the Federal Constitution, and other state and municipal laws. Additionally, there are some specific regulations administered by each tax authority. As part of corporate compliance in Brazil, each company must pay taxes for the federal, state and municipal tax authorities.
There are different types of taxes and, consequently, there are different types of tax returns.
Regarding federal taxes, the main ones applicable for an LLC in Brazil are:
- IPI: Taxes Over Industrialized Products
- IOF: Financial Transactions Tax
- IRPJ: Corporate Income Tax
- CSLL: Social Contribution on Net Income
- COFINS: Contribution for Social Security Financing
- PIS: Social Integration Program.
Considering the main federal tax returns, a Limited Liability Company in Brazil must comply with the following:
- DCTF: Federal Tax Debt Statement
- EFD Contribuições: Digital Tax Bookkeeping Contributions
- ECD: Digital Accounting Bookkeeping
- ECF: Fiscal Accounting Bookkeeping
- DIRF: Withholding Income Tax Statement.
Brazil still has a complex tax system. By considering state and municipal tax returns on top of those listed above, the list of accounting compliance requirements for companies in Brazil can be extensive.
In recent governments, tax reforms have been passed with the aim to simplify this system but have never been fully satisfactory. Therefore, only experienced accountants have the necessary expertise to handle such obligations.
Using an experienced local accounting and taxation specialist is the best way to fully meet corporate compliance requirements in Brazil and protect your company from non-compliance issues.
3. Labor and social security obligations
As with tax, labor regulations and compliance requirements in Brazil can also be complex. The government has been carrying out reforms both in terms of labor and social security.
Since 2017, labor legislation has been somewhat more flexible, and the government and labor Courts now enforce legal certainty about new hires.
Among the main labor rights and obligations, companies must take note of the following as part of their corporate compliance requirements in Brazil:
- Paid vacation: 30 days of paid vacation for every 1 year of work
- Vacation allowance: one-third salary allowance on vacation salary amount (salary x 0.333)
- ‘Thirteenth Salary’: paid before 20 December
- Contribution to Social Security: Paid over the total salary amount (8% to 27.6%)
- Deposit Guarantee Fund (FGTS): Paid over the total salary amount (8%).
Note: Every employer must enroll its employees before the INSS (National Social Insurance Institution or Instituto Nacional do Seguro Social).
Keep tabs on due dates
To avoid the incidence of fines or other penalties, make sure you meet all corporate compliance requirements in Brazil with the following in mind:
- Compliance with local rules on tax incidence
- Understand how to accurately calculate the contributions owed
- Due dates for payments and filing statements.
It’s therefore important to engage with a trusted provider with comprehensive knowledge of corporate compliance in Brazil, to ensure your company operates in accordance with local law and doesn’t miss deadlines. That way, company executives are free to focus on business growth and development.
Engage with our specialists to meet your corporate compliance requirements in Brazil
At Biz Latin Hub, our team of local and expatriate professionals in Brazil routinely support foreign entrepreneurs enter the market and do business in full compliance of local law.
We offer a full suite of market entry and back-office support for expanding multinationals in Brazil and the wider Latin American region, making us your single point of contact for full legal and accounting services. This includes company formation, corporate compliance, legal representation, accounting, hiring, visa processing, due diligence, and other business solutions.
Reach out to us at [email protected] to make the most of our market leading services, and get a customized quote from our team.
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