Accounting in Brazil: What are the legal requirements?

When embarking on a business venture in Brazil, it is essential to understand the nuances of accounting in Brazil to effectively navigate the country’s tax and compliance landscape. This comprehensive guide is designed to provide a detailed overview of the tax regime, accounting obligations and legal compliance requirements, offering invaluable information for those considering incorporating a company in Brazil.

Incorporating a company in Brazil requires a thorough understanding of corporate tax, accounting in Brazil and regulatory requirements. This article will serve as a roadmap, elucidating critical aspects related to compliance with accounting and tax obligations in Brazil.

Throughout the process of incorporating a company in Brazil, you will have various obligations regarding accounting in Brazil. This includes corporate income tax, value added tax (VAT) and social security contributions. This guide provides a comprehensive collection of essential information to equip you with the knowledge you need to effectively navigate Brazil’s fiscal intricacies.

What are the tax requirements in Brazil?

When incorporating a company in Brazil, several crucial tax considerations must be kept in mind:

• Tax return extensions are not possible.
• An annual paper tax return must be filed before the last working day of April each year.
• Corporate income tax rate averages at 34%, contingent on turnover.
• Federal tax on domestic and foreign products is levied at 1.65%.
• Mandatory social security contribution stands at 7.6%.
• Federal and state VAT taxes apply to various products and services, with rates varying between 7% to 25% depending on the state.

What accounting standards are used in Brazil?

Key annual accounting obligations for companies in Brazil include:

• Documenting and implementing accounting procedures.
• Implementing financial accounting software.
• Preparation of financial accounting records.
• Preparing forecasts, budgets, and sensitivity analyses to better manage financial obligations and ease the process of reporting to Brazil’s accounting authorities.

You need to be aware of personal and corporate tax obligations in your country of residence as well. You must fulfill those obligations annually.

Prepare your business for Brazilian legal compliance and laws

Before starting a business in Brazil, familiarize yourself with various laws, including those related to employee benefits, business regulations, and protection as a foreign investor.

For instance, employee benefits in Brazil may vary based on the professional category of your business. Providing meal allowances, transportation allowances, and health plans becomes necessary to comply with labor laws and enhance employee satisfaction.

6 Company requirements in Brazil:

1. Your company must have at least one director and one shareholder of any nationality.
2. There is no minimum share capital requirement for a Brazilian LLC.
3. Annual returns, verifying director names, business addresses, shareholder details, and shareholdings, are mandatory.
4. A local registered address is required for private companies.
5. Foreign companies must appoint a Brazilian legal representative.
6. Restrictions apply to foreigners owning businesses in specific industries.

To exemplify, let’s envision a scenario where a foreign company seeks to establish its presence in Brazil’s aerospace industry. In such instances, securing additional regulatory approvals and ensuring adherence to industry-specific laws become imperative necessities.

Giving employee benefits in Brazil

In Brazil, providing additional benefits for employees is essential, depending on the professional category of your business. These benefits may include meal allowances, transportation allowances, and health plans.

Once you understand your company’s compliance requirements, delve into the laws governing business operations in Brazil.

3 Key Brazilian business laws

Adhering to the following laws is crucial for maintaining business success in Brazil:

1. Public companies must publish annual financial statements in a national newspaper.
2. For company de-registration, maintaining a resident company secretary and a legal registered office in Brazil is mandatory.
3. At least one individual representative must be a resident of Brazil.

For instance, public companies that annually publish financial statements must prioritize compliance with the regulations set forth by the National Financial and Capital Markets Association (Anbima).

Are foreign investors protected in Brazil?

The specific organizations listed below are the ones that protect your business as a foreign investor. Foreign investors also have several outlets that protect their business:

• The Brazilian Export and Investment Promotion Agency (Apex).
• The National Financial and Capital Markets Association (Anbima).
• Cetip.
• Market Information Organization Board (Codim).
• Brazilian Institute for Investor Relations (IBRI).

FAQs when understanding taxation and accounting in Brazil

Based on our extensive experience these are the common questions and doubts from our clients when looking to understand accounting and taxation in Brazil.

As of the last update in December 2023, the mentioned tax rates are current.

Biz Latin Hub can assist you with accounting in Brazil

Once you understand the accounting process, laws, and legal requirements in Brazil, you are ready to do business there.

Biz Latin Hub is the market leader in helping both local and foreign companies to successfully expand their business in Brazil, by providing a full suite of multi-lingual commercial representation and back-office services.

Contact us today to find out more about how we can support you doing business or read about our team and expert authors. 

Watch the following video to learn more!