If you want to incorporate a company, you should know the basic tax laws and understand how accounting works in Brazil.
When starting a business in Brazil, you need to know the basic tax, accounting, and compliance laws and regulations in the country. Below, we explain everything you need to know about how to comply with your accounting and taxes obligations in Brazil.
When incorporating in Brazil, you will be subject to corporate income tax, value-added tax (VAT), and social security contributions in Brazil. Below is a list of things you should know when it comes to taxes in Brazil.
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Accounting & Taxation Requirements: Know and Understand Brazilian Taxes
- Tax return extensions are not possible.
- Your company must file a paper annual tax return before the last working day of April every year (final date may be postponed based on Governmental discretion).
- You are subject to paying an average corporate tax rate of 34% depending on turnover size.
- Expect to pay a federal tax levied on domestic and foreign manufactured products levied at a rate of 1.65%.
- Expect to pay a mandatory social security contribution levied at a rate of 7.6%.
- Understand federal VAT taxes on the production and importation of domestic or foreign manufactured products.
- Understand state VAT taxes on goods and certain services (ICMS), levied anywhere between 7% to 25% depending on the state.
Prepare Yourself for Accounting in Brazil
Below, you will find some of the general annual accounting obligations for a company incorporated in Brazil:
- Documenting and implementing accounting procedures.
- Implementing financial accounting software.
- Preparation of financial accounting records.
- Preparing forecasts, budgets, and sensitivity analysis to better manage financial obligations and ease the process of reporting to Brazil accounting authorities.
It is important that you are 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
There are several laws you need to understand before starting your business in Brazil. These include employee benefits, business laws, and your protection as a foreign investor.
Company Requirements in Brazil:
- Your company must have at least one director and one shareholder of any nationality
- There is no minimum share capital requirement for Brazilian LLC.
- Your company is mandated to lodge annual returns verifying the names and addresses of all directors, address of the business, and the details of shareholders and their shareholdings.
- You must maintain a local registered address if your company is private.
- Each foreign company must appoint a Brazilian legal representative to act as a sponsor.
- Foreigner attempting to own a business in health services, postal services, aerospace, and nuclear energy industries is restricted.
Giving Employee Benefits
In Brazil, you must provide additional benefits for employees, depending on the Professional Category of your business. Those benefits include, among others:
- Providing meal allowance.
- Providing transportation allowance.
- Providing Health Plan
Once you understand everything your company must comply with, you will need to know the laws about doing business in Brazil.
Know These Brazilian Business Law
Adhering to the laws below is important to maintaining business success in Brazil:
- Public companies in Brazil must publish annual financial statements in a national newspaper.
- For the process of company de-registration, the company will be required to maintain a resident company secretary and a legal registered office in Brazil.
- You must have at least one individual representative who is ordinarily a resident in Brazil.
Your business as a foreign investor is protected in Brazil.
You are Protected as a Foreign Investor 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)
Common Questions when understanding accounting and taxation 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
The Corporate Tax rate in Brazil is 34%
Companies in Brazil are taxed in accordance with the Tax Laws in force in the country and can be calculated based on a presumed percentage of Gross Revenue or, even, based on Net Profit (Total Revenue – Total Costs and Expenses).
The IRS in Brazil is called the RFB (Receita Federal do Brasil), which is responsible for the Implementation and Regulation of Tax and Customs Legislation in Brazil.
Brazilian Accounting Standards require companies to prepare their financial statements in Portuguese and in accordance with Brazilian Accounting Norms (NBC), formerly known as Generally Accepted Accounting Principles (GAAP). Accounting records and statements must be made in Portuguese (Brazil).
The equivalent of the CPA in Brazil is the Conselho Federal de Contabilidade (CFC). All accountants must be qualified and registered before the Regional Accounting Council in their region.
In Brazil, all companies must follow the Brazilian Accounting Norms (NBC TG; NBC TG 1000; ITG 1000), within the IFRS standards, according to the size of the company.
Biz Latin Hub can assist you in doing business in Brazil
Once you understand the accounting process, laws, and legal requirements in Brazil, you are set and ready to do business in Brazil.
Contact us today to find out more about how we can support you doing business or read about our team and expert authors.
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The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
