According to Law 4.131, dated 09.03.1962, foreign capitals are defined as:
Art. 1 – FOREIGN CAPITALS are the goods, machines and equipments introduced in Brazil without initial payment, designated to the production of goods and services; as well as the financial or monetary resources introduced in the country for the use in economic activities; since, in both cases, they belong to companies or individuals with permanent residence or headquarters in foreign countries.
Foreign capitals are assured identical juridical treatment to that of national capitals, under the Constitutional principle of equality.
The legal path for a foreign company to start operations in Brazilcan be outlined as below:
In the next lines, those issues will be addressed in details.
INCORPORATING A COMPANY IN BRAZIL
Investors may choose, basically, between two kinds of legal entities: the Limited Liability Company, which resembles the Limited Liability company from the American law, and the Corporation (or Anonymous Society, or SA,, as per the Brazilian Law).
The basic difference among them is that only the SA is able to become listed in stock exchanges and sell stocks and bonds to the public. Nevertheless, the basic procedures for incorporation of both kinds of companies follow the same general lines.
TOTAL TIME: 90 DAYS.
COST: AROUND 3,000 USD
NO MINIMUM CAPITAL REQUIREMENT
CAPITAL MAY BE DISTRIBUTED AMONG PARTNER AT ANY PROPORTION.
A lawyer must sign the company’s articles of association. This is a legal requirement.
Every new company must hire an accountant from day one. Usually, accountants charge one minimum wage (about 350 USD) per month.
The yellow brick road:
FOREIGN INVESTORS' REPRESENTATIVES
The individuals or legal entities that owns shares in a Brazilian company and have residence / head office abroad must maintain two legal representatives in Brazil:
The first one to represent the capital. His only duty is to serve as a legal representative in case court orders need to be delivered to the foreign investor.
The second one is the Director of the company. The Director must either be a Brazilian citizen or have a permanent visa. The Director is responsible for managing the company.
The individuals that own corporate shares in Brazil must register themselves under the CPF (Individual's Tax Registration Number). In case of foreign companies, the registration shall be made under CNPJ (Company's Tax Registration Number).
The articles of association of the incorporated company in Brazil must contain the following information:
- Headquarters of the foreign partner;
- Name of the legal representative of the foreign partner, resident inBraziland bearing powers of attorney;
- Enclose the legal representative's Power of Attorney;
- Indication of how is the capital going to be entered intoBrazil(currency, goods, rights, machines, etc.).
- Lawyer responsible for the drafting of the articles.
Only foreigners bearing a permanent visa are allowed to establish themselves in the country as businessmen or as directors of a local company. The permanent visa is granted after approval by the Ministry of Labor, Ministry of Foreign Relations and the Federal Police. The applicant shall present documents that demonstrate:
- That he is partner of Brazilian company; and/or
- Has been designated as the local Director of a Brazilian company, and depends on the visa to fulfill his duties.
Another determinant condition for the granting of the visa is the amount invested in Brazil:
The foreign investor as an individual, must invest BRL 150.000,00, or the equivalent in another currency, at least, in a local company. In addition, the investor must employ at least 10 new Brazilian employees within a 2 year period.
Legal entities can also obtain a permanent visa for administrators, managers, directors or foreign executives, without the mandatory commitment of generating new jobs if the invested amount is, at least, BRL 600.000,00, or the equivalent in another currency. This value corresponds to one permanent visa. Extra ones may be granted, upon new investments of the same value.
The Central Bank ofBrazil(Bacen) controls the foreign capital admission and registration, as well as financial operations with foreign countries.
The registration is the only formality imposed to the investors. There is no previous analysis of the investment. The Brazilian government also does not impose mandatory licensing procedures for foreign investments.
The registration is made through an online system called Electronic Registration of Foreign Direct Investment (RDE-IED), which is part of the Central Bank Information System (SISBACEN). This system can be accessed through Bacen's website, using a previously requested password and registration number.
The investor shall declare:
- The amount of capital entering the country;
- The source of the resources;
- If the capital is being entered as currency or as goods. In the last case, the value of the goods.
- The repatriation of capital or profits, as well as the payment of royalties, or reimbursement of technical expenses;
- The reinvestment of profits.
The registration is of essential importance. Only after the registration the capital becomes legalized. Also, the registration warrants the investor the free disposal of the money/shares/stocks, allowing its immediate repatriation, liquidation or transference.
The Lack of registration may also give cause to heavy monetary penalties.