The Creation of Legal Entity (domestic or foreign) in Brazil
Mar 11, 2015 QuickCounsel Download PDF
By Demétrio Beck da Silva Giannakos, PUC-RS
This QuickCounsel intends to clarify the process of creation of a Brazilian or foreign legal entity in Brazil. We will discuss how create a legal entity in Brazil, ways for foreign partners to open a business in Brazil and also how to implement a foreign subsidiary on Brazilian soil.
According to article 1126 of the Brazilian Civil Code, all companies that are created according to Brazilian laws and that have Brazil as its headquarters are considered Brazilian entities. It is extremely important to clarify that having non-Brazilian citizens or non-Brazilian companies as partners does not prevent a company to be a Brazilian company, as long as they have a representative that is either Brazilian resident in Brazil or that holds a permanent resident Brazilian visa.
How to create a Brazilian company
To create a legal entity in Brazil, it is necessary to register the bylaws with the Board of Trade (Junta Comercial), at the state level, and the Business Registration Department and Integration (Departmento de Registro Empresarial e Integração), at the federal level.
For the registration, it is necessary to present the following two documents at the Board of Trade:
ii) Personal documents of each partner. If the partners are not Brazilians, the document is a passport. If the partner is foreign legal entity, the document will be a translated and consularized version of the bylaws. In both cases is required proxy to a Brazilian or foreign resident in Brazil.
The bylaws need must contain:
After the Availability Consultation test, the following will be required:
Also, some Boards of Trade require that the application to CNPJ (National Register of Legal Entities) is made prior to the filing with the Board. In this case, the DBE (Basic Entry Document for the CNPJ with the Federal Tax Authority) also must accompany the documentation file with the Board.
The application for a CNPJ can be made in the Federal Tax Authority website, which provides an automated approval, generating the DBE. The DBE must be signed by the representative of the future company and then delivered to the Board in the same act of submission of the documentation mentioned above.
After the register is made, a Company Registration ID (NIRE) will be generated. The Board of Trade will provide this number to the partners.
In case the Board of Trade does not require the DBE to be filed with the initial application, after receiving the NIRE, the future company should apply for a CNPJ and file the DBE to the Board of Trade.
After the CNPJ is created, an application for the Permit to Operate with the Municipal Authorities of the location where the company will operate is necessary. The following documents are required to apply for the Permit to Operate:
After the Permit is issued, the next step is to register the company with the state tax authority, through the State Department of Finance. The State Registration is mandatory for companies in the sectors of trade, industry and intercity and interstate transport services. Also included are communication and energy services. It is necessary to obtain the registration in the ICMS (State Tax on Goods and Services).
Most states have an agreement with the Federal Tax Authority, which, in turn, makes the registration with the CNPJ with the State Tax Authority. The following documents required are:
Finally, you need to apply for the Tax Apparatus, to be able to print of invoices and authenticate tax books. This can be done with the Municipal Authorities.
After following all the steps above, the company is officially created.
How to open a branch in Brazil
Another option for foreign investors is to open a branch in Brazil. The company can keep in Brazil the same business name, they are both considered to be the same legal entity and CNPJ (see below).
To start the process the foreign company needs to apply for a CNPJ, which will then be shared with its Brazilian branch.
According to article 1134 of the Civil Code, a foreign company can only operate in Brazil after getting permission from the Executive branch of the Brazilian government, except as shareholder or partner, as discussed before.
In practice, it is common for the Brazilian Executive Branch to require changes in the capital to be brought into the country to create the branch of the company. Since the Brazilian Civil Code does not specify the amount, either an increase or decrease may be requested at the discretion of the Brazilian government.
The requirements to create a branch are listed on article 1134 of the Civil Code:
The Executive Branch of the Brazilian government has discretion to establish conditions to foreign companies as it sees fit to protect national interest, for example it may require change in the capital brought to Brazil, as already mentioned and/or the company's legal representative in Brazil (Article 1135, Civil Code). If the company accepts the conditions, the Executive Branch will issue an authorization decree. The authorization decree will include the amount of capital for operations in Brazil. It is the company's responsibility to publish (for example, in a newspaper) of the authorization with copy of the bylaws, signed by all the members, or, if it is a corporation (not partnership), a copy signed by the founders together with documents required by Law 6.404 of 1976 and possibly the changes required by the Executive Branch, pursuant to article 1129 of the Civil Code, within 30 days.
Finally, it is necessary to register with the Board of Trade of the respective state to be able to operate (Article 1136, Civil Code).
The registration application shall be accompanied by copy of the publication of the decision from the Execute Branch to either authorize or deny the creation of the branch of the foreign company, accompanied by proof of payment of an application fee in official banking institution.
After these documents are filed, the registration will be made in a special book for foreign companies. This registration will include:
After the registration, a publication in a in the Federal Official Gazette will be made within 30 days.
The foreign company will operate in the country with the same name that has abroad and may only add "of Brazil" ("do Brasil") or "Brazil" ("para o Brasil").
The company has to maintain during all times a representative in Brazil with powers to resolve any issues and receiving summons.
Any amendment to the bylaws is subject to authorization of the Executive.
The foreign company, under penalty of forfeiture of authorization, should make, in the federal and state official offices that have jurisdiction over its location, the publications that, under the law of its country of origin, is obliged to make related to its financial statements and the results, as well as the acts of his administration.
Finally, after the presentation of the different ways to open a Brazilian legal entity or to open a branch of a foreign company in Brazil, is of paramount importance to assess the pros and cons of each option, always seeking the option that best meets the investors' needs.
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