Doing Business In Brazil: What You Should Know

• Published date: 26 November 2021
• Subject Matter: Corporate/Commercial Law, Tax, Corporate and Company Law, Contracts and Commercial Law, Tax Authorities
• Law Firm: TMF Group BV
• Author: TMF Group

Business rules in Brazil are complex and require that anyone thinking of doing business there have a clear understanding of the local rules and regulations.

Brazil ranks as the most complex jurisdiction in TMF's Global Business Complexity Index 2021. Complexity in Brazil is driven by a multi-layered system of governance, where federal, state-level and city-level authorities all have significant legislative power; incorporating companies must register with all three of these levels of government.

However, Brazil is also an attractive destination for investment given that it is ranked as the 12th largest economy in the world by GDP and has grown rapidly in recent years.

The Brazilian government has launched initiatives to achieve fiscal sustainability and liberalise one of the most closed emerging market economies. The efforts have strengthened the country's competitiveness and provided a better environment for private sector development. This has resulted in tremendous interest from companies that have long sought to expand into Latin America's largest economy and access its (more than 200 million) consumers.

For companies looking to invest in South America, Brazil remains a top destination, home to about half of the region's population and wealth. The United States is one of the largest exporters to Brazil and one of the leading sources of direct investment in the country.

Bureaucracy

Doing business in Brazil, however, requires an intimate knowledge of the country's bureaucratic commercial environment, which is among the most complex in the world. In fact, the nation ranked 124th for 'ease of doing business' in the World Bank's Doing Business 2020 report. The rankings are based on 10 topics, including trading across borders, registering property, getting credit, paying taxes and enforcing contracts.

The poor ranking is in large part due to Brazil's history of protecting local businesses and employees, which has resulted in a plethora of local rules and regulations.

Brazil's tax environment is one of the primary factors contributing to its complexity. Various taxes are levied at each level of government, meaning that tax rates differ from city to city and state to state. There are significant tax reforms taking place, but these are complex due to the tensions between the multiple levels of government. For example, the federal government is looking to increase VAT across the jurisdiction, but such sweeping changes can affect areas very differently, as...