Snapshot on Brazil's main rules for incorporating and runing a business, including tax, labor, immigration, IP, registrations and licenses, foreign trade and other main regulatory issues. All in a nutshell.

1. LEGAL GUIDE FOR
DOING BUSINESS
IN BRAZIL
May 2011

2. Villela e Kraemer Advogados is a prominent boutique law firm
founded in 1986 by Gustavo Alberto Villela Filho and Tania Mara de
Morais Kraemer. The firm currently has eleven lawyers based in its
Rio de Janeiro and São Paulo offices.
Villela e Kraemer Advogados is recognized for its impressive track
record in civil and securities litigation cases, which it could only
achieve by maintaining a small close-knit group of lawyers. We take
pride in dedicated quality control of our work product, ensuring
delivery of premium service to all of our clients.
Providing business-oriented legal services, the firm is also strongly
positioned in real estate, wills and estates, securities, banking and
other litigation areas, such as torts, asset recovery, collection on
secured transactions and foreclosures.
We have recently widened our legal practice to include corporate
law, mergers and acquisitions, securities, insurance and investment
LEGAL GUIDE FOR legal strategy, asset protection and succession planning.
DOING BUSINESS Our client portfolio includes multinational corporations, medium
IN BRAZIL sized and small companies, asset management firms, investment
advisers, stock brokers and individuals.
May 2011
Happy reading and welcome to Brazil!
2

3. TABLE OF CONTENTS
TABLE OF CO
3

4. 1 Corporate ..............................................................................9 5 Taxes ...................................................................................25
1.1. Limited liability company - Limitada (Ltda.) ..................9 5.1. Federal taxes................................................................25
1.2. Corporation - Sociedade Anônima (S.A.) .......................9 5.1.1. Corporate turnover taxes .........................................25
5.1.1.1. IRPJ ..........................................................................25
2 Licenses And Registrations................................................ 13
5.1.1.2. CSLL.........................................................................25
2.1. Business permit (Alvará) ............................................. 13
5.1.1.3. PIS ...........................................................................25
2.2. Taxpayer registrations ................................................ 13
5.1.1.4. COFINS ....................................................................26
2.2.1 Federal taxpayer registration (CNPJ) ....................... 13
5.1.2. CIDE ...........................................................................26
2.2.2. State taxpayer registration ...................................... 13
5.1.3. Financial transactions tax (IOF) ...............................26
2.2.3. Municipal taxpayer registration .............................. 13
5.1.4. Import tax (II) ...........................................................26
2.3. Foreign investment registration................................. 13
5.1.5. Excise tax (IPI) ..........................................................26
2.4. Customs registrations and licenses............................ 13
5.1.6. Export tax .................................................................26
2.5. Environmental licensing for activities with ................ 14
5.1.7. PIS on imports...........................................................26
environmental impact ................................................ 14
5.1.8. COFINS on imports ................................................... 27
2.5.1. Precedent license...................................................... 14
5.1.9. Withholding income tax (IRRF) .............................. 27
2.5.2. Installation license.................................................... 14
5.2. State value-added tax (ICMS) ..................................... 27
2.5.3. Operating license ..................................................... 14
5.3. Municipal service tax (ISS).......................................... 27
3 Employment ....................................................................... 17
6 Foreign Trade .....................................................................29
3.1. Overview of basic labor rights .................................... 17
6.1. Import transactions.....................................................29
3.2. Foreign personnel ....................................................... 18
6.2 Export transactions .....................................................29
3.3. Severance Indemnity Fund for Employees (FGTS) .... 18
6.3 Customs tariffs and duties ...........................................30
3.4. Labor charges and social security .............................. 18
6.4. Marking and barcodes ................................................30
4 Immigration ........................................................................ 21 6.5. Methods of quoting and payment .............................30
4.1. Brazilian visas............................................................... 21
7 Antitrust Merger Control .................................................. 32
4.1.1. Permanent visas ........................................................ 21
4.1.2. Temporary visas – Type V ......................................... 21 8 Trademark Registration .....................................................33
4.1.3. Business trip “Temporary Visa” – Type II ................ 22
4 Table of Contents

5. This guide is only an overview of certain Brazilian 4 The company’s capital and the time-frame for
laws and regulations. It does not constitute legal its payment must be stated in the organizational
advice in respect of any particular situation and no documents. A Brazilian corporation (sociedade anônima)
action should be taken solely in reliance hereon. must have at least ten percent of its initial capital paid-
in upon incorporation if the corporation is closely-held,
Key steps for incorporating a legal entity in Brazil or thirty percent in the case of a corporation whose
1 Make sure to obtain a “business visa” for the first shares are publicly traded.
business trips that you as nonresident make to Brazil. 5 The company’s name must reference the main
This visa is valid for ninety days. For more information, business activity to be carried out by the company
please refer to Section 4.1.3. followed by “Limitada” or its abbreviated form “Ltda.”
2 Choose the location where the Brazilian entity in the case of a limited liability quota company. For
will have its registered head office. Logistics and corporations, the name must begin with “Companhia”
taxation usually are the factors driving this election. or its abbreviated form “Cia.”, or end with “Sociedade
The company’s registered head office in Brazil must Anônima” or its abbreviated form “S.A.”, which is most
be specified in the corporate charter. A lawyer or common. To ensure that such name will be available,
accountant may lease or sublet a part of his office space it is advisable to check availability with the State’s
for the new company’s registered head office. Commercial Registry website. If available, the name
will be reserved for 72 hours. For securing intellectual
3 Appoint an attorney in fact. The easiest way to
property rights, the corresponding tradename should
have the incorporation charter executed is for each
be registered at INPI (please refer to Chapter 8) and
foreign shareholder to grant a power of attorney to
its domain name recorded with the “NIC.br” (Nucleus
an individual resident in Brazil to sign the corporate
of Information and Coordination) for ensuring rights
articles and represent the foreign shareholder of
over the Brazilian internet’s domain name and
the Brazilian subsidiary. Incorporation is achieved by
corresponding URL.
filing the original execution copies of the Articles of
Organization (“contrato social”) if a limited liability quota 6 The management of the Brazilian company must
company, or the minutes of the shareholders meeting also be established from inception. For a limited
of incorporation if a corporation, with the Commercial liability quota company (limitada), at least one
Registry of the Brazilian State where the company will administrator needs to be appointed. A natural person
have its headquarters. Such power of attorney should resident in Brazil, whether or not a quotaholder, may
contain specific authority to receive service of process on be appointed as administrator. The appointment
behalf of the foreign shareholder. Otherwise, a power of may be effected in the Articles of Organization or by
attorney specifically authorizing receipt of legal process means of a resolution of quotaholders in a meeting.
must be granted to another resident of Brazil. Powers The Articles may include limitations on the authority
of attorney must be notarized and, except when the of the appointed administrator, for instance, requiring
grantor is domiciled in a jurisdiction having a valid treaty formal written approval from quotaholders for the
with Brazil exempting consular legalization (e.g., France, execution of certain acts, such as those involving
Uruguay and Argentina), it needs to be legalized at the the disbursement of company funds that exceed
relevant Brazilian Consulate, then translated in Brazil by a a certain value threshold. Most banks in Brazil are
“sworn translator” and registered with a local Registry of familiar with such internal approvals enshrined in the
Titles and Deeds (often referred to as “RTD”). corporate charter and enforce them strictly. In the
5

6. case of a corporation (sociedade anônima), unless it has obligations in Brazil.
authorized capital or is registered as a publicly traded
8 After the registrations referenced in the preceding
corporation 1 , the company may opt to have only a Board
paragraph are accomplished, the company officially
of Officers, composed of at least two officers resident
exists and an accountant must be hired to handle the
in Brazil who shall be elected by the Board of Directors
bookkeeping and make the filings and submissions of
in a board meeting or, if there is no Board of Directors,
all tax, labor and social security forms and documents
by the shareholders in a shareholder meeting. If the
required under federal, state and local laws, which may
corporation has a Board of Directors, such board must
result in fines if not filed in a timely fashion.
have at least three members, who are not required to
be resident in Brazil if a power of attorney has been 9 To begin operations, the company will also need a
granted to a Brazilian resident to receive service of business permit (alvará) issued by the local authorities
process in the name of the Board member for a period and possibly other federal, state or municipal licenses
not shorter than three years after the expiration of her/ and registrations. Such application processes are
his office tenure. The rules for removal and office tenure lengthy and may take months to be completed. Please
(which cannot exceed three years) must be established refer to Chapter 2 for more information.
in the corporate charter. Each administrator, officer and
director must sign an affidavit (often in the corporate
charter itself) declaring that she/he was not declared
bankrupt or guilty of certain infractions, and is not a
defendant in a case which prevents the performance of
corporate acts by force of law.
7 Once the corporate charter is registered with the
relevant State’s Commercial Registry (which takes two
weeks on average), the company must enroll with the federal
taxpayers registry of the Ministry of Finance, which results in
the issuance of a CNPJ number and card (which takes three
weeks on average). Such registration will enable the Brazilian
subsidiary to enter into contracts (e.g., lease agreement),
open bank accounts and hire employees in Brazil. Any foreign
shareholders/quotaholders must also appoint a Brazilian
resident to be accountable for her/his undischarged tax
1
Corporations registered with the Brazilian Securities Commission (CVM) are referred to as being “publicly traded” because most
of them have their shares traded on the Brazilian stock exchange (Bovespa) or over the counter. It is possible, however, for
corporations in Brazil to seek registration without listing their securities, thus subjecting themselves to public reporting requirements.
Such registration is not triggered by the number of shareholders, so the distinction between “open capital” and “closed capital”
corporations in Brazil is based merely on CVM registration status and not shareholder number. Nor does Brazil offer pass-through
tax benefits for corporations with shareholders below a certain number, as in the case of a U.S. so-called “close” corporation. To
avoid confusion, we refer to S.A. corporations in this paper as being either publicly traded or non-publicly traded.
6

7. 1 CORPORATE
CORPORATE
7

8. The types of company more commonly used in Brazil are the 1.2 Corporation - Sociedade Anônima (“S.A.”)
limited liability quota company (“sociedade limitada”), and the
The Brazilian entity similar to a US stock corporation or European
corporation (“sociedade anônima”). Both corporate forms require
joint stock company (sociedade anônima) is governed by Law
a minimum of two equity holders, that is, two quotaholders or
nº 6.404/76. The organizational charter of an S.A. (“Estatuto
two shareholders.
Social”, hereinafter referred to as “Articles of Incorporation”) 2
1.1 Limited liability company - Limitada (“Ltda.”) contains most of the company’s information, such as the data
typically contained in the Articles of Incorporation and By-laws
The limited liability quota company is similar to a U.S. LLC. Its
of US corporations and European joint stock companies. Its
equity capital is represented by quotas, usually with par value,
capital stock is represented by shares, which may be common
which are held by at least two quotaholders without any
or preferred (the latter representing up to 50% of the total
residency or domicile requirement, meaning that any and all of
share capital), may be divided into different classes, and do not
quotaholders may be either Brazilian resident or non-resident
need to have a par value. Transfers of title to shares are usually
individuals or entities. Each quotaholder has her/his/its liability
made by means of book entries in the share ledgers kept at
limited to the respective amount of the quotas of the company’s the headquarters or recorded through electronic custody by a
capital effectively paid-in by each one but all quotaholders remain share issuing agent (bank). Although certificates reflecting the
jointly and severally liable for any unpaid portion of the capital. shareholding may be issued, the share ledgers are the ultimate
Unless the company’s business activity is regulated, there is no proof of share ownership. When the scrip form is adopted,
minimum capital requirement. share agents may issue account statements indicating the
All of a company’s characteristics, such as the number of quotas shareholding position. No bearer shares or other types of bearer
held by each quotaholder, the amount of the issued capital, the securities are allowed in Brazil since 1992. Upon incorporation,
company’s duration (usually indefinite) and the management the shareholders must deposit at least ten percent of the
structure, powers and duties, must be stated in the company’s subscribed capital in a bank account, for a non-publicly traded
Articles of Organization (Contrato Social) and all amendments corporation, or thirty percent for a public corporation. Five
to such Articles require the approval of holders of quotas percent or more of the corporation’s annual profits must be set
representing at least seventy-five percent of the company’s aside in a legal reserve until such reserve accrues twenty percent
capital. Other corporate matters not requiring an amendment to of the company’s capital.
the Articles of Organization (e.g., appointment and removal of In a sociedade anônima, the Articles of Incorporation must state
managers, filing for reorganization) are subject to a lower voting the company’s corporate information (i.e. corporate name,
requirement percentage. Limitadas are regulated mainly by the issued capital, registered head office and branches, profit-
2002 Civil Code of Brazil and, where the Civil Code is silent, by the sharing rules, management bodies and the rules for election
Corporation Law (Law nº 6.404/76) if such secondary application or appointment of directors and officers, etc.). Corporate
was provided for in the Articles. resolutions are passed in shareholders meetings and reflected
2
The corporate charter of an S.A., called the “Estatuto Social”, consolidates into such single document most of the corporate
information (i.e., name, address, purpose, capital, governance, etc.) typically found in the Articles of Incorporation and also
the Bylaws of U.S. corporations and European joint stock companies. The term Estatuto Social of the S.A. is often translated
into English as Bylaws in order to distinguish from the Articles of Organization (“Contrato Social”) of the Limitada. Only some
corporations in Brazil adopt a separate internal document to regulate governance matters, called the “Regimento Interno”, which
is not registered, and would be more appropriately translated into English as the corporation’s Bylaws. For consistency and ease
of reference, we refer to Estatuto Social in this paper as the Articles of Incorporation because such term best corresponds with
the nature of this S.A. charter document.
8 Corporate

9. in meeting minutes. Unless all shareholders attend the meeting stated in the Articles of Incorporation and must have at least
personally or are represented by a proxy holder, or otherwise three members. Up to one third of the members of the Board
waive notice, the shareholders meeting must be convoked by an of Directors may also serve as officers of the corporation.
invitation notice, published in a newspaper of broad circulation The representation of the corporation is made by the officers
at least three times on different days. The first notice must be pursuant to the rules contained in the Articles of Incorporation,
published at least eight or fifteen days before the meeting at first always subject to the directives of the Board of Directors or
call, depending on whether the company is non-publicly traded Shareholders Meeting, as the case may be, which may also
or publicly traded. Notices of meetings at second call must be need to grant approval for the execution or implementation
published for the first time five or eight days before the meeting. of certain corporate actions by the officers. The core attributes
As a general rule, decisions in meetings are taken by approval of the Board of Directors are listed in the Corporation Law. The
of the simple majority where usually each share gives the right management structure and duties of all administrative bodies
of one vote to their shareholders, but for corporate matters shall be set forth in the Articles of Incorporation.
relating to changes in the rights attributable to preferred shares
Publicly traded and non-publicly traded corporations with
or the reduction of the mandatory dividends, the resolutions
assets exceeding R$ 240 million or whose gross revenues in
will require approval by shareholders representing the simple
the past year exceeded R$ 300 million must have their financial
majority of the affected class of preferred shares in a meeting
statements audited by an independent external auditor. Non-
convened for such purpose. If the shares are highly dispersed and
publicly traded corporations with less than twenty shareholders
certain conditions are met, Brazil’s securities commission (CVM)
and net worth below R$ 1 million are exempt from publishing
may authorize a reduced voting percentage for approval.
notices of convocation of shareholders meetings and from
The quorum to hold a shareholders meeting at the first call is
publishing financial statements, balance sheets, auditor’s
two thirds if the resolution is to vote a change in the Articles of
reports, management reports and other corporate documents
Incorporation and one fourth for any other matters, and any
in newspapers before the shareholders’ annual meeting.
number in a second call if the first call did not have the required
quorum of attendees. Thirty days before the annual shareholders If a person does not wish to appear on the company’s records
meeting, the financial statements, the auditor’s opinion thereon, as a shareholder but has agreed to share in the profits of the
and the management report to be approved must be published entity, it may participate as a co-venturer in an unincorporated
in a newspaper for disclosure to shareholders or made available joint venture with the incorporated partner. The relationship
at the company’s headquarters. (e.g., funding requirements, return on investments and liability
of the parties) is ruled by contract in a silent partnership called
If the company has plans to issue debentures or other
“Sociedade em Conta de Participação”, as regulated by the 2002
securities or to have its shares listed on a stock exchange or
Civil Code of Brazil. A consortium may also be formed according
over the counter, or if the law so requires due to the company’s
to rules of the Civil Code to set up a “de facto company” pursuant
activity (e.g., banking or insurance), it must incorporate as a
to a joint venture arrangement.
corporation. The shareholders’ names are only stated in the
share registry books. The corporation must have a minimum of
two officers. If there is a Board of Directors, it shall be elected
at the shareholders meeting. The officers (at least two) are
elected at a meeting of the Board of Directors or directly at
the shareholders meeting if there is no Board of Directors. The
officers and board members are not referenced in the Articles
of Incorporation. A Board of Directors is only required for
publicly traded corporations or those with authorized capital
9 Corporate

10. 2LICENSES AND REGISTRATIONS
LICENSES AN

11. The following are the most important registrations and licenses, taxpayer’s registration with the competent local authorities
but other filings, enrollments and registrations may also be where it has an office and where the services are rendered. The
required. The company’s location and activity are important to treasury department of the relevant municipality regulates the
determine all administrative requirements for the business and application process.
some of them are conditions precedent for others. As such,
2.3 Foreign investment registration
registration with the local Fire Department will normally be
applicable for merchants and manufacturers. Within thirty days after a foreign exchange transaction to
buy Brazilian currency for the purpose of making a capital
2.1 Business permit (“Alvará”)
contribution to a Brazilian subsidiary is made, the investor must
The “alvará” is a document issued by the relevant municipality effect an online declaratory registration widely referenced
for each company operating in Brazil in order to ensure that as “RDE-IED” (which is an acronym for its original name in
the company meets all legal requirements for its activities. The Portuguese: “Registro Declaratório Eletrônico – Investimento
application process is usually straightforward and the Alvará is Externo Direto”) with the Central Bank of Brazil for monetary
represented by a small poster that must be displayed in a visible and fiscal control purposes. As a condition for such registration,
location on the reception wall of the company’s headquarters both the foreign investor and the Brazilian recipient company
in order to facilitate inspections by municipal officials. must be enrolled with the “CADEMP” roll of foreign or Brazilian
2.2 Taxpayer registrations companies which is managed at the Central Bank’s electronic
system (“Sisbacen”). The RDE-IED online registration can be
2.2.1 Federal taxpayer registration (“CNPJ”)
made by a bank, foreign exchange dealer or by any person
All Brazilian companies must obtain a “CNPJ” federal taxpayer’s authorized by the foreign investor or by the Brazilian company
registration by electronically submitting the application forms having access to Sisbacen.
available on the Brazilian Federal Revenue Service’s website and
2.4 Customs registrations and licenses
presenting the required documents, such as proof of its existence,
to the competent office of the Brazilian Federal Revenue Service. Brazilian and foreign companies engaging in import or export
Foreign companies holding assets and rights subject to ownership transactions in Brazil must obtain an electronic accreditation
recordation in Brazil (including shareholding of Brazilian with the Federal Revenue Service commonly referred to as
companies) must also obtain a CNPJ number. “RADAR”, which is the acronym in Portuguese for “Tracking
of Customs Agents’ Operations” (Rastreamento de Atuação
2.2.2 State taxpayer registration
dos Intervenientes Aduaneiros). The main types of RADAR are
If the Brazilian company is an “ICMS” (value-added tax) the “simplified” and the “ordinary”, which enable access to
taxpayer, it must obtain a state taxpayer’s registration from the Integrated System of Foreign Trade (Sistema Integrado de
the competent Brazilian State where it has its registered head Comércio Exterior – “SISCOMEX”).
office. Manufacturers, merchants (wholesalers and retailers) of
As the name indicates, the simplified RADAR requires much
goods and commodities, transportation companies and trading
less documentation than the ordinary. The simplified RADAR
companies, for instance, are required to hold a state taxpayer’s
accreditation takes approximately two months if all documents
registration. Each state’s treasury department regulates its
are in good order although, according to the applicable
application procedures.
regulations, the review of an application for a “simplified”
2.2.3 Municipal taxpayer registration RADAR must be made within ten days. Such RADAR is limited,
If the Brazilian company provides any service set out in the however, to export transactions not exceeding US$ 300,000
list attached as an exhibit to Complementary Law nº 116/03, (FOB value) per semester, or import transactions of up to US$
it is an ISS (service tax) taxpayer and must obtain a municipal 150,000 (CIF value) per semester.
11 Licenses and Registrations

12. An “ordinary” RADAR may be required for higher trade of plants and installation of machinery on the land. The
volumes, which are usually made through international trading “installation license” can only be issued after the conditions set
companies. Its application requires more documents and is forth under the precedent license are met. The validity period
processed by a more complex and thorough review of the of the installation license cannot be shorter than the timeline
Federal Revenue Service, which has thirty days to process and established for the installation of the plant or activity, up to a
grant or deny applications. maximum of six years.
2.5 Environmental licensing for activities with environmental 2.5.3 Operating license
impact
The operating license approves the commencement of the
Each environmental agency of the relevant Brazilian state is activities or industrial operations in the facilities and can
in charge of regulating, reviewing and issuing permits for the only be issued after fulfillment of the installation license’s
installation, expansion and operation of activities and facilities conditions. The validity period must take into consideration the
that could potentially have an adverse impact on the natural relevant environmental controls and contingency plans but, in
environmental of the relevant state. The general guidelines and any event, it ranges between four and ten years. In case the
main requirements for such licensing are found in Law nº 6.938 venture is predicted to last longer than the period of validity
of August 31, 1981 which delegated to the National Council of of the operating license, a renewal must be applied for at least
Natural Environment (“CONAMA”) responsibility for studying one hundred and twenty days before expiration.
the official environmental policies, and CONAMA’s Resolution
nº 237 of December 19, 1997, but each state has a certain degree
of discretion to regulate its specific proceedings in this regard.
Each license has different time-frames for review and
adjudication, which may not exceed six months for the less
complex licenses and twelve months for those applications
requiring an environment impact survey or technical analysis.
Some Brazilian states adopt other intermediary licensing
procedures, but the following are the core licenses required for
manufacturers and other potential polluters to build a plant or
start an activity:
2.5.1 Precedent license
This license approves the environmental feasibility of the business
activity to be carried out and must be sought during the planning
phase of the installation, change or expansion of the activity.
It does not approve construction work. The validity period of
the precedent license cannot be shorter than the milestones
established for the planning, projection and blueprinting of each
phase of the project, up to a maximum of five years.
2.5.2 Installation license
The installation license approves the project itself and
authorizes the commencement of the building/construction
12 Licenses and Registrations

13. 3EMPLOYMENT
EMPLOYMEN
13

14. 3.1 Overview of basic labor rights
installments or in a lump sum at the end of the year, which
The longstanding and employee-favorable Brazilian labor must be equivalent to one twelfth of the total salary and
legislation regulates most aspects of labor-management and certain selected benefits and bonuses received by the
employment contractual issues. Trade unions and employee employee throughout the referenced calendar year.
labor unions have an important role in the negotiation of
(v) Profit sharing program: Employees are entitled to
collective bargaining agreements for different categories
participate in the financial profits of her/his employer or
of employees based on the relevant industry sector.
upon achieving certain benchmarks, as agreed to with a
Most of the fundamental employment rights, which may committee of employees and/or with the relevant workers
not be changed even with the employee’s written consent, union, in a specific program sponsored by the company
are restated in the Consolidation of Labor Laws (“CLT”), a (“Participação nos lucros e resultados”, or just “PLR”).
compendium of labor laws. The more important rules are Certain statutory standards must be observed for such a
as follows: program. PLR payments do not accrue in the calculation
basis of FGTS, social security levy and other mandatory
(i) Working schedule: The maximum duration of the work
labor charges.
week in Brazil is forty-four hours, unless provided otherwise
in the collective bargaining agreement entered into with (vi) Overtime: Any actual or presumed work performed after
the relevant labor union. Certain professional categories, the employee’s work shift entitles the employee to receive
such as bank clerks, telephone operators and call center an hourly overtime pay of at least fifty percent above the
operators are subject to a different working schedule. employee’s ordinary hourly wage. Employees in managerial
Management executives holding jobs considered to be or similar positions considered as trust functions are not
“trust positions” are not subject to a working schedule. entitled to overtime pay.
(ii) Vacation: After completion of a period of twelve months (vii) Maternity/paternity leave: Female employees in Brazil
of work, employees are entitled to thirty calendar days of who become mothers are entitled to a paid maternity leave
vacation (or less if the employee missed six or more days of of one hundred and twenty days (payment being refundable
work in the year), receiving regular salary payments during to the employer by INSS, the official social security entity),
that period, plus one third of the monthly salary, which shall and fathers to a “paternity leave” of five calendar days.
be paid at least two days in advance. The employer has the Employers who grant one hundred and eighty days of
discretion of choosing the 30-day vacation period within maternity leave may enjoy a tax benefit for wages paid
that twelve-month period. Employees may opt to exchange during such paid leave.
one third of the vacation period for a corresponding (viii) Termination notice: In cases of dismissal without cause,
monetary allowance. the dismissed employee must receive a prior written notice
(iii) Wages: All work of equal nature and function must be of termination at least thirty calendar days in advance of
remunerated at the same rate, irrespective of nationality, age, her/his last working day, during which period the employer
gender, marital status, place of work, or any other particularity. may require the employee to work or not. Employees
A minimum wage is set by law annually by the Brazilian federal must also submit a thirty-day prior written notice upon
government and each state’s government. The federal resignation.
minimum wage is currently R$ 545.00 per month and in some (ix) Weekly holiday: All employees are entitled to a twenty-
cases serves as the basis for readjusting salaries. four-hour uninterrupted rest period per week, preferably on
Sundays.
(iv) Annual Bonus: Employees in Brazil are entitled to an
annual bonus named “13th salary”, usually paid in two (x) Tenure: Pregnant women and members of unions or
14 Employment

15. safety teams (CIPA) have employment tenure and can only and deduct and remit to the INSS from the employee’s
be laid off under certain special circumstances. salary her/his contributions of between 8% and 11% of the
employee’s salary, subject to a maximum of R$ 3,467.40.
3.2 Foreign personnel
The actual applicable rate depends on the employee’s
If a company has more than two employees, at least two- salary bracket, applying the variable scaled rate schedule
thirds of its employees must be Brazilian citizens. The issued by the INSS.
same ratio must be observed for the remuneration of
• Mandatory employer’s contributions to sponsor
Brazilian and foreign nationals. In case a certain industry
governmental official programs:
sector lacks qualified workers of Brazilian nationality for
a specific job, Brazilian authorities may allow a lower ratio
of Brazilian nationals. That has been the case of welders
Beneficiary Institutions Or Fund Maximum Rate (*)
on Brazilian oil platforms, for example. For purposes of
SESI, SESC and SEST 1.5%
such proportionality headcount, an expatriate married to
SENAI, SENAC or SENAT 1.0%
a Brazilian citizen or officially residing in Brazil for more
INCRA 0.2%
than ten years is considered to be a Brazilian citizen. Only
SEBRAE 0.6%
foreigners holding a Permanent Visa or a Temporary Visa
Education Salary 2.5%
(Type V) may lawfully work in Brazil. For more information
Work accident insurance fund 3.0%
on this topic, please refer to Chapter 4.
Total (Maximum rate) 8.8%
3.3 Severance Indemnity Fund for Employees (“FGTS”) (*) The application and actual rate depends on the
The employer must deduct and deposit every month in the company’s main business activity.
employee’s FGTS blocked interest-bearing account held at
the government-controlled bank Caixa Econômica Federal
(“CEF”) an amount equal to 8.5% of each employee’s
monthly compensation (including bonuses and most fringe
benefits). Upon dismissal without cause of the employee,
she/he may withdraw the balance accrued with a penalty
payable by the employer equal to forty percent of such
balance. The employer must also pay another ten percent
of the accrued balance to the Federal Government. Other
triggering events regulated by law (e.g., buying a first home)
also allow the employee to withdraw the cash balance from
her/his FGTS account.
3.4 Labor charges and social security
Except for those companies benefiting from a special
taxation program available to lower income companies,
employers are subject to certain labor charges and social
contributions levied on each employee’s monthly pay
check.
• Employers must pay twenty percent of each employee’s
salary to the National Institute for Social Security (“INSS”)
15 Employment

16. 4IMMIGRATION
IMMIGRATIO
16

17. 4.1 Brazilian Visas Foreigners married to Brazilian citizens or having Brazilian
children may also be eligible for a permanent visa.
Brazil maintains a rigid immigration policy to protect
Brazilian workers. As a general rule, for temporary visas, the 4.1.2 Temporary visa V (VITEM V)
Ministry of Foreign Affairs issues the visa to a foreigner after
Among other cases not mentioned herein, temporary work
the approval of the foreign citizen’s employment contract
visas may be granted to foreigners under certain limited
by the Ministry of Labor.
circumstances, namely:
4.1.1 Permanent visas
• With a labor contract: The foreigner must have an
Pursuant to specific rules issued by the National Immigration employment contract with a Brazilian company to perform
Council and by the Ministry of Labor, permanent visas are professional activities, which must be approved by the
usually granted to expatriates assigned to occupy a top Ministry of Labor. It must be evidenced that the foreign
management position in the Brazilian subsidiary of a foreign professional has a background compatible with the
company, or to a foreign person intending to invest her/his function, such as nine years of education and two years
own capital in productive activities in Brazil. of work experience; a college degree plus one year of
professional experience; or, a graduate degree (Masters,
Requirements: A minimum direct investment equivalent to
PhD etc.). Her/his compensation must be equal to that of
US$ 200,000 in the capital of the Brazilian subsidiary for each
Brazilian nationals hired for the same function. The visa
foreign individual appointed to a management position, or an
is issued for a period of up to two years, renewable for
investment equivalent to US$ 50,000 in a Brazilian company
another two years. South Americans are exempt from
coupled with the creation of ten new jobs within the
most of those eligibility requirements.
following two years for each appointed foreigner. The visa
will only be valid during the foreign citizen’s tenure in office • Without a labor contract (Technicians): Foreigners
but expiring at latest within two or five years, depending on without an employment contract with a Brazilian
the basis of the visa application (i.e., five years of validity company who come to Brazil to perform scientific or
for visas supported by investments of US$ 200,000 or two technical functions must have a technology transfer or
years for investments of US$ 50,000). Individual investors technical assistance contract or cooperation agreement
who evidence investment of her/his own funds equal to registered with “INPI”, the Brazilian patent and
at least R$ 150,000 as a capital contribution to a Brazilian trademark office, entered into between her/his employer
company with a productive purpose (i.e., generate jobs, abroad and the Brazilian entity to which the services will
transfer know-how, develop a region, etc.) may also obtain be provided. It must be evidenced that the expatriate’s
a permanent visa for five years according to a business previous work experience includes at least three years
plan to be reviewed by the Brazilian authorities processing of carrying out the relevant activity. Such visa is granted
the application. If such productive investment generates for a period not longer than one year but it is subject to
employment for at least ten Brazilian citizens, the permanent renewal.
visa may be granted without expiration date even if the
• Internship program: The foreign employee of a
individual investor fails to prove such minimum investment
multinational company who comes to Brazil as a trainee
threshold. Foreign investments below the threshold of R$
of the Brazilian subsidiary or branch entity and whose
150,000 may still qualify as the basis for a permanent visa
salary is paid completely outside Brazil may also be
application to the extent that the investor is a citizen of a
eligible for such a visa.
South American country or that her/his investment has a
strong welfare objective, such as to support a Brazilian non- • Crew members: Foreigners who come to Brazil to work
governmental organization. on a vessel, ship, cruiser, fishing boat or offshore oil rig
17 Immigration

18. in any river, lake or sea, either with or without a Brazilian Brazil exclusively for a business purpose, such as to attend a
valid labor contract, may apply for a temporary visa. meeting, conduct market surveys or negotiate agreements.
It is valid for up to five years from date of issuance and it is
The application process must be initiated in Brazil by the
valid for multiple trips.
contracting company by completing and filing the proper
application form. Once the National Immigration Council
approves the visa, the approval is published in the Official
Journal of Brazil. Once the visa is granted, the foreigner
has three months to enter the Brazilian territory and thirty
days thereafter to register with the Federal Police in the city
where she/he will live.
Individual income taxation in Brazil of immigrant aliens
A foreign individual holding a permanent visa or a temporary
visa tied to an employment contract is considered to be a
Brazilian taxpayer as of the date of her/his arrival in Brazil.
Temporary visa holders without an employment contract
are deemed to be Brazilian taxpayers as of the 184th day
spent in Brazil, whether consecutive or not, within any
given twelve-month period. As a Brazilian taxpayer, the
foreign immigrant becomes subject to the income tax rules
applicable to residents of Brazil and all of her/his worldwide
income is subject to taxation in Brazil. A tax credit may be
granted for income taxes paid in other countries if certain
conditions are met. Individual employment income in Brazil
is normally withheld at the source at rates varying from 0% to
27.5%, depending on the actual income bracket. The ultimate
tax burden is assessed upon filing the annual income tax
return by the end of April of each year for the fiscal year
ending on the preceding December 31. Any difference
between the amount determined on the tax return and the
values withheld at source throughout the year (e.g., payroll
compensation) must be paid by, or refunded to, the taxpayer.
Certain income, such as dividends or interest on equity, is
not considered taxable income and several deductions may
also apply.
4.1.3 Business trip “Temporary Visa” II (VITEM II)
The business visa permits a foreign individual to enter
Brazil for a short term (ninety days or less) on specific
business assignments. The business visa is recommended
to business owners or their representatives that come to
18 Immigration

19. 5TAXES
TAXES
19

20. Brazil has a vast and complex tax system which 5.1.1.1 Corporate income tax (“IRPJ”)
encompasses several federal, state and municipal taxes. The
The IRPJ corporate income tax is ascertained based on the
Brazilian federal government taxes most types of income;
calendar year’s taxable income with monthly estimated tax
manufacturing activity, financial, credit and securities
payments required, and is generally computed on the basis of
transactions, and foreign trade (imports and exports). It
annual or quarterly taxable income at the taxpayer’s choice.
imposes taxes and contributions on certain taxable events
In the actual profit taxable method (lucro real), the IRPJ is
and revenues generated by specific economic activities. Each
levied at 15% on adjusted net income plus a surtax of 10% on
Brazilian state taxes the sales and transportation of goods
annual taxable net income in excess of R$ 240,000. Under the
and services, telecommunication, motor vehicle ownership,
estimated profits computation method (lucro presumido), if
transfer of title over assets by gifts and inheritance. Each
eligible and actually opted for, the company applies a rate
Brazilian municipality taxes service fees, transfers of title and
that varies from 1.6% to 32%, according to its activity sector
interests over real properties and real estate ownership.
classification set forth in the applicable legislation (for most
We comment below only on the most important taxes service companies, it is 32%), on its gross quarterly income
applicable to corporate activities and business transactions. to assess the taxable base (estimated profit margin). IRPJ
of 4.8%, plus a surtax of 8% on the amount of the taxable
5.1 Federal Taxes
base exceeding R$ 20,000.00, are imposed on the estimated
5.1.1 Corporate income taxes profit margin amount so calculated.
Certain qualified Brazilian companies whose gross annual 5.1.1.2 Social contribution on net income (“CSLL”)
income in the preceding fiscal year did not exceed R$
Brazilian tax legislation provides for a social contribution
48,000,000 or, in case of new companies, R$ 4,000,000
tax on profits, which also has the nature of corporate
times the number of months that it carried out operational
income tax, being in practice another surcharge. Its taxable
activities during the preceding fiscal year 3 may choose
base is similar to that of the IRPJ, with certain adjustments.
between two tax computation methods, namely the
For companies taxed under the actual profit taxation
“estimated or presumed profit” (lucro presumido) or the
income method, the CSLL is levied at a flat 9% rate on net
“actual profit” or “taxable income” taxation method (lucro
income. However, under the estimated profits taxation for
real) on annual or quarterly taxable income. Taxable income
companies which qualify for such method and actually opts
is equal to the excess of gross turnover over the sum of costs
in, the company applies a rate that varies from 1.6% to 32%
of goods sold, administrative and operational expenses and
according to its activity (for most service companies, the
other reserves and accruals permitted by law. Net operating
applicable rate is 32%), on its gross income to assess the
losses generated in a given period can offset taxable income
taxable base. From the taxable base amount yielded, the
of the subsequent period up to 30% of taxable income and
CSLL is levied at a 2.88% rate.
be carried forward.
5.1.1.3 Contribution for the social integration program (“PIS”)
Small and mid-size companies with an annual gross income
not exceeding R$ 2.4 million may elect to be taxed under a The PIS is a federal welfare contribution on most gross
simplified regime at a lump sum rate that encompasses most revenues, generally levied at 1.65%. Higher rates are imposed
taxes that would otherwise be levied separately. Such rate on companies in some industry sectors. A “credit system”
will depend on the company’s annual income and it is called granted to the company on acquisition of inputs and certain
Simples. expenses ensures that it applies only once to the final value of
the transaction in a chain of transactions. Certain companies
3
Please note that some entities such as banks are required to be taxed under the “actual profit” method.
20 Taxes

21. may pay the PIS cumulatively (i.e. without recording PIS the Brazilian Real - R$) is 0.38%. The IOF is imposed at a
credits) at a lower rate (0.65%). The PIS applies also to the rate of 5.38% on foreign loans with an average maturity of
import of goods and to the payment of services to non- ninety days or less. Loans with longer average maturities
residents. Export revenues are exempt. are subject to IOF at a 0.38% rate.
5.1.1.4 Contribution for social security financing 5.1.4 Import tax (“II”)
(“COFINS”)
The II (import tax) is levied on the CIF price (“ad valorem”
COFINS is also a federal welfare contribution on most gross basis) at a rate defined by the product’s tax code in
revenues, levied on a monthly basis generally at 7.6%. Higher accordance with the tariff classification schedule of the
rates are imposed on companies in certain industry sectors. Mercosur’s Common Nomenclature (“NCM”) upon clearance
A “credit system” granted to the company on acquisition of of imported products.
inputs and certain expenses ensures that it applies only once
Unlike the ICMS, IPI, PIS and COFINS taxes, for which the
to the final value of the transaction in a chain of transactions.
taxpayer may obtain a tax credit to be offset against sales of
Certain companies may also pay the COFINS cumulatively
products, the II (import tax) is not recoverable.
(i.e. without recording credits on purchases) at a lower rate
of 3%. The COFINS applies also to the importation of goods 5.1.5 Excise tax (“IPI”)
and to the payment of services to non-residents. Export The IPI is a federal value-added tax imposed on manufacturers
revenues are exempt. and assemblers at the time of sale of an output good
5.1.2 Contribution for the intervention in the economic to another manufacturer for further industrialization or
domain (“CIDE”) improvement, or to a wholesaler or retailer, or similarly on
the importation of products. But IPI is a non-cumulative tax
Brazilian companies paying royalties, fees or other amounts
because the subsequent manufacturer down the chain may
pursuant to licensing or assignment of technology,
take a credit for the prior IPI paid. The IPI must be stated
tradenames, patents and other rights, or service agreements
conspicuously in the sales invoice and shall be levied as the
not involving transfer of technology, with foreign entities
products leave the plant where they are manufactured.
are subject to a 10% CIDE, assessed on the value of payments
The IPI tax rate is defined by the product’s tax code in the
made to a foreign recipient.
NCM’s tariff schedule. The IPI applies also on the import of
5.1.3 Financial transactions tax (“IOF”) manufactured goods upon importation and resale by the
importer.
IOF is a tax levied on monetary, currency, credit, insurance,
securities and gold-backed transactions whose rate varies 5.1.6 Export tax
from 0% to 25%. Its taxable base and rates vary according
Only a few products are subject to the export tax: (i) raw
to the type of transaction and the federal government’s
hides and skins of bovines, including buffalo, horses, sheep
monetary policy at the relevant time and it is often used
and lambs; (ii) cigarettes containing tobacco exported to
as a tool for making certain investments or flows of funds
the Caribbean, Central and South America countries; and
more or less attractive. Funds remitted to Brazil for capital
(iii) weapons and ammunition exported to Central American
markets investments may be taxed with IOF.
and South American countries except for Argentina, Chile
As a general rule, foreign currency exchange transactions and Ecuador. The export tax is calculated on the ad valorem
in connection with offshore payments of royalties, loans or export price of exported goods.
technical assistance/administrative services, for instance,
are subject to IOF. The current IOF rate for foreign
exchange transactions (payment in a currency other than
21 Taxes

22. 5.1.7 PIS on imports 5.2 State value-added tax (“ICMS”)
The PIS on imports is a federal welfare contribution on the Each of the Brazilian states collects a value-added tax
import of goods and payment of services to non-residents, (ICMS) on the sale and/or on the supply or transportation
generally levied at a 1.65% rate. of goods and on certain services not otherwise subject
5.1.8 COFINS on imports to the ISS tax, and also on import transactions. The ICMS
is levied on imported and domestic products when the
The COFINS on imports is a federal welfare contribution
goods exit an establishment at each stage of business.
on the import of goods and payment of services to non-
The ICMS is levied based on the price of products sold
residents, generally levied at a 7.6% rate.
and a tax credit is granted for all ICMS paid on the
5.1.9 Withholding income tax (“IRRF”) purchase or importation of a product, similarly to the
The current withholding income tax rates applicable to IPI tax-credit system. As a non-cumulative tax, the
offshore remittances to nonresidents are as follows: ICMS taxable basis is ascertained on the increased
value of the product’s price in each subsequent
Nature of payment Taxation rate
phase of trade. The calculation process provides for
Dividends 0%(2)
a check of credits and debits by the relevant taxpayer
Interest on loans 15%(2)(3)
on each sale phase to ascertain the actual ICMS due.
Royalties(1) 15%(2)(3)(4)
The specific rate will depend on the relevant taxable
Technical and 15%(2)(3)(4)
administrative services event (sale or transportation) and the taxing state
Other service payments 25% (2)(3) but most states levy the ICMS at rates varying from
(1) The royalty agreement must be registered with 12% to 18%. Some products are subject to a higher or
the National Institute of Intellectual Property (“INPI”) lower rate. Intrastate transactions are usually subject
and the Central Bank of Brazil. to lower rates. The rates may also vary depending on
the specific product, service or state in which the
(2) The specified IRRF rates do not apply to payments
transaction occurs, and for interstate transactions.
to jurisdictions with whom Brazil has a treaty to avoid
The ICMS is also imposed on interstate and inter-
double taxation (South Africa, Argentina, Austria,
municipal transportation and communication services.
Belgium, Canada, Chile, China, Czech Republic, Denmark, Communication services are ICMS taxed usually at a
Ecuador, Finland, France, Hungary, India, Israel, Italy, 25% rate.
Japan, Korea, Luxembourg, Mexico, Netherlands,
5.3 Municipal service tax (“ISS”)
Norway, Philippines, Portugal, Slovakia, Spain, Sweden
and Ukraine), in which cases the respective treaty The ISS is a municipal tax imposed on certain services
should be reviewed in order to assess the applicable which are listed in the schedule attached as exhibit to
taxation. Complementary Law nº 116/2003. The applicable rates for
each taxable event or service are determined by each
(3) Payments to low tax jurisdictions, understood
municipality but may not exceed 5%. As a general rule,
as those which tax income at a rate of 20% or less,
the ISS is collected by the city where the service provider
listed in Brazil’s Federal Revenue Service’s Normative
has its registered head office but companies rendering
Instruction nº 1.037 of June 4, 2010, are subject to a
assembly, construction, seismic, demolition, energy
25% IRRF.
transmission, oil drilling and distribution services, inter
(4) Such remittances are also subject to CIDE at a alia, are taxed under special rules that look at the place
10% rate. of provision of the service.
22 Taxes

23. 6FOREIGN TRADE
FOREIGN TRA
23

24. Foreign trade is under the direct control and jurisdiction An extensive list of items is subject to non-automatic
of the federal government. The agency responsible for licensing, such as imports subject to restrictions or
regulation, supervision and control of foreign trade tax benefits; items similar to products which are also
transactions in Brazil is the foreign trade secretariat manufactured in Brazil; after-market materials; imports
(Secretaria de Comércio Exterior - “SECEX”) subordinated to made under financial or operating lease transactions;
the Ministry of Development, Industry and Foreign Trade of and imports made without “exchange cover” or foreign
Brazil which, together with the Central Bank of Brazil and the exchange payment clearance (e.g., donation). These
Federal Revenue Service, holds a tight control over transfer are subject to prior examination and special control by
of funds in connection with foreign trade transactions to governmental agencies either prior to shipment abroad or
prevent tax avoidance and money laundering practices prior to customs clearance, depending on the case.
and to ensure compliance with applicable transfer pricing
As a general rule, all imports are subject to II (import tax),
rules.
IPI, ICMS, PIS and COFINS (import duties), irrespective of
Brazil is a member of the Latin American Integration foreign exchange currency transactions. The II (import tax)
Association and of the World Trade Organization and rate for machinery and equipment not produced locally
signatory of the Treaty of Asuncion that created Mercosur may be reduced to 2% upon request by the importer to the
with Argentina, Paraguay and Uruguay, and which more competent authorities.
recently added Venezuela as a new member, with the goal of
Used goods can only be imported if not manufactured in
uniting the economies of the acceding countries by fostering
Brazil and whose age is lower than the limits of its useful
trade and foreign investments among its members. Bolivia,
life attested by a technical report prepared by an entity of
Chile, Colombia, Peru and Ecuador are Mercosur’s associated
reputable knowledge.
nations.
6.2 Export transactions
6.1 Import transactions
Any company organized in Brazil and accredited with the
Import operations are carried out in Brazil by industrial
Federal Revenue Service’s RADAR (please refer to section
companies, commercial import/export companies and trading
2.4) may carry out export operations upon registration as
companies accredited with the Federal Revenue Service’s
an exporting company with SECEX. Industrial companies,
RADAR. Each foreign trade transaction requires an electronic
commercial exporting companies and trading companies are
registration with SISCOMEX (refer to section 2.4), which is
among the types of companies eligible for registration with
jointly managed by SECEX, the Federal Revenue Service
SECEX. Registration of industrial companies and commercial
and the Central Bank of Brazil, which are the authorities
exporting companies is very simple, and no prior export
responsible for monitoring and enforcing tax, customs and
experience is required. Registration of a trading company is
foreign exchange laws and regulations regarding cross-border
complex, requiring the fulfillment of several conditions.
transactions. The licensing for import transactions may be
either automatic (compulsory), with the registration of the As a general rule, exportation of goods is free of taxes, subject
transaction with SISCOMEX being made upon the arrival of only to the necessary export registration with the SISCOMEX.
the goods in Brazil, or non-automatic when the registration The exportation of certain products, however, is prohibited
of the transaction depends on an import licensing made (e.g., native animals, skins of native animals and works of
prior to the shipment of the goods from outside of Brazil. art older than one hundred years and antique books). The
Imports carried out under the “temporary admission regime” SISCOMEX registration of exports is the mechanism through
(e.g., leases and products coming to Brazil to be displayed in which all exports are regulated so as to ensure acceptable sales
exhibitions or competitions) are not subject to any licensing. price, collection of export taxes and compliance with export
24 Foreign Trade

25. programs. imports are freely negotiable, averaging 360 days, whether
or not backed by an irrevocable letter of credit. The more
Commissions to foreign agents are permitted and may
usual modalities of foreign trade transactions in Brazil are
be deducted from the export invoices registered with
the CAD (Cash against documents), ADD (Acceptance against
SISCOMEX. Nevertheless, except for very specific cases and
documents) and other modalities upheld by documentary
at SECEX’s discretion, the payment of commissions to legal
credit (UCP-600 – ICC 2007)
entities affiliated with the Brazilian exporter will not be
permitted.
6.3 Customs tariffs and duties
Tariffs, in general, are the primary instrument in Brazil
for regulating imports. Brazil and its Mercosur partners
implemented the Mercosur common external tariff schedule
(“TEC”). Products manufactured in or exported to Brazil are
classified under Mercosur NCM’s classification, which was
adapted to the IV Amendment to the Harmonized System
of Designation and Codification of Goods approved by the
Customs Cooperation Council known as “SH-2007”. Mercosur
members have also unilaterally adjusted their tariffs in
response to economic crises and, given these developments,
the TEC is currently full of exceptions. Automobiles, luxury
items and other goods are subject to higher rates.
As mentioned above, the import duties (II, IPI for
manufactured goods, PIS on imports, COFINS on imports
and the ICMS), apply to imported goods.
6.4 Marking and barcodes
The essential identifying marks, such as shipping marks, port
of destination and package number, when required, must be
prominently shown on shipping cases and situated so that
they will not be covered by any subsequent strapping. Any
other markings should be placed in a less prominent place
and should be limited to essential data. Identifying marks
used in the bill of lading should be shown on shipping cases.
A number may be used as an identification mark, provided
that it is placed within a geometric figure (e.g. triangle or
square).
6.5 Methods of quoting and payment
Quotations for foreign trade transactions in Brazil are usually
made on an FOB (free on board) or C&F (Cost and freight)
basis in US dollars. Payment maturity terms for exports and
25 Foreign Trade

26. Brazilian laws confer on governmental agencies overseeing
certain regulated business sectors, such as banking,
insurance and telecommunications, authority to pre-approve
transactions of change of control or amalgamation, mergers
and joint ventures which may be harmful to competition in
the relevant economic sector.
In addition to the required merger controls by such
industry regulatory agencies, any M&A transaction or joint
venture which may harm competition by creating a market
concentration in a specific segment in Brazil must be
submitted for prior approval by CADE (acronym in Portuguese
for “administrative council of economic defense”), even
if the triggering event occurs outside Brazil, within fifteen
days after execution of any binding agreement. Letters of
intent and conditional transactions may also trigger CADE’s
review.
According to CADE’s rules, any take-over, merger or
association among companies or economic groups which
7ANTITRUST
yields a market-share of twenty percent or greater is subject
ANTITRUST /
to CADE review. Additionally, if any of the transaction’s
participants had gross revenues in the financial year
preceding the deal of R$ 400 million or more in or from the
MERGER CONTROL Brazilian territory, the transaction shall require a filing with
CADE. A participant’s gross revenues for such purposes are
calculated by aggregating all gross revenues of its economic
MERGER CON
group worldwide, i.e. the participant and all of its affiliates.
Failure to submit the transaction to CADE may subject the
parties to penalties, fines and even to an order to unwind
the transaction.
As a result of CADE’s analysis and in order to protect the
Brazilian market from a market concentration or harmful
competition, CADE may impose a series of conditions on the
deal, such as the divestment of certain divisions or brands,
the restriction on operations in certain Brazilian states or
areas and the change of a tradename, among others. CADE
may even require the parties to unwind the deal.
ANTITRUST | MERGER CONTROL 26

27. The holder of foreign trademark rights may apply for the same
trademark in Brazil at the Brazilian Patent and Trademark
Office (“INPI”) under the rules of the Paris Convention which
secures preference for a period of six months from the date
of application in the country of origin. The applicant must
submit: (i) a certified copy of the trademark application or
certificate of registration; and (ii) declare that it is in good
standing in its country of origin and actually operates in such
field of business.
The INPI trademark registration in Brazil affords a protection
over the registered rights for ten years, which may be
renewed and extended, for successive ten-year periods,
indefinitely. If the trademark holder fails to use the same
for a period longer than five years, the registration becomes
subject to a forfeiture proceeding. Well-known trademarks
may be afforded special protection.
In addition to entitling exclusive use of the registered
trademark, registration with INPI allows for payments of
8TRADEMARK
royalties offshore with tax deductibility. Any agreement
TRADEMARK
providing for licensing or transfer of trademark rights
must therefore be filed for registration with INPI and
subsequently with the Central Bank of Brazil to comply with
REGISTRATION foreign exchange controls. Outbound remittance of royalty
payments may be supported by the filing for registration of
the trademark licensing agreement but tax deductibility may
REGISTRATIO
require the actual registration by INPI.
Trademark registrations may be applied for and granted for
each class (nature) of business activity and business sector,
thus enabling the same tradename to be registered for
entrepreneurs in completely different industries if there is
no chance of confusion. The registration may be for a word
mark, for a word and an associated logo mark, which is
known as a ‘composite mark’, or for a device mark.
The examination process is very lengthy due to a lack of staff
and it may take several years for INPI to publish final approval
of registration in its official magazine. Any aggrieved party
may file an administrative opposition with INPI requesting
the rejection of an application for a tradename or mark
already registered, or annulment thereof if the trademark
registration was already completed.
TRADEMARK REGISTRATION 27

28. © Copyrights reserved. This publication is protected by
Brazilian copyright legislation. Other than identified citations
for private studies or research permitted under applicable
cpyright legislation, this work product may not be reproduced
or transmitted without the prior written consent of Villela e
Kramer Advogados.
28

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