Doing Business in Brazil: initiatives contribute to making the country more attractive to investors 

 

The Brazilian government has been adopting measures aimed at attracting foreign investment 

 

By Glória Cunha 

 

Brazil is full of opportunities and is growing more receptive to foreign investors. In this vein, some measures that have been recently adopted already show a positive impact on investments in the country. 

Between 2016 and 2018, twenty-one permits were issued for opening branches of foreign companies in Brazil, whereas between 2019 and 2021 this number grew to 92 permits.  

 

The increase in the number of interested parties is due to the simplification of the process for establishing branches of foreign companies in Brazil, as the federal government has been working to reduce the level of bureaucracy. As of now, the authorization process for starting a company takes three days. Previously, it took, on average, 45 days.  

Among recent initiatives aimed at attracting investments, the following are noteworthy:  

Transfer price 

This April, the Brazilian government unveiled its plans to implement a new transfer pricing system (see here). The country seeks ways to avoid two problems: double taxation – which can affect companies investing in Brazil –, and tax evasion – which leads to the transfer of profits to countries with a more favorable tax environment. This is part of the wave of measures adopted by the country in its efforts to join the Organization for Economic Cooperation and Development (OECD).  

Legal framework for Foreign Exchange 

The Foreign Exchange Legal Framework (Federal Law No. 14,286/2021), which comes into effect in December 2022, introduces important changes in several aspects regarding foreign exchange transactions between companies headquartered in Brazil and those based in other countries, bringing local legislation into line with other financial environments. 

The streamlining of foreign exchange laws will contribute to greater predictability and a reduction in operating costs. The new rules are also expected to facilitate remittances to correspondent companies abroad, making international transactions less bureaucratic. 

Learn more: Legal Exchange Framework: understand the positive impacts for companies

 

Elimination of the tax on Forex transactions 

In another measure aimed at making the country more attractive to investors and closer to joining the OECD, the Brazilian government issued Decree No. 10,997/2022, which establishes a gradual reduction in the rates of the Tax on Credit, Exchange and Insurance Transactions, or Marketable Securities (IOF) on foreign exchange transactions. By 2029, this tax shall be completed zeroed out. 

 

See also: Decree established that IOF on foreign exchange will be reduced to zero up to 2029

 

Modernization of the business environment 

Federal Law No. 14,195/2021 has been enacted with the intention of modernizing and streamlining the country's business environment, thus creating incentives for national and foreign investors. The Act makes it easier to start companies and carry out foreign trades by promoting actions aimed at reducing bureaucracy in business activities. 

 

Reforms for greater efficiency

 

Brazil is also seeking to make progress in updating its labor laws and promoting tax reform to make the country’s economy more attractive. Efforts are being made to bring Brazilian laws more in line with those practiced in developed countries. 

Proposals related to tax reform, with an impact on the taxation of individuals and companies, are currently under discussion by lawmakers.  

 

Partnership to identify opportunities 

 

Foreign investors will find in Domingues e Pinho Contadores a partner to support them in a consultative and strategic way, in order to take full advantage of the opportunities offered in Brazil. 

With a cross-functional team, DPC assists companies in setting up their business in Brazil in compliance with tax, accounting, labor, and social security laws. You can count on our support: dpc@dpc.com.br.