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Your Guide to Business + Legal Success in Latin America

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The partnership of Kegler Brown, the Ohio Small Business Development Center and the Ohio Development Services Agency, presented "Your Guide to Business + Legal Success in Latin America" as a panel discussion on July 28, 2015. The panel, consisting of local industry professionals, discussed best practices for conducting business in Brazil, Chile and Colombia.

Roberta Winch, international program director at the Ohio SBDC hosted by CSCC introduced the speakers and opened the program and Vinita Bahri-Mehra, global business attorney and Asia-Pacific team leader at Kegler Brown, moderated the panel. Speakers included: Amy Freedman , international trade specialist at U.S. Department of Commerce; Zoe Munro, program manager at Council of Great Lakes Governors; Fidel Quinones , senior director + general manager, Latin America consumer business group at The Scotts Miracle-Gro Company; Brian Sturtz, director, international tax services at GBQ Partners; and David M. Wilson, global business attorney at Kegler Brown.

Published in: Law
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Your Guide to Business + Legal Success in Latin America

  1. 1. z
  2. 2. Regional Impact Global Leadership Council of Great Lakes Governors Co-Chairs: Illinois Governor Pat Quinn and Michigan Governor Rick Snyder Zoë Munro, Program Manager Conference of Great Lakes and St. Lawrence Governors and Premiers SOUTH AMERICA TRADE MISSION
  3. 3. Conference of Great Lakes and St. Lawrence Governors and Premiers Conference formed in June, 2015 Chief executives of Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Ontario, Pennsylvania, Québec and Wisconsin are working as equal partners to grow the region’s $5 trillion economy and protect the world’s greatest freshwater system. The Council of Great Lakes Governors serves as secretariat. Council of Great Lakes Governors Co-Chairs: Illinois Governor Pat Quinn and Michigan Governor Rick Snyder
  4. 4. Economic Development  International Trade and Investment  Maritime  Tourism Environmental Protection  Priorities  Water Management  Aquatic Invasive Species Conference of Great Lakes and St. Lawrence Governors and Premiers
  5. 5. Regional Leadership Global Impact  Region’s economy is 3rd largest “country” GDP in the world  One of the country’s emerging mega regions  Centralized location with outstanding market access  Extensive air, rail, road and maritime transportation system www.bmo.com
  6. 6. Regional Leadership Global Impact Santiago, Chile Toronto, Canada São Paulo, Brazil Johannesburg, South Africa Shanghai, China Sydney, Australia United Kingdom Germany Trade Office Tourism Office New Delhi, India Mexico City, Mexico CHICAGO, ILLINOIS Headquarters Trade Office LONDON, UNITED KINGDOM BERLIN, GERMANY
  7. 7. Export Missions  Québec – 2015  Mexico – 2015  Czech Republic, Poland and Turkey – 2014  India – 2014  Colombia, Chile and Brazil – 2012 & 2013  Australia – 2006, 2009 & 2013  South Africa – 2007, 2011 & 2013  Dubai, Abu Dhabi and Qatar – 2012  Indonesia, Vietnam and Thailand – 2012  Brazil, Chile, Peru - 2010  Australia & New Zealand – 2009  Argentina, Brazil & Chile – 2004 & 2008
  8. 8. CGLSLGP Trade Missions have assisted over 300 Great Lakes companies to export their products and services to 20 international markets
  9. 9. South America Trade Mission 2015 • Multi-sector trade mission to Brazil, Chile and Colombia October 17-27, 2015 • São Paulo, Santiago and Bogotá • Customized one-on-one business appointments with interested distributors, agents and other prospective business partners set up by the CGLSLGP Trade Office (average 2 – 4 appointments per day) • Brief market overview including industry sector information and target company profiles
  10. 10. South America Trade Mission 2015 • In-country market business briefings • In-country staff support of CGLSLGP Brazil and Chile Trade Offices. Chile Trade Office covering Colombia. • Group airport-hotel-airport ground transportation in all three cities • Assistance with hotel bookings, drivers and interpreters
  11. 11. South America Trade Mission 2015 Itinerary Saturday, October 17 Sunday, October 18 Depart U.S. for São Paulo, Brazil AM: Arrive São Paulo PM: Country Business Briefing and Networking Dinner Monday, October 19 Individual Business Appointments in São Paulo Tuesday, October 20 Individual Business Appointments in São Paulo Wednesday, October 21 AM: Fly to Santiago, Chile PM: Country Business Briefing and Networking Dinner Thursday, October 22 Individual Business Appointments in Santiago Friday, October 23 Individual Business Appointments in Santiago Saturday, October 24 Free day in Santiago
  12. 12. Itinerary Continued Sunday, October 25 AM: Depart for Bogotá, Colombia Monday, October 26 Individual Business Appointments in Bogotá Tuesday, October 27 Individual Business Appointments in Bogotá Late PM: Fly back to US (pending flight schedules) Wednesday, October 28 AM: Fly back to US South America Trade Mission 2015
  13. 13. Mission Logistics • Drivers/Interpreters • Hotel Block Bookings • Group Inter-Country Flights • Group Ground Transport • Visa Invitation Letters • Travel/Medical Insurance
  14. 14. CGLG Trade Mission Website Website: http://www.cglg.org/projects/international-trade/trade- missions/south-america-mission-2015/
  15. 15. South America Trade Mission 2015 Mission registration deadline: August 19, 2015  Mission Participation Fee US$ 995 per person  Brief Market Research and Appointment Setting Brazil US $ 3,852 Chile US $ 2,500 Colombia US$ 2,600  Grant funding available in many states  Main goal: To assist SMEs from the Great Lakes region or Canada looking to export products and services to Brazil, Chile and Colombia *varies by state Website: http://www.cglg.org/projects/international-trade/trade- missions/south-america-mission-2015/mission-costs/ October 17-27, 2015
  16. 16. Other Mission Costs Costs Paid Directly by Participants (All costs below are estimated and will depend on exchange rate at the time of the mission) International Airline Ticket $1,800 USD Approx. US-Sao Paulo, Santiago & Bogotá Each participant will make their own flight arrangements to travel both to/from and within the South America. Recommended group flight times will be provided. Hotels Sao Paulo, Santiago, & Bogotá (10 nights) $2,3000 USD Approx. The Council will reserve a block of discounted rooms at hotels in Sao Paulo, Santiago and Bogotá. Material translation – website, business cards, materials (Portuguese and Spanish)
  17. 17. Other Mission Costs All fees are approximate Transportation to Meetings Brazil: $600 USD per day Combines driver and interpreter fee Santiago: $20 USD per hour Bogotá: $320 USD for 9 hours Interpreters Brazil see above Santiago: $260 USD for 9 hours Bogotá : $380 USD for 8 hours Material translation – website, business cards, materials to Portuguese and Spanish Brazil Business Visa Fee $160 USD
  18. 18. CGLSLGP FY15-16 TRADE MISSIONS Brazil, Chile and Colombia: October 17-27, 2015 São Paulo, Santiago and Bogotá Germany and the United Kingdom: March 1-9, 2016 Frankfurt (base) and London (base) China: May 7-14, 2016 Shanghai, Guangzhou and Beijing Kazakhstan and Azerbaijan: June, 2016 Website: http://www.cglg.org/projects/international-trade/trade- missions/
  19. 19. Trade Mission Feedback “The South America trip that was organized by the Council of Great Lakes Governors was simply outstanding. All three countries we visited were very productive from a business standpoint. The potential customers that CGLG prequalified and set up for us to meet were exactly the type of customers we want to do business with. As we visited these potential customers, the interpreters were very professional and smart. In the short time we were with them, they picked up our industry lingo and knew our product very well. The entire experience was nothing short of great! We look forward to going on another trade mission trip in the future!” Jeremy Sizer and Jodi Boldenow Industrial Door Co. Inc, Minnesota
  20. 20. "As an international business developer, I have worked with other US agencies for similar trade services. I do have to admit that this is by far the best experience I’ve had. I was very impressed by the thoroughness and enthusiasm in not leaving any stone unturned in peruse of any potential opportunities for my company. In all honesty, I was concerned about meetings schedule crossing the country. However, the planned logistics were impeccable making my time in Australia both effective and efficient. I would with all confidence recommend both the Council of Great Lakes Governors and the CGLG Trade Office in Australia.” Nalex Cordova Blair Rubber, Ohio Trade Mission Feedback
  21. 21. Questions? Zoë Munro Program Manager 20 N. Wacker Dr., Suite 2700 Chicago, Illinois 60606 Email: zmunro@cglg.org Phone: +1 312 407-0177 Website: www.cglslgp.org
  22. 22. “Your Guide to Business + Legal Success in Latin America” June 28th, 2015 Let the U.S. Commercial Service connect you to a world of opportunity. Presented by Amy Freedman US Commercial Service, Cleveland amy.freedman@trade.gov
  23. 23. US Commercial Service The U.S. Commercial Service is the export arm of the U.S. Department of Commerce’s International Trade Administration. With offices throughout the United States and in U.S. Embassies and consulates in nearly 80 countries, the U.S. Commercial Service utilizes its global network of trade professionals to connect U.S. companies with international buyers worldwide.
  24. 24. Export.gov/LookSouth Amy Freedman
  25. 25. What is Look South? • LOOK SOUTH is a coordinated Federal Government effort led by the U.S. Department of Commerce to help more American companies “Look South” to do business with FTA countries • Export promotion • Trade Winds • Trade Missions • IBP • Financing • SBA • OPIC • Training and Education • US Trade & Development Agency • Procurement Initiative • Strategic Partnerships • Chambers • Private companies Mexico is our second-largest trading partner (Canada is the largest), with record U.S. merchandise exports of $216.3 billion in 2012. This “LOOK SOUTH” campaign encourages more than 54,000 U.S. companies already exporting to Mexico to expand exports to other Latin American markets.
  26. 26. Look South Target Markets 7/28/2015 International Trade Administration 26 U.S. FTA partner markets in Latin America: • Mexico • CAFTA-DR • Panama • Colombia • Peru • Chile FUN FACT: Latin American countries are developing their own SBDC-like networks, with the support of the U.S. State Department. These SBDC-like networks will become part of the Small Business Network of the Americas (SBNA).
  27. 27. 7/28/2015 27International Trade Administration Look South target markets show great opportunity Stable, growing economies • Target market GDP growth averages 4.7% Untapped markets • Growing middle class seeks new products Favorable trade policies • Free trade agreements, regional integration, reduced trade barriers
  28. 28. 7/28/2015 28International Trade Administration U.S. products ideal for meeting latent demand Automotive Parts and Supplies • A growing middle class has led to more car ownership, including U.S. brands, raising the demand for U.S. auto parts. Construction Equipment • Growth in infrastructure projects, housing, and mining development all demand construction equipment. Medical/Healthcare Equipment • Growing incomes and increased social safety nets in these markets lead to growing sales.
  29. 29. Markets have favorable policies for doing business 7/28/2015 International Trade Administration 29 Free Trade Agreements • Provide U.S. goods with favorable tariff treatment, government procurement opportunities, legal and intellectual property rights protections, among others. Regional integration • Integration of regional trade blocks such as Central America and the newly formed Pacific Alliance, builds common markets, regulatory regimes, and product standards, and allows for accumulation of origin. Active U.S. engagement • USG agencies are actively engaged in the removal of policy barriers in target markets through programs such as the Customs and Border Management Program and the Standards Alliance.
  30. 30. Look South Resources • Commercial Service in each target market. • Full trade event and webinar schedule. • Export.gov/LookSouth. • Coordinated support from other government agencies, partner networks. 7/28/2015 International Trade Administration 30
  31. 31. • Export.gov/LookSouth. • Newsletter registration. • Market and sector reports. • Promo and Fact Sheets. • Spotlights: missions, shows, conferences, webinars. • Social Media: regular blogs and tweets. • Financing. • Policy support. • Direct Line calls. 7/28/2015 31International Trade Administration Look South Toolkits
  32. 32. • August 2015 • Brazil Health IT Trade Mission Mon, 8/17/2015 – Thu, 8/20/2015 Sao Paulo, Brazil • September 2015 • Inter-American Dialogue: Latin America Clean Transport Forum Wed, 9/02/2015 Mexico City, Mexico *This event will be held in Spanish • Franchise Trade Mission to Central America Sun, 9/20/2015 – Sat, 9/26/2015 San Jose, Costa Rica • 32nd Perumin Mining Convention Mon, 9/21/2015 – Fri, 9/25/2015 Lima, Peru • International Buyer Program (IBP): Pack Expo Mon, 9/28/2015 – Wed, 9/30/2015 Las Vegas, NV • October 2015 • CONEXPO Latin America Wed, 10/21/2015 – Sat, 10/24/2015 Santiago, Chile • Discover Global Markets: Pacific Rim Consumers Thu, 10/29/2015 – Fri, 10/30/2015 Orange County, CA • November 2015 • American Water Works Association Trade Mission to South America Sun, 11/15/2015 – Sat, 11/21/2015 Santiago, Chile and Bogotá, Colombia • SelectUSA Canada 2015 Tue, 11/17/2015 Toronto, Canada • International Buyer Program (IBP): Greater New York Dental Meeting Fri, 11/27/2015 – Wed, 12/2/2015 New York, NY • December 2015 • Enterprise Florida Export Sales Mission to Honduras Tue, 12/1/2015 – Thu, 12/3/2015 Tegucigalpa, Honduras • SelectUSA Brazil Road Show Tue, 12/1/2015 – Fri, 12/4/2015 Rio de Janeiro, São Paulo, Belo Horizonte, Brazil • Houston: Gateway to the Americas Mon, 12/2/2015 – Wed, 12/4/2015 Houston, TX Upcoming Trade Events
  33. 33. Questions? Thank you for your time. Amy.freedman@trade.gov
  34. 34. z in Latin America  Sr. Director & GM, Latin America Consumer Business Group  20+ years experience in the international business sector, specifically LATAM  Global Lawn & Garden Industry  Latin America L&G industry  Why venture into LATAM? Mexico?  Challenges  Regulatory  Business Practices  Logistics  Opportunities  Business Expansion  M&A  ‘Testing the Waters’
  35. 35. z My Background Before joining Kegler Brown in 2011, lived in São Paulo Brazil and worked in a Brazilian law firm 2012 Council of Great Lakes Governors Trade Mission to Brazil, Chile and Colombia participant 2014 Greater Columbus Sister Cities International, Inc. Curitiba, Brazil delegation member MBA course instructor at The Ohio State University
  36. 36. z Designed, developed and lead multinational global business MBA course at The Ohio State University, Fisher College of Business MBA Course Instructor
  37. 37. z
  38. 38. z Course Accomplishments
  39. 39. z Course Accomplishments Managed three MBA consulting teams and related projects for U.S. multinational business.
  40. 40. z Course Accomplishments Analyzed Brazil macro political, economic, social, and technological considerations.
  41. 41. z Course Accomplishments Analyzed Brazil’s outlook for growth with leading global economist.
  42. 42. z Course Accomplishments Analyzed regulatory and policy trends, with experts from U.S. DoS.
  43. 43. z Course Accomplishments Analyzed structured trade and export finance solutions, with representatives of HNB.
  44. 44. z Course Accomplishments Analyzed Brazil market entry and organizational structure considerations.
  45. 45. z Course Accomplishments Analyzed employment and other relationships in Brazil – including Brazil specific labor, agent, and distributor considerations.
  46. 46. z Sample LatAm Experience
  47. 47. z Sample LatAm Experience Managed acquisition of Dow Chemical Company polyolefin films facility by Brazilian manufacturer. Transaction included not only physical real estate assets, but also certain intellectual property, strategic corporate tax planning, environmental implications and tax incentives.
  48. 48. z Sample LatAm Experience Managed acquisition and post acquisition integration of Brazilian software company by Santa Monica based U.S. technology company.
  49. 49. z Sample LatAm Experience Assisted U.S. publically traded company with development of Brazilian market entry strategy.
  50. 50. z Sample LatAm Experience Negotiated and drafted definitive agreements related to acquisition of assets, including robotic equipment and tooling, in Mexico, by U.S. publically traded company.
  51. 51. z Sample LatAm Experience Negotiated and drafted supply agreements for use by U.S. publically traded company in Mexico.
  52. 52. z Sample LatAm Experience Managed drafting and negotiation of Uruguayan distribution agreement related to farm and compact construction equipment.
  53. 53. z Sample LatAm Experience Managed drafting and negotiation of Brazilian distribution agreements in software and manufacturing industries.
  54. 54. z Sample LatAm Experience Developed and provided anti-corruption training to publically traded U.S. company employees in Brazil.
  55. 55. z
  56. 56. z
  57. 57. z Import Export Process
  58. 58. z State Department Directorate of Defense Trade Controls (DDTC) Arms Export Control Act International Traffic in Arms Regulations ITAR 22 C.F.R. Parts 120-130 UML - U.S. Munitions List Commerce Department Bureau of Industry and Security (BIS) Export Administration Act Export Administration Regulations (EAR) 15 C.F.R. Parts 700-799 CCL - Commerce Control List Treasury Department Office of Foreign Assets Control (OFAC) Trading with the Enemy Act, Int’l Emergency Economic Powers Act Iraq Sanctions, Terrorism Regulations, and Others 31 C.F.R. Parts 500-599 List of Specially Designated Nationals + Blocked Persons Cuba
  59. 59. z
  60. 60. z Import Export Process Tax/DutyRadar Obtain importing license (if required) Register with the governmental registration system (if required)
  61. 61. z General Import Taxes + Duties II-Import Duty varies based on product & Country of origin (NCM, HS) 0-35% Import Duty 0-5% raw materials, 20% finished consumer goods, 35% autos and luxury items 0-35% 12% avg Import Duty 6% IPI-Industrial Product Tax Varies based on product (CNM) up to 300% tobacco 20% avg VAT 16% VAT 19% PIS-Social Integration Program Contribution 1.65% COFINS-Social Security Financing Contribution 7.6% ICMS-State Tax 7-25%* SP 18% *Current legislation and recent Supreme Court decisions may impact the applicable ICMS rate. Decree 8,426/15 – effective this month (July 2015)
  62. 62. z Additional Tax Considerations On average, firms make 9 tax payments per year and spend 2600 hours per year filing, preparing and paying taxes Brazil: 2,600 LatAm: 366 OECD: 175 Corporate Tax Plus 10% on taxable income over R$240,000 -may choose deemed profit system if under threshold 15% Corporate Tax 34% Corporate Tax 20% Transfer Price Considerations Yes Transfer Price Considerations Yes Transfer Price Considerations Yes Source: World Bank, Doing Business 2012 On average, firms make 9 tax payments per year and spend 239 hours per year filing, preparing and paying taxes On average, firms make 9 tax payments per year and spend 291 hours per year filing, preparing and paying taxes Baseline: + medium size business + taxes and mandatory contributions are measured at all levels of government + a range of standard deductions and exemptions is also factored
  63. 63. z Brazil Ex-Tarifário Program Tariff reductions generally reduce the applicable tariff from to 0-2% and may also reduce IPI (Resolução CAMEX 35/2006) Importer must file for the Ex-tarifário Certificate or statement from appropriate body, technical reports, public consultation among other things may be considered to determine the existence of a similar domestic good If no similar good is produced domestically, an importer may qualify for reduced or eliminated tariffs
  64. 64. z Importer May Qualify If: Higher quality product or service Higher productivity of equipment Increased efficiency Reduced delivery time Other specific performance factors may be considered depending on product
  65. 65. z ICMS credit to importer PIS/COFINS reduced II/IPI 0% or 88% reduction IRPJ reduced 75% Free Trade Manaus Free Trade Zone – ZFM Western Amazon – AO Free Trade Areas - ALC General Process Cert of importer eligibility on the SISCOMEX Classification of imported goods HS / NCM Submit Invoice Register Transaction on SISCOMEX Import Licenses
  66. 66. z MERCOSUL Southern Common Market Free from import duty with certificate of origin Exceptions to Common External Tariff (CET) Brazil is permitted 93 exceptions to the CET June 2009 trade minister raised several import duty rates Mexico/Brazil revised auto tariff structure Decision No. 39/11 of the Mercosul Common Market Council permits and outlines procedures for the countries to negotiate these topics Member Countries + Brazil + Argentina + Uruguay + Paraguay + Venezuela Applied + Guyana + Suriname Associate Members + Bolivia + Chile + Colombia + Ecuador + Peru Observer of Agreement + Mexico + New Zealand
  67. 67. z Pacific Alliance Latin America (NO BRAZIL) trade bloc Members: Chile Colombia Mexico Peru Observers 30+ Countries: + Costa Rica (currently applying for membership) + Panama + Finland + India + Israel + Singapore + Canada + U.S.
  68. 68. z Level of corruption Transparency International, 2014 CPI index The abuse of entrusted power for private gain Perception of corruption in public sector 2014 USA: 17th of 175 Brazil: 69th of 175 1995 (year 1 of CPI) USA: 15 of 41 Brazil: 36 of 41 P E S T Political Risk + The ability of government to respond to political risk + The ability of government to NOT cause political risk The unit of measurement for political risk is STABILITY Denmark 1st USA 17th Chile 21st Brazil 69th India 85th Colombia 94th China 100th Russia 136th North Korea, Somalia 174th
  69. 69. z FCPA
  70. 70. z About the FCPA Applies to U.S. companies, citizens, foreign subsidiary, officer, director, employee, or agent of a U.S. company or its foreign subsidiary, any stockholder acting on behalf of the company, foreign companies with U.S. registered securities Scope and operation of FCPA not restricted to USA territorial boundaries
  71. 71. z Facts about the FCPA U.S. has pursued 3.5 formal foreign bribery enforcement actions for every one action pursued by all other countries Companies settle, pay fines and forfeit profits U.S. Justice Dept. continues to focus on individuals Guilty employees go to jail, pay fines and must make restitution
  72. 72. z Best Practices Contract Review Compliance Program + Culture Financial Controls
  73. 73. z Agents + Distributors
  74. 74. z Questions to Ask What is the relationship? Is a written agreement required? Rights and duties? Termination? Permanent establishment?
  75. 75. z Agent Distributor Activities subject to some control by supplier Activities subject to only minimal control by supplier Does NOT take title to goods Takes title to goods, buys and sells for own account May handle products of other suppliers; but, is less likely to do so than distributor May handle products of other suppliers Generally compensated on a commission basis Earnings based on resale profit margin Usually does not warehouse goods Usually warehouses and physically delivers goods Usually does not use own capital Uses own capital Bears no risk of failure of payment Bears economic risk of failure of payment by customer May have power to contract on behalf of the supplier Has no power to bind the supplier contractually
  76. 76. z Agent Distributor Creation Statutory requirements Contract law Compensation Commission Sells on own account Termination Enumerated “just cause” reasons Contract law
  77. 77. z Best Practices If properly structured commercial representative and distributorship agreements may require less up-front investment than a more direct presence in the market. Tradeoff for this can be less control over how product is promoted, sold and serviced in the market. Using commercial representatives or distributors may make sense as a means to first enter the market or even as a permanent business model. If proper safeguards are not in place, mismanagement of product by commercial representative or distributor can permanently damage a brand.
  78. 78. z Best Practices Foreign companies should structure commercial representative and distribution agreements with a long-term strategy that preserves maximum flexibility and may include a future more direct presence in the market. For this strategy to work, well-crafted written agreement is imperative. Care must be exercised to not blur the distinctions between a commercial representative and a distributor. Long term exclusive contracts should generally be avoided. In some countries, short term contracts once renewed may be considered contracts for "indefinite terms" after the first renewal, by some courts.
  79. 79. z Best Practices Minimum sales requirements should generally be established in the agreement. Standards for product service and maintenance should generally be set out in the agreement. Generally, regular and adequate reporting should be required. Other key points to address often include termination and causes for termination, distribution points and control over distribution in case of termination.
  80. 80. z Visas Temporary Visas Technical Visas Permanent Visas
  81. 81. z Data Protection
  82. 82. z Legal Advice The content of this presentation is for educational purposes only. Each legal issue is fact dependent, this presentation should not be used or viewed as legal advice; your legal counsel should be consulted on the application of your particular factual situation to the current law.
  83. 83. Brazil TAX
  84. 84. Corporate Tax Rate Top marginal corporate tax rate stands at 34 % in Brazil Break down of 34% ◦ 15 % Basic rate ◦ 10% Surtax on income above BRL 240,000 per year (approximately $ 800,000) ◦ 9% Social contribution on pre-tax profits ◦ Losses can be carried forward indefinitely ◦ Dividends are not subjected to withholding taxes on profits generated on or after Jan 1, 1996 Importation of Royalties and Services ◦ 15% withholding tax for Royalties from patents knowhow and services ◦ PIS, CONFIS, and CIDE total 19.25% Historically the tax rates have been consistent
  85. 85. Repatriation Generally there are no restrictions on repatriation of earnings. The investors must register the original investment and any capital increases/ earnings with BACEN (Banco Central do Brasil) Repatriations of originally invested capital are subject to withholding tax t 15% Over the past few years all levels of government have increased incentives to attract foreign investments
  86. 86. Assuming the dividend paid was after Jan 1, 1996 The example considers Federal Taxes only Example Rate Dividend Services Royalties Pre tax income 1,000,000 1,000,000 1,000,000 Basic rate 15% (150,000.) (150,00) (150,000) Surtax 10% (100,000) (100,000) (100,000) (PIS & COFINS) Social Contribution 9% (90,000) (90,000) (90,000) Withholding 15% - (99,000) (99,000) PIS/COFINS/CIDE 19.25 Effective Tax Rate All earnings paid out as dividends All earnings used to import services All earnings used to import know how withholding tax creditable/(not creditable) in US 34% 56.6%/47% 56.6%/47% 660,000 433,950/531,300 433,950/531,300
  87. 87. Chile TAX
  88. 88. Corporate Tax Rate in Chile Corporate tax rate stands at 20% in 2015 and are expected to go up to 22.5% in 2016 ◦ The tax rate has been in the range of 17%-20% from 2006 to 2015 ◦ 35% withholding tax rate for dividends and capital gains for foreign investor ◦ 20% withholding tax rate for payments made for engineering, technical assistance or technical services rendered abroad ◦ The rates have been on an upward trajectory since 2011
  89. 89. Repatriation The capital may be repatriated one year after the date of investment and gains can be repatriated as soon as they become available Tax treaty signed with the US, still waiting ratification by Chilean Congress
  90. 90. The taxes considered are at the Federal level only Example Rate Dividend Services Royalties Pre tax income 1,000,000.00 1,000,000.00 1,000,000.00 Corporate Tax Rate 20% (200,000.00) (200,000.00) (200,000.00) Withholding 20% - (200,000.00) (200,000.00) Tax rate for dividend 35% (280,000.00) - - Return 520,000.00 600,000.00 600,000.00
  91. 91. Colombia TAX
  92. 92. Corporate Tax Rate in Colombia Corporate tax rate stands at 25% in 2015 and 2016 ◦ The tax rate have been consistent at 25% ◦ Corporate income tax for equality rate- 9% (applies to corporate tax payers required to file return) ◦ Capital Gains are taxed at 10% ◦ Dividends paid to nonresidents without a branch or PE in Colombia are not subject to tax if the dividend are paid out of profit taxed at corporate level. If the dividends paid are paid out of profit not taxed at corporate level are subject to 33% withholding tax ◦ Withholding tax of 26.4% for software royalties and 10% withholding tax for technical service, technical assistance or consulting services ◦ Municipal and state taxes may apply
  93. 93. Repatriation Foreign investment needs to be registered with the central bank The government has the authority to restrict remittance if the international reserve fall below 3 months worth of imports (The reserve have been above this level for decades) No tax treaty in place yet with the US
  94. 94. The taxes considered are at the Federal level only Example Rate Dividend Services Royalties Pre tax income 1,000,000.00 1,000,000.00 1,000,000.00 Corporate Tax Rate 25% (250,000.00) (250,000.00) (250,000.00) Corporate Tax Rate for equality 9% (90,000.00) (90,000.00) (90,000.00) Withholding for Services 10% - (66,000.00) - Withholding for Royalties 26.4% - - (174,240.00) Return 660,000.00 594,000.00 485,760.00

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