Brazil legal guide

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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.

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Brazil legal guide

  1. 1. LEGAL GUIDE FORDOING BUSINESSIN BRAZILMay 2011
  2. 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 investmentLEGAL GUIDE FOR legal strategy, asset protection and succession planning.DOING BUSINESS Our client portfolio includes multinational corporations, mediumIN BRAZIL sized and small companies, asset management firms, investment advisers, stock brokers and individuals.May 2011 Happy reading and welcome to Brazil!2
  3. 3. TABLE OF CONTENTSTABLE OF CO3
  4. 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 ..........................................................................252 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).......................................... 273 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 ................................................304 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 ................ 224 Table of Contents
  5. 5. This guide is only an overview of certain Brazilian 4 The company’s capital and the time-frame forlaws and regulations. It does not constitute legal its payment must be stated in the organizationaladvice 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 whose1 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 mainThis visa is valid for ninety days. For more information, business activity to be carried out by the companyplease 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. Forwill 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 “SociedadeThe company’s registered head office in Brazil must Anônima” or its abbreviated form “S.A.”, which is mostbe 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’sfor the new company’s registered head office. Commercial Registry website. If available, the name will be reserved for 72 hours. For securing intellectual3 Appoint an attorney in fact. The easiest way to property rights, the corresponding tradename shouldhave the incorporation charter executed is for each be registered at INPI (please refer to Chapter 8) andforeign shareholder to grant a power of attorney to its domain name recorded with the “NIC.br” (Nucleusan individual resident in Brazil to sign the corporate of Information and Coordination) for ensuring rightsarticles and represent the foreign shareholder of over the Brazilian internet’s domain name andthe Brazilian subsidiary. Incorporation is achieved by corresponding URL.filing the original execution copies of the Articles ofOrganization (“contrato social”) if a limited liability quota 6 The management of the Brazilian company mustcompany, or the minutes of the shareholders meeting also be established from inception. For a limitedof incorporation if a corporation, with the Commercial liability quota company (limitada), at least oneRegistry of the Brazilian State where the company will administrator needs to be appointed. A natural personhave its headquarters. Such power of attorney should resident in Brazil, whether or not a quotaholder, maycontain specific authority to receive service of process on be appointed as administrator. The appointmentbehalf of the foreign shareholder. Otherwise, a power of may be effected in the Articles of Organization or byattorney 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 authorityof attorney must be notarized and, except when the of the appointed administrator, for instance, requiringgrantor is domiciled in a jurisdiction having a valid treaty formal written approval from quotaholders for thewith Brazil exempting consular legalization (e.g., France, execution of certain acts, such as those involvingUruguay and Argentina), it needs to be legalized at the the disbursement of company funds that exceedrelevant 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 theTitles and Deeds (often referred to as “RTD”). corporate charter and enforce them strictly. In the5
  6. 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 precedingcorporation 1 , the company may opt to have only a Board paragraph are accomplished, the company officiallyof Officers, composed of at least two officers resident exists and an accountant must be hired to handle thein Brazil who shall be elected by the Board of Directors bookkeeping and make the filings and submissions ofin a board meeting or, if there is no Board of Directors, all tax, labor and social security forms and documentsby the shareholders in a shareholder meeting. If the required under federal, state and local laws, which maycorporation 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 tobe resident in Brazil if a power of attorney has been 9 To begin operations, the company will also need agranted to a Brazilian resident to receive service of business permit (alvará) issued by the local authoritiesprocess in the name of the Board member for a period and possibly other federal, state or municipal licensesnot shorter than three years after the expiration of her/ and registrations. Such application processes arehis 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 anddirector must sign an affidavit (often in the corporatecharter itself) declaring that she/he was not declaredbankrupt or guilty of certain infractions, and is not adefendant in a case which prevents the performance ofcorporate acts by force of law.7 Once the corporate charter is registered with therelevant State’s Commercial Registry (which takes twoweeks on average), the company must enroll with the federaltaxpayers registry of the Ministry of Finance, which results inthe issuance of a CNPJ number and card (which takes threeweeks on average). Such registration will enable the Braziliansubsidiary to enter into contracts (e.g., lease agreement),open bank accounts and hire employees in Brazil. Any foreignshareholders/quotaholders must also appoint a Brazilianresident to be accountable for her/his undischarged tax1 Corporations registered with the Brazilian Securities Commission (CVM) are referred to as being “publicly traded” because mostof them have their shares traded on the Brazilian stock exchange (Bovespa) or over the counter. It is possible, however, forcorporations 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-throughtax benefits for corporations with shareholders below a certain number, as in the case of a U.S. so-called “close” corporation. Toavoid confusion, we refer to S.A. corporations in this paper as being either publicly traded or non-publicly traded.6
  7. 7. 1 CORPORATECORPORATE7
  8. 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 Europeancorporation (“sociedade anônima”). Both corporate forms require joint stock company (sociedade anônima) is governed by Lawa minimum of two equity holders, that is, two quotaholders or nº 6.404/76. The organizational charter of an S.A. (“Estatutotwo shareholders. Social”, hereinafter referred to as “Articles of Incorporation”) 21.1 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-lawsThe limited liability quota company is similar to a U.S. LLC. Its of US corporations and European joint stock companies. Itsequity capital is represented by quotas, usually with par value, capital stock is represented by shares, which may be commonwhich are held by at least two quotaholders without any or preferred (the latter representing up to 50% of the totalresidency or domicile requirement, meaning that any and all of share capital), may be divided into different classes, and do notquotaholders may be either Brazilian resident or non-resident need to have a par value. Transfers of title to shares are usuallyindividuals or entities. Each quotaholder has her/his/its liability made by means of book entries in the share ledgers kept atlimited to the respective amount of the quotas of the company’s the headquarters or recorded through electronic custody by acapital effectively paid-in by each one but all quotaholders remain share issuing agent (bank). Although certificates reflecting thejointly and severally liable for any unpaid portion of the capital. shareholding may be issued, the share ledgers are the ultimateUnless 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 theAll of a company’s characteristics, such as the number of quotas shareholding position. No bearer shares or other types of bearerheld 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 thestructure, powers and duties, must be stated in the company’s subscribed capital in a bank account, for a non-publicly tradedArticles of Organization (Contrato Social) and all amendments corporation, or thirty percent for a public corporation. Fiveto such Articles require the approval of holders of quotas percent or more of the corporation’s annual profits must be setrepresenting at least seventy-five percent of the company’s aside in a legal reserve until such reserve accrues twenty percentcapital. 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 statemanagers, 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 electionCorporation Law (Law nº 6.404/76) if such secondary application or appointment of directors and officers, etc.). Corporatewas provided for in the Articles. resolutions are passed in shareholders meetings and reflected2 The corporate charter of an S.A., called the “Estatuto Social”, consolidates into such single document most of the corporateinformation (i.e., name, address, purpose, capital, governance, etc.) typically found in the Articles of Incorporation and alsothe Bylaws of U.S. corporations and European joint stock companies. The term Estatuto Social of the S.A. is often translatedinto English as Bylaws in order to distinguish from the Articles of Organization (“Contrato Social”) of the Limitada. Only somecorporations in Brazil adopt a separate internal document to regulate governance matters, called the “Regimento Interno”, whichis not registered, and would be more appropriately translated into English as the corporation’s Bylaws. For consistency and easeof reference, we refer to Estatuto Social in this paper as the Articles of Incorporation because such term best corresponds withthe nature of this S.A. charter document.8 Corporate
  9. 9. in meeting minutes. Unless all shareholders attend the meeting stated in the Articles of Incorporation and must have at leastpersonally or are represented by a proxy holder, or otherwise three members. Up to one third of the members of the Boardwaive 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 officersat 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 orcall, depending on whether the company is non-publicly traded Shareholders Meeting, as the case may be, which may alsoor publicly traded. Notices of meetings at second call must be need to grant approval for the execution or implementationpublished for the first time five or eight days before the meeting. of certain corporate actions by the officers. The core attributesAs a general rule, decisions in meetings are taken by approval of the Board of Directors are listed in the Corporation Law. Theof the simple majority where usually each share gives the right management structure and duties of all administrative bodiesof 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 withor the reduction of the mandatory dividends, the resolutions assets exceeding R$ 240 million or whose gross revenues inwill require approval by shareholders representing the simple the past year exceeded R$ 300 million must have their financialmajority 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 shareholderscertain conditions are met, Brazil’s securities commission (CVM) and net worth below R$ 1 million are exempt from publishingmay authorize a reduced voting percentage for approval. notices of convocation of shareholders meetings and fromThe quorum to hold a shareholders meeting at the first call is publishing financial statements, balance sheets, auditor’stwo thirds if the resolution is to vote a change in the Articles of reports, management reports and other corporate documentsIncorporation 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 requiredquorum of attendees. Thirty days before the annual shareholders If a person does not wish to appear on the company’s recordsmeeting, the financial statements, the auditor’s opinion thereon, as a shareholder but has agreed to share in the profits of theand the management report to be approved must be published entity, it may participate as a co-venturer in an unincorporatedin a newspaper for disclosure to shareholders or made available joint venture with the incorporated partner. The relationshipat the company’s headquarters. (e.g., funding requirements, return on investments and liability of the parties) is ruled by contract in a silent partnership calledIf the company has plans to issue debentures or other “Sociedade em Conta de Participação”, as regulated by the 2002securities or to have its shares listed on a stock exchange or Civil Code of Brazil. A consortium may also be formed accordingover 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” pursuantactivity (e.g., banking or insurance), it must incorporate as a to a joint venture arrangement.corporation. The shareholders’ names are only stated in theshare registry books. The corporation must have a minimum oftwo officers. If there is a Board of Directors, it shall be electedat the shareholders meeting. The officers (at least two) areelected at a meeting of the Board of Directors or directly atthe shareholders meeting if there is no Board of Directors. Theofficers and board members are not referenced in the Articlesof Incorporation. A Board of Directors is only required forpublicly traded corporations or those with authorized capital9 Corporate
  10. 10. 2LICENSES AND REGISTRATIONSLICENSES AN
  11. 11. The following are the most important registrations and licenses, taxpayer’s registration with the competent local authoritiesbut other filings, enrollments and registrations may also be where it has an office and where the services are rendered. Therequired. The company’s location and activity are important to treasury department of the relevant municipality regulates thedetermine all administrative requirements for the business and application process.some of them are conditions precedent for others. As such, 2.3 Foreign investment registrationregistration with the local Fire Department will normally beapplicable 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. 12. An “ordinary” RADAR may be required for higher trade of plants and installation of machinery on the land. Thevolumes, which are usually made through international trading “installation license” can only be issued after the conditions setcompanies. Its application requires more documents and is forth under the precedent license are met. The validity periodprocessed by a more complex and thorough review of the of the installation license cannot be shorter than the timelineFederal Revenue Service, which has thirty days to process and established for the installation of the plant or activity, up to agrant or deny applications. maximum of six years.2.5 Environmental licensing for activities with environmental 2.5.3 Operating licenseimpact The operating license approves the commencement of theEach environmental agency of the relevant Brazilian state is activities or industrial operations in the facilities and canin charge of regulating, reviewing and issuing permits for the only be issued after fulfillment of the installation license’sinstallation, expansion and operation of activities and facilities conditions. The validity period must take into consideration thethat could potentially have an adverse impact on the natural relevant environmental controls and contingency plans but, inenvironmental of the relevant state. The general guidelines and any event, it ranges between four and ten years. In case themain requirements for such licensing are found in Law nº 6.938 venture is predicted to last longer than the period of validityof August 31, 1981 which delegated to the National Council of of the operating license, a renewal must be applied for at leastNatural Environment (“CONAMA”) responsibility for studying one hundred and twenty days before expiration.the official environmental policies, and CONAMA’s Resolutionnº 237 of December 19, 1997, but each state has a certain degreeof discretion to regulate its specific proceedings in this regard.Each license has different time-frames for review andadjudication, which may not exceed six months for the lesscomplex licenses and twelve months for those applicationsrequiring an environment impact survey or technical analysis.Some Brazilian states adopt other intermediary licensingprocedures, but the following are the core licenses required formanufacturers and other potential polluters to build a plant orstart an activity:2.5.1 Precedent licenseThis license approves the environmental feasibility of the businessactivity to be carried out and must be sought during the planningphase of the installation, change or expansion of the activity.It does not approve construction work. The validity period ofthe precedent license cannot be shorter than the milestonesestablished for the planning, projection and blueprinting of eachphase of the project, up to a maximum of five years.2.5.2 Installation licenseThe installation license approves the project itself andauthorizes the commencement of the building/construction12 Licenses and Registrations
  13. 13. 3EMPLOYMENTEMPLOYMEN13
  14. 14. 3.1 Overview of basic labor rights installments or in a lump sum at the end of the year, whichThe longstanding and employee-favorable Brazilian labor must be equivalent to one twelfth of the total salary andlegislation regulates most aspects of labor-management and certain selected benefits and bonuses received by theemployment 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 tocollective bargaining agreements for different categories participate in the financial profits of her/his employer orof employees based on the relevant industry sector. upon achieving certain benchmarks, as agreed to with aMost of the fundamental employment rights, which may committee of employees and/or with the relevant workersnot be changed even with the employee’s written consent, union, in a specific program sponsored by the companyare 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 aas 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 otherwisein the collective bargaining agreement entered into with (vi) Overtime: Any actual or presumed work performed afterthe relevant labor union. Certain professional categories, the employee’s work shift entitles the employee to receivesuch as bank clerks, telephone operators and call center an hourly overtime pay of at least fifty percent above theoperators are subject to a different working schedule. employee’s ordinary hourly wage. Employees in managerialManagement 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 Brazilof work, employees are entitled to thirty calendar days of who become mothers are entitled to a paid maternity leavevacation (or less if the employee missed six or more days of of one hundred and twenty days (payment being refundablework 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 ofdiscretion of choosing the 30-day vacation period within maternity leave may enjoy a tax benefit for wages paidthat 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 ofremunerated at the same rate, irrespective of nationality, age, her/his last working day, during which period the employergender, marital status, place of work, or any other particularity. may require the employee to work or not. EmployeesA minimum wage is set by law annually by the Brazilian federal must also submit a thirty-day prior written notice upongovernment 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 anannual bonus named “13th salary”, usually paid in two (x) Tenure: Pregnant women and members of unions or14 Employment
  15. 15. safety teams (CIPA) have employment tenure and can only and deduct and remit to the INSS from the employee’sbe 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’sIf a company has more than two employees, at least two- salary bracket, applying the variable scaled rate schedulethirds 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 sponsorBrazilian and foreign nationals. In case a certain industry governmental official programs:sector lacks qualified workers of Brazilian nationality fora specific job, Brazilian authorities may allow a lower ratioof 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 theThe employer must deduct and deposit every month in the company’s main business activity.employee’s FGTS blocked interest-bearing account held atthe government-controlled bank Caixa Econômica Federal(“CEF”) an amount equal to 8.5% of each employee’smonthly compensation (including bonuses and most fringebenefits). Upon dismissal without cause of the employee,she/he may withdraw the balance accrued with a penaltypayable by the employer equal to forty percent of suchbalance. The employer must also pay another ten percentof the accrued balance to the Federal Government. Othertriggering events regulated by law (e.g., buying a first home)also allow the employee to withdraw the cash balance fromher/his FGTS account.3.4 Labor charges and social securityExcept for those companies benefiting from a specialtaxation program available to lower income companies,employers are subject to certain labor charges and socialcontributions levied on each employee’s monthly paycheck.• Employers must pay twenty percent of each employee’s salary to the National Institute for Social Security (“INSS”)15 Employment
  16. 16. 4IMMIGRATIONIMMIGRATIO16
  17. 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 protectBrazilian 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 workthe approval of the foreign citizen’s employment contract visas may be granted to foreigners under certain limitedby the Ministry of Labor. circumstances, namely:4.1.1 Permanent visas • With a labor contract: The foreigner must have anPursuant to specific rules issued by the National Immigration employment contract with a Brazilian company to performCouncil and by the Ministry of Labor, permanent visas are professional activities, which must be approved by theusually granted to expatriates assigned to occupy a top Ministry of Labor. It must be evidenced that the foreignmanagement position in the Brazilian subsidiary of a foreign professional has a background compatible with thecompany, or to a foreign person intending to invest her/his function, such as nine years of education and two yearsown 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 ofUS$ 200,000 in the capital of the Brazilian subsidiary for each Brazilian nationals hired for the same function. The visaforeign individual appointed to a management position, or an is issued for a period of up to two years, renewable forinvestment equivalent to US$ 50,000 in a Brazilian company another two years. South Americans are exempt fromcoupled with the creation of ten new jobs within the most of those eligibility requirements.following two years for each appointed foreigner. The visawill only be valid during the foreign citizen’s tenure in office • Without a labor contract (Technicians): Foreignersbut expiring at latest within two or five years, depending on without an employment contract with a Brazilianthe basis of the visa application (i.e., five years of validity company who come to Brazil to perform scientific orfor visas supported by investments of US$ 200,000 or two technical functions must have a technology transfer oryears for investments of US$ 50,000). Individual investors technical assistance contract or cooperation agreementwho evidence investment of her/his own funds equal to registered with “INPI”, the Brazilian patent andat least R$ 150,000 as a capital contribution to a Brazilian trademark office, entered into between her/his employercompany with a productive purpose (i.e., generate jobs, abroad and the Brazilian entity to which the services willtransfer know-how, develop a region, etc.) may also obtain be provided. It must be evidenced that the expatriate’sa permanent visa for five years according to a business previous work experience includes at least three yearsplan to be reviewed by the Brazilian authorities processing of carrying out the relevant activity. Such visa is grantedthe application. If such productive investment generates for a period not longer than one year but it is subject toemployment 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 aindividual investor fails to prove such minimum investment multinational company who comes to Brazil as a traineethreshold. Foreign investments below the threshold of R$ of the Brazilian subsidiary or branch entity and whose150,000 may still qualify as the basis for a permanent visa salary is paid completely outside Brazil may also beapplication 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 astrong welfare objective, such as to support a Brazilian non- • Crew members: Foreigners who come to Brazil to workgovernmental organization. on a vessel, ship, cruiser, fishing boat or offshore oil rig17 Immigration
  18. 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 isThe application process must be initiated in Brazil by the valid for multiple trips.contracting company by completing and filing the properapplication form. Once the National Immigration Councilapproves the visa, the approval is published in the OfficialJournal of Brazil. Once the visa is granted, the foreignerhas three months to enter the Brazilian territory and thirtydays thereafter to register with the Federal Police in the citywhere she/he will live.Individual income taxation in Brazil of immigrant aliensA foreign individual holding a permanent visa or a temporaryvisa tied to an employment contract is considered to be aBrazilian taxpayer as of the date of her/his arrival in Brazil.Temporary visa holders without an employment contractare deemed to be Brazilian taxpayers as of the 184th dayspent in Brazil, whether consecutive or not, within anygiven twelve-month period. As a Brazilian taxpayer, theforeign immigrant becomes subject to the income tax rulesapplicable to residents of Brazil and all of her/his worldwideincome is subject to taxation in Brazil. A tax credit may begranted for income taxes paid in other countries if certainconditions are met. Individual employment income in Brazilis normally withheld at the source at rates varying from 0% to27.5%, depending on the actual income bracket. The ultimatetax burden is assessed upon filing the annual income taxreturn by the end of April of each year for the fiscal yearending on the preceding December 31. Any differencebetween the amount determined on the tax return and thevalues withheld at source throughout the year (e.g., payrollcompensation) must be paid by, or refunded to, the taxpayer.Certain income, such as dividends or interest on equity, isnot considered taxable income and several deductions mayalso apply.4.1.3 Business trip “Temporary Visa” II (VITEM II)The business visa permits a foreign individual to enterBrazil for a short term (ninety days or less) on specificbusiness assignments. The business visa is recommendedto business owners or their representatives that come to18 Immigration
  19. 19. 5TAXESTAXES19
  20. 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 theBrazilian federal government taxes most types of income; calendar year’s taxable income with monthly estimated taxmanufacturing activity, financial, credit and securities payments required, and is generally computed on the basis oftransactions, 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 isand revenues generated by specific economic activities. Each levied at 15% on adjusted net income plus a surtax of 10% onBrazilian state taxes the sales and transportation of goods annual taxable net income in excess of R$ 240,000. Under theand services, telecommunication, motor vehicle ownership, estimated profits computation method (lucro presumido), iftransfer of title over assets by gifts and inheritance. Each eligible and actually opted for, the company applies a rateBrazilian municipality taxes service fees, transfers of title and that varies from 1.6% to 32%, according to its activity sectorinterests over real properties and real estate ownership. classification set forth in the applicable legislation (for mostWe comment below only on the most important taxes service companies, it is 32%), on its gross quarterly incomeapplicable 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 taxable5.1 Federal Taxes base exceeding R$ 20,000.00, are imposed on the estimated5.1.1 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 contribution48,000,000 or, in case of new companies, R$ 4,000,000 tax on profits, which also has the nature of corporatetimes the number of months that it carried out operational income tax, being in practice another surcharge. Its taxableactivities 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 forreal) on annual or quarterly taxable income. Taxable income companies which qualify for such method and actually optsis 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, theother reserves and accruals permitted by law. Net operating applicable rate is 32%), on its gross income to assess thelosses generated in a given period can offset taxable income taxable base. From the taxable base amount yielded, theof 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 incomenot exceeding R$ 2.4 million may elect to be taxed under a The PIS is a federal welfare contribution on most grosssimplified regime at a lump sum rate that encompasses most revenues, generally levied at 1.65%. Higher rates are imposedtaxes 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 certainSimples. expenses ensures that it applies only once to the final value of the transaction in a chain of transactions. Certain companies3 Please note that some entities such as banks are required to be taxed under the “actual profit” method.20 Taxes
  21. 21. may pay the PIS cumulatively (i.e. without recording PIS the Brazilian Real - R$) is 0.38%. The IOF is imposed at acredits) at a lower rate (0.65%). The PIS applies also to the rate of 5.38% on foreign loans with an average maturity ofimport of goods and to the payment of services to non- ninety days or less. Loans with longer average maturitiesresidents. 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 inrevenues, levied on a monthly basis generally at 7.6%. Higher accordance with the tariff classification schedule of therates are imposed on companies in certain industry sectors. Mercosur’s Common Nomenclature (“NCM”) upon clearanceA “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 theto the final value of the transaction in a chain of transactions. taxpayer may obtain a tax credit to be offset against sales ofCertain 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 rateof 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 manufacturersrevenues are exempt. and assemblers at the time of sale of an output good5.1.2 Contribution for the intervention in the economic to another manufacturer for further industrialization ordomain (“CIDE”) improvement, or to a wholesaler or retailer, or similarly on the importation of products. But IPI is a non-cumulative taxBrazilian companies paying royalties, fees or other amounts because the subsequent manufacturer down the chain maypursuant to licensing or assignment of technology, take a credit for the prior IPI paid. The IPI must be statedtradenames, patents and other rights, or service agreements conspicuously in the sales invoice and shall be levied as thenot 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 themade to a foreign recipient. NCM’s tariff schedule. The IPI applies also on the import of5.1.3 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 taxfrom 0% to 25%. Its taxable base and rates vary according Only a few products are subject to the export tax: (i) rawto the type of transaction and the federal government’s hides and skins of bovines, including buffalo, horses, sheepmonetary policy at the relevant time and it is often used and lambs; (ii) cigarettes containing tobacco exported toas a tool for making certain investments or flows of funds the Caribbean, Central and South America countries; andmore or less attractive. Funds remitted to Brazil for capital (iii) weapons and ammunition exported to Central Americanmarkets investments may be taxed with IOF. and South American countries except for Argentina, ChileAs a general rule, foreign currency exchange transactions and Ecuador. The export tax is calculated on the ad valoremin 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 foreignexchange transactions (payment in a currency other than21 Taxes
  22. 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 taximport of goods and payment of services to non-residents, (ICMS) on the sale and/or on the supply or transportationgenerally levied at a 1.65% rate. of goods and on certain services not otherwise subject5.1.8 COFINS on imports to the ISS tax, and also on import transactions. The ICMS is levied on imported and domestic products when theThe 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 soldresidents, generally levied at a 7.6% rate. and a tax credit is granted for all ICMS paid on the5.1.9 Withholding income tax (“IRRF”) purchase or importation of a product, similarly to theThe current withholding income tax rates applicable to IPI tax-credit system. As a non-cumulative tax, theoffshore 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 orthe National Institute of Intellectual Property (“INPI”) lower rate. Intrastate transactions are usually subjectand 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 aEcuador, Finland, France, Hungary, India, Israel, Italy, 25% rate.Japan, Korea, Luxembourg, Mexico, Netherlands, 5.3 Municipal service tax (“ISS”)Norway, Philippines, Portugal, Slovakia, Spain, Swedenand Ukraine), in which cases the respective treaty The ISS is a municipal tax imposed on certain servicesshould be reviewed in order to assess the applicable which are listed in the schedule attached as exhibit totaxation. 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 providerlisted in Brazil’s Federal Revenue Service’s Normative has its registered head office but companies renderingInstruction nº 1.037 of June 4, 2010, are subject to a assembly, construction, seismic, demolition, energy25% 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 place10% rate. of provision of the service.22 Taxes
  23. 23. 6FOREIGN TRADEFOREIGN TRA23
  24. 24. Foreign trade is under the direct control and jurisdiction An extensive list of items is subject to non-automaticof the federal government. The agency responsible for licensing, such as imports subject to restrictions orregulation, supervision and control of foreign trade tax benefits; items similar to products which are alsotransactions 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 foreignBrazil which, together with the Central Bank of Brazil and the exchange payment clearance (e.g., donation). TheseFederal Revenue Service, holds a tight control over transfer are subject to prior examination and special control byof funds in connection with foreign trade transactions to governmental agencies either prior to shipment abroad orprevent 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 ofBrazil 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 locallysignatory of the Treaty of Asuncion that created Mercosur may be reduced to 2% upon request by the importer to thewith 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 inuniting the economies of the acceding countries by fostering Brazil and whose age is lower than the limits of its usefultrade and foreign investments among its members. Bolivia, life attested by a technical report prepared by an entity ofChile, Colombia, Peru and Ecuador are Mercosur’s associated reputable knowledge.nations. 6.2 Export transactions6.1 Import transactions Any company organized in Brazil and accredited with theImport operations are carried out in Brazil by industrial Federal Revenue Service’s RADAR (please refer to sectioncompanies, commercial import/export companies and trading 2.4) may carry out export operations upon registration ascompanies 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 areregistration with SISCOMEX (refer to section 2.4), which is among the types of companies eligible for registration withjointly managed by SECEX, the Federal Revenue Service SECEX. Registration of industrial companies and commercialand the Central Bank of Brazil, which are the authorities exporting companies is very simple, and no prior exportresponsible for monitoring and enforcing tax, customs and experience is required. Registration of a trading company isforeign exchange laws and regulations regarding cross-border complex, requiring the fulfillment of several conditions.transactions. The licensing for import transactions may beeither automatic (compulsory), with the registration of the As a general rule, exportation of goods is free of taxes, subjecttransaction 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 prohibitedof the transaction depends on an import licensing made (e.g., native animals, skins of native animals and works ofprior to the shipment of the goods from outside of Brazil. art older than one hundred years and antique books). TheImports 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 salesexhibitions or competitions) are not subject to any licensing. price, collection of export taxes and compliance with export24 Foreign Trade
  25. 25. programs. imports are freely negotiable, averaging 360 days, whether or not backed by an irrevocable letter of credit. The moreCommissions to foreign agents are permitted and may usual modalities of foreign trade transactions in Brazil arebe deducted from the export invoices registered with the CAD (Cash against documents), ADD (Acceptance againstSISCOMEX. Nevertheless, except for very specific cases and documents) and other modalities upheld by documentaryat SECEX’s discretion, the payment of commissions to legal credit (UCP-600 – ICC 2007)entities affiliated with the Brazilian exporter will not bepermitted.6.3 Customs tariffs and dutiesTariffs, in general, are the primary instrument in Brazilfor regulating imports. Brazil and its Mercosur partnersimplemented the Mercosur common external tariff schedule(“TEC”). Products manufactured in or exported to Brazil areclassified under Mercosur NCM’s classification, which wasadapted to the IV Amendment to the Harmonized Systemof Designation and Codification of Goods approved by theCustoms Cooperation Council known as “SH-2007”. Mercosurmembers have also unilaterally adjusted their tariffs inresponse to economic crises and, given these developments,the TEC is currently full of exceptions. Automobiles, luxuryitems and other goods are subject to higher rates.As mentioned above, the import duties (II, IPI formanufactured goods, PIS on imports, COFINS on importsand the ICMS), apply to imported goods.6.4 Marking and barcodesThe essential identifying marks, such as shipping marks, portof destination and package number, when required, must beprominently shown on shipping cases and situated so thatthey will not be covered by any subsequent strapping. Anyother markings should be placed in a less prominent placeand should be limited to essential data. Identifying marksused in the bill of lading should be shown on shipping cases.A number may be used as an identification mark, providedthat it is placed within a geometric figure (e.g. triangle orsquare).6.5 Methods of quoting and paymentQuotations for foreign trade transactions in Brazil are usuallymade on an FOB (free on board) or C&F (Cost and freight)basis in US dollars. Payment maturity terms for exports and25 Foreign Trade
  26. 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 which7ANTITRUST yields a market-share of twenty percent or greater is subjectANTITRUST / 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 theMERGER 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 economicMERGER 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. 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 agreementTRADEMARK 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 mayREGISTRATIO 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. 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
  29. 29. www.vk.adv.br | vk@vk.adv.brRua Rodrigo Silva, 18 - 11º e 12º andares Rua do Rocio, 291 - 8º andar20011-040 - Centro - Rio de Janeiro - RJ 04552-000 - Vila Olímpia - São Paulo - SP Tel/Fax: 55 21 3231-7705 Tel/Fax: 55 11 3044-3544

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