Investment Visa in Brazil: the complete guide for foreign investment

This article provides a step by step guide on how to approach the complex system of foreign investment visa in Brazil.

Starting with obtaining a tax payer ID and registering your business with the appropriate authorities.

It also covers the necessary steps for obtaining an investment visa, including submitting the necessary documents and fulfilling the requirements for eligibility. 

CPF – Cadastro de Pessoa Física (Individual Taxpayer Registration Number)

First thing needed in order for you to obtain an investor visa in Brazil is to be registered by the Federal Revenue through the CPF.

The CPF will be your first Brazilian document and the most important one, since everything you hire or buy in Brazilian territory will be registered under your CPF number.

Stablishment of a Brazilian Company:

Brazilian laws provide for several types of company forms, of which the Sociedade Limitada (Limitada) and the Sociedade Anônima (S.A.) are most commonly used. Other company forms have enjoyed virtually no acceptance in practice, especially because most of them provide for unlimited liability of their partners.

The election of the company form most suited to the proposed activities should take into account the desired ownership structure, legal flexibility, cost and confidentiality considerations, among other factors, as specific circumstances may warrant.

For instance, a Limitada may not be adequate in the case of a joint venture, since certain fundamental matters affecting the company require  approval from partners representing at least 75% percent of its capital.

On the other hand, and in contrast to the S.A., the Limitada is not required to publish financial records and statements, which results in cost savings and confidentiality benefits for the Limitada.

Unlike the Limitada, however, the S.A. may issue securities and other negotiable instruments.

The Limitada and S.A. are accorded the same treatment under Brazilian tax legislation; however, the home tax jurisdiction of investors may treat Limitada and S.A. company profits and losses differently.

For smaller business, the Limitada is the solution which fits best the needs of the investor. So for most visas we start companies under the “Limitada” form, which we will explain how it works as follows:

The Sociedade Limitada

The Sociedade Limitada (commonly referred to as a Limitada and translated as a limited liability company) is statutorily governed by Sections 1052 to 1087 of the Brazilian Civil Code and, in the case of omissions, depending on the language of the articles of association, by Law 6.404 of December 12th, 1976, as amended (the Corporation Law), or by the regulations of the Sociedade Simples, which is a new type of company regulated in Sections 997 to 1038 of the Brazilian Civil Code.

A Limitada needs at least two partners, also known as quota holders, whether or not Brazilian resident individuals or legal entities.

To constitute a Limitada, the partners must sign a contrato social (articles of association) and comply with the registration requirements of the state in which the head office of the company is to be located.

Since the formation and operation of companies is governed by federal law, the state in which the company’s head office is located will usually depend on practical or tax considerations.

A partner who is not a Brazilian resident must appoint a Brazilian resident as its attorney-in-fact, with powers to receive service of process on behalf of the nonresident partner with respect to company matters.

The articles of association and any amendments may be drafted to suit the purposes of the Limitada, but must be written in Portuguese and include:

(i) the name of the partners and their personal data,

(ii) the name of the Limitada, which must include its purpose and the expression “Limitada” (or its abbreviated form “Ltda”) and cannot be identical or similar to the name of a pre-existing company,

(iii) the address of the head offices,

(iv) the company’s purposes, which must be clearly described,

(v) the company’s duration, which may be determined or undetermined,

(vi) the company’s capital, whether or not it is fully paid and, if
not, the payment term therefore, and

(vii) each partner’s participation in the capital and that the responsibility of each partner is limited to the company’s subscribed capital.

Other provisions may be included if the partners so desire, such as:

(i) regulations on the transfer of quotas,

(ii) fiscal board,

(iii) corporate actions that require prior approval from the partners, in addition to those specihed by law, and 

(iv) authorization for the exclusion of minority partners from the company, if due cause is present.

Unless the Limitada is not organized as a business enterprise, the partners must register the articles of association with the competent state commercial registry.

In order to have legal effect retroactive as of the date of execution with respect to third parties, the articles of association must be registered within thirty days of execution.

The Capital

The capital of a Limitada is represented by units called “quotas”, with no issuance of certificates of ownership.

The capital is denominated in Brazilian currency and recorded in the articles of association, as amended from time to time to reflect any assignment and transfer of quotas and capital increases and reductions.
No minimum capital requirement exists.

However, where the company seeks to appoint a nonresident individual to a management position, the individual must obtain the required resident status in Brazil through a permanent visa, which in turn triggers minimum capital requirements.

For the moment, the minimum capital requirements for issuance of an investor’s visa in Brazil is R$ 500.000,00 (five hundred thousand reais) per investor.

Each partner must subscribe for quotas, which may be paid upon subscription or subsequent thereto, in cash or moveable or immovable property.

The value of moveable or immovable property contributions are not subject to expert appraisal, and may be established by mutual agreement of the partners.

However, all partners are jointly liable for five years with respect to any deficiency between the actual value of the assets and the value attributed to them at the time of the capital contribution.

A partner who fails to fully pay for quotas to which it subscribed in accordance with the terms provided in the articles of association may:

(i) be  removed from the Limitada upon reimbursement of any amounts it has previously paid,

(ii) be charged for losses and damages, or

(iii) have its participation in the company reduced to those quotas already paid for, always at the discretion of the remaining partners.

The capital of a Limitada may only be increased once all quotas previously subscribed have been paid-up.

The partners are entitled to preemptive rights in the subscription of new quotas, to be exercised within thirty (30) days from the date of the resolution approving the capital increase. The capital may be reduced if:

(i) the company has registered losses, or

(ii) it is deemed excessive in relation to the company’s activities.

In the latter case, unsecured creditors may object to the capital reduction within a period of ninety (90) days, in which case the reduction may only be effected if the corresponding credits are previously paid or if the relevant amounts are deposited with a competent Court for the benefit of the objecting creditor.

Depending on the articles of association, profit distributions may be effected at the discretion of the partners both as to time and amount.

The law does not require profit distributions to partners to be effected in proportion to their quota interests.

Quota transfers and assignments among the partners and/or to third parties are subject to the provisions of the articles of association.

In the absence of specific provisions in the articles of association, quotas may be freely transferred among partners, and may also be transferred to third parties if there is no objection from partners representing at least one-fourth of the capital.

Changes in capital ownership and levels are effected by an amendment to the articles of association registered with the competent state registry.

Rights and Obligations of Partners

As a matter of internal relationship among partners, each partner is responsible for the payment of its subscribed quotas.

With respect to claims of third parties, however, all partners are jointly liable for the entire amount of the corporate capital until it is fully paid.

Personal unlimited liability may attach to a partner who votes for or consents to a resolution contrary to the articles of association or the law.

The law establishes that the following matters must be decided by the partners pursuant to the following voting requirements:

1. appointment of managers that are not partners: unanimous approval until capital is fully paid in, and partners representing two-thirds of the capital thereafter;
2. removal of managers that are partners and have been appointed in the articles of association: partners representing two-thirds of the capital, unless otherwise established in the articles of association;
3. amendments to  the  articles  of  association:  partners  representing  three-fourths of the capital;
4. merger, consolidation, dissolution and termination of liquidation procedures: partners representing three-fourths of the capital;
5. appointment of managers in a separate document outside the articles of association: partners representing more than one-half of the capital, unless the manager is not a partner, in which case item (a) above will apply; 
6. f) removal of managers: partners representing more than one-half of the capital, unless the manager is a partner appointed in the articles of association, in which case item (b) above will apply; manager compensation if not established in the articles of association:
7. partners representing more than one-half of the capital; and court-relief proceedings: partners representing more than one-half of the voting requirements may be increased, but not decreased, by contractual provisions included in the articles of association. Other matters submitted to the partners must be approved by a majority of votes, unless otherwise established in the articles of association. 

A partner who objects to an amendment to the articles of association or to a merger is entitled to withdraw from the Limitada.

If the articles of association are silent, the amount payable to the dissenting partner will be the book value of its quotas, determined on the basis of a special balance sheet as at the date of the action that triggered the right of withdrawal, which amount must be paid in cash within ninety (90) days.

Unless approved in writing by all partners, all matters to be decided by partners must be submitted for approval in a partners meeting.

Such meetings may take the form of more rigid general meetings (assembléias) or more flexible meetings (reuniões).

The former is mandatory for companies with more than ten partners.

The latter may be used by all other companies.

Using reuniões provides more flexibility because they can be freely regulated in the articles of association, while assembléias must follow mandatory legal requirements, including for instance the publication in newspapers of notices calling each meeting.

Once again, it is important to note that neither assembléias nor reuniões need to be held if all partners approve in writing each applicable matter.

Annual partners meetings must be held within the first four months following the end of the fiscal year to consider and review financial statements and management accounts, appoint new managers, if applicable, and decide on any other matters included in the agenda.

Copies of the financial statements must be forwarded to the partners at least thirty days prior to the annual meeting.

Any other partners meetings may be held if and when company interests so require.

Management

Management of the Limitada may be vested in one or more resident individuals, appointed in the articles of association or in a separate document.

Managers may or may not be partners, but in the latter case, the articles of association must expressly authorize the appointment of non-partner managers.

Whenever the articles of association establish that all partners will be managers of the company, such attribution does not apply automatically to new partners.

The Limitada is liable for all acts performed on its behalf by managers acting within the scope of their powers.

Fiscal Board

The  Limitada may have a fiscal board comprised of three or more members, but such board is not mandatory.

The members of the fiscal board must be resident in Brazil, may be partners or not, and must be elected at the annual partners meeting.

The responsabilities of the fiscal board include:

(i) the review, at least quarterly, of the books and accounts of the company;

(ii) denouncing any mistakes, fraud, or crimes relating to company matters, and making suggestions in the interest of the company;

(iii) calling annual partners meetings when managers fail to do so, and

(iv) exercising certain acts during the liquidation of the company.

FOREIGN CAPITAL REGULATIONS

The Central Bank of Brazil (BACEN), through Circular 2997, of August 15, 2000, created and regulated the declaratory electronic registration of direct foreign investments.

According to such regulation, direct foreign investments in Brazil must be registered electronically through the module RDE-IED of the online Information System of BACEN (SISBACEN).

TAXATION

Taxes on Income

Domestic companies must pay federal taxes imposed on all income as well as on any and all gains whatsoever.

Profits arising from activities carried out in Brazil or abroad (Brazil adopts a worldwide system of taxation) are subject to the Corporate Income Tax (IRPJ) and to the Social Contribution on Profits (CSL).

Taxes on Revenues

Domestic companies must also pay to the federal government the Social Contribution for Financing of Social Security (COFINS) and the Contribution to the Social Integration Program (PIS).

COFINS and PIS are contributions levied on a monthly basis on total revenues realized by a company, including financial revenues, but excluding revenues resulting from the participation of such Brazilian complyany in other companies.

Dividends

Dividends payable by a Brazilian company to it’s shareholders, in and outside of Brazil, are not subject to Brazilian withholding taxes.

Tax Treaties

Brazil has entered into treaties for avoidance of double taxation with the following countries: Argentina, Austria, Belgium, Canada, Chile, China, Czech Republic, Slovakia Republic, Denmark, Ecuador, Finland, France, Hungary, India, Israel, Italy, Japan, Korea, Luxembourg, the Netherlands, Norway, the Philipines, Portugal, Spain, Sweden and Ukraine.

VISA APPLICATION

Once the company is set, its bank account is open and the money is transferred from the applicant’s personal bank account abroad to the Brazilian Company’s bank account in Brazil, it is possible to file an application for an Investment Visa.

Investment Visa

The requirements of minimum value invested are R$500.000,00 (five hundred thousand reais) per applicant, sent as Direct Foreign Investment (transferred from the applicant’s personal bank account abroad to the Brazilian Company’s bank account in Brazil.

The company must hire at least 2 Brazilian employees and keep them working in the company full time in order to meet the constitutional requirement of 2/3 (of a company’s work force must be held by Brazilian employees).

Once the structure is prepared, Visa forms, documents and a Business Plan elaborated considering the next 03 years must be presented along the application.

The application is filed before the Ministry of Justice in Brasília and once is approved (this process can take up to a couple of months), the applicant must attend to the Brazilian Consulate in their country of residence in order to obtain their visa printed to their passport.

There is also the option of applying for a residence permit which takes the same process except that the applicant should be in  Brazilian Territory until the decision on the permit is released. 

This process can take up to a couple of months.