There are two ways in which a foreign company can start its business activities and the decision to open a branch vs a subsidiary in Brazil should be based on factors such as the level of liability and the desired level of control the foreign company will have.
Both the branch and the subsidiary have particularities and advantages. In this article, our team of lawyers in Brazil offers a summary of their characteristics.
For more in-depth information, as well as for assistance during the registration of each of these two business forms, we invite you to reach out to our local attorneys specializing in company formation. We also welcome you to get assistance from our lawyers if you are interested in permanent residence in Brazil.
The main differences between the branch and the subsidiary in Brazil
The table below presented by our team of lawyers in Brazil highlights the main general differences between a branch and a subsidiary.
|Parent company liability||The parent company is fully liable||The company abroad is not liable for the actions of its subsidiary|
|Parent company control||Full control||To the extent of its shareholding|
|Registration||Needs to register in Brazil||Needs to register as a local company|
|Taxation||15%/34% including surtax||15%/35% including surtax|
|Tax compliance||Files annual return||Files annual return|
Both options are valid ones, depending on the parent company’s objectives. If you would like complete legal assistance when you open a branch or a subsidiary in Brazil, our team can help.
Our English-speaking team can also provide complete services related to tax laws for each of these business forms and offer details about the regulations imposed by the Brazilian Revenue Service.
Documents for branch and subsidiary registration
The branch in Brazil is registered upon receiving a special approval. Part of the key documents that are submitted when opening a branch are the following:
- Application for registration, addressed to the Ministry of Industry, Foreign Trade and Services (the Special Secretary thereof);
- The foreign company’s resolution to open a branch in Brazil, complete with information about the activities that will be performed and the capital for the Brazilian operations;
- The foreign company’s Articles of Association, as registered in the country of origin;
- A list of members and shareholders, with relevant identification information;
- Proof of conformity for the foreign company, a document issued by the authorities in its country of origin;
- Branch representative appointment resolution, as well as the appointed representative’s statement of accepting the conditions.
The appointed representative is a Brazilian resident. The person can be a foreign national with the right to reside in the country.
The requirements for opening a subsidiary include the following:
- Prepare the documents for registration: the Articles of Incorporation, the application form, other documents;
- Register: the documents are submitted with the National Companies Registry Office and then the company receives the NIRE identification number;
- Obtain the license: the next step if to obtain the national company registration number and then obtain the operating license from the City Hall;
- State inscription: mandatory for companies in certain business fields and it is done with the State Department of Finance;
- Other registrations: these are for social security purposes (within 30 days), for value-added tax, and for the purpose of printing tax invoices and authenticating fiscal records.
Our lawyers in Brazil can help you with more information about these requirements to open a business. Furthermore, if you want to apply for citizenship in Brazil after living there for a significant period, consult with our lawyers. They can offer you comprehensive information on different scenarios in which you can apply for citizenship. Our lawyers will also practically assist you in the application procedure. With their assistance, you will able to comply well with the requirements.
What to incorporate in Brazil – branch or subsidiary
Deciding whether to establish a branch or subsidiary in Brazil depends on various factors, including your business goals, operational requirements, legal considerations, and tax implications. Here’s a brief description of each option:
- A branch is an extension of the parent company and operates under its legal entity;
- It does not have a separate legal identity from the parent company;
- The parent company assumes full liability for the branch’s obligations and activities;
- Branches are generally suitable for companies seeking a temporary presence or centralized control in Brazil;
- Tax implications may vary depending on the country of origin and any tax treaties in place.
- A subsidiary is a separate legal entity from the parent company, registered and incorporated in Brazil;
- It has its rights and liabilities and is subject to Brazilian laws and regulations;
- A subsidiary allows for more autonomy, limited liability, and potential tax benefits;It requires compliance with local incorporation procedures, such as registration with the Brazilian authorities and fulfilling capital requirements;
- Subsidiaries are commonly chosen by companies aiming for a long-term presence and local market penetration.
When making the decision, consider these key factors:
- Legal and Regulatory Considerations:
- Learn the legal requirements, registration process, and compliance obligations for branches and subsidiaries with the help of our lawyers in Brazil;
- Consult with our legal advisors to understand the legal implications and protections associated with each option.
- Liability and risk:
- Evaluate with the help of our Brazilian lawyers the level of liability and risk you are willing to assume. A subsidiary can provide limited liability protection, separating the parent company’s assets from those of the subsidiary.
- Tax considerations:
- The lawyers at our law firm in Brazil can access the tax implications of both options, considering factors such as corporate income tax, withholding tax, and any applicable tax treaties between Brazil and the country of origin;
- Consult with our tax professionals who specialize in international taxation to understand the specific tax implications for your business.
- Operational control and flexibility:
- Determine the level of control and autonomy you desire over your Brazilian operations;
- Consider the administrative and reporting requirements associated with each option.
It is crucial to consult with professionals, such as lawyers, accountants, and business advisors, who have expertise in international business and Brazilian regulations. They can provide tailored advice based on your specific circumstances and goals. You are welcome to get in touch with our experienced lawyers in Brazil if you are planning to open a company here. They can offer you detailed guidance along with practical assistance.
Furthermore, if you are interested to immigrate to Brazil, the services of our attorneys are at your disposal.
How our lawyers can help with company formation in Brazil?
Our Brazilian lawyers can play a crucial role in assisting with company formation in this country. It does not matter if you choose to incorporate a branch or a subsidiary in Brazil, the services of our lawyers are available. Here is how our lawyers can assist you:
- Legal advice and guidance: Our Brazilian lawyers have in-depth knowledge of the legal framework and requirements for company formation. They can provide expert advice on the appropriate legal structure for your business, whether it is a branch or subsidiary, based on your specific needs and goals;
- Incorporation process: Our lawyers can guide you through the entire company formation process, including preparing and filing the necessary documents and registrations with the relevant authorities. They ensure compliance with local laws and regulations, minimizing the risk of errors or omissions;
- Drafting and reviewing legal documents: Our lawyers in Brazil can prepare or review legal documents required for company formation, such as articles of incorporation, bylaws, shareholder agreements, and contracts. Their expertise ensures that these documents are accurate, comprehensive, and aligned with Brazilian laws;
- Registration and licensing: Our Brazilian lawyers can assist with registering your company with the appropriate governmental agencies and obtaining the necessary licenses and permits to operate legally in Brazil. They help navigate the bureaucracy and ensure compliance with regulatory requirements.
- Due diligence: Our lawyers can conduct due diligence on potential partners, suppliers, or other entities you plan to engage within Brazil. This process involves evaluating the legal and financial standing of these parties to mitigate risks and ensure a solid foundation for your business relationships;
- Intellectual property protection: Our Brazilian attorneys can advise on intellectual property matters, such as trademark and copyright registrations, to protect your company’s brand and assets. They can also help with enforcing intellectual property rights if infringement issues arise.
It is important to engage our reputable lawyers who specialize in corporate and commercial law in Brazil. They have a good understanding of local regulations, business practices, and cultural nuances to effectively guide you through the company formation process and provide ongoing legal support.
In addition to this; if you need any assistance with your Brazilian citizenship application, our lawyers can offer their services.
Company formation statistics presented by our lawyers in Brazil
According to the Geography and Statistical Institute of Brazil, the number of companies in the country in 2019 was 4,683,840. Our of these:
- 1,793,449 were operating in commerce and the repair of motor vehicles and motorcycles;
- 390,378 were activating in the processing industries;
- 319,303 were offering administrative activities and complementary services.
For more information on company formation in Brazil, including how to open a branch or a subsidiary in Brazil, you can contact our lawyers. Besides this, if you want to immigrate to Brazil, our lawyers can help you with documentation. With the varying circumstances, the paperwork also varies. Some applications might need further supporting documentation. For instance, candidates under the age of 18 are required to submit documentation demonstrating parental approval. First, the candidate must specify whether they have one parent, two parents, or a legal guardian as their primary caregiver. After that, they must present the required paperwork. For further details, get in touch with our lawyers.
Besides this, if an investor spends R$150,000 in technological or scientific fields, he/she can become a resident of Brazil. A person may qualify for Brazilian permanent residency if he/she hires ten nationals of the country. Regarding where one should invest to be eligible for an investment visa, there is no written framework. He or she could make an investment in stocks, real estate, or company establishment in Brazil. So, if you want to apply for a residency permit in Brazil by investing, get in touch with our lawyers.