Brazil’s Case

Even though Brazil’s tax code can be very complex and difficult to understand, there are some consideration’s your company will benefit from doing business in Brazil. Brazil can offer your company a Free Trade Zone within the Amazon Rainforest should your company choose to start your business in Brazil. The Free Trade Zone was created by the Brazilian government as a way to encourage economic development in the Amazon region. At the end of 2013, more than 600 companies were doing business within the Free Trade Zone and had a combined total revenue of BRL 83.3 billion which was 13.3% higher than in 2012 (Bruha). We are certain that if your company comes and does business in Brazil, you will be successful and profitable. The only catch is that it is difficult to get approval. Your company will have to greatly prove that it will be successful and benefit the area. The good news is that currently the Brazilian government is planning a new system of over 20 Free Trade Zones. It is important for your company to invest and get into these new Free Trade Zones sooner rather than later.

Brazil uses their own set of accounting principles referred to as Brazilian GAAP. Since most companies are not publicly traded in Brazil, Brazilian GAAP is built on a theory that is more effective for Brazilian businesses and government. In this system, it is more about reporting low income that is why these taxes are layered on top of each other.

Brazil’s tax code, if not planned well, can result in a very burdensome tax liability. This is not because the corporate tax rates are really high; instead it has to do with the indirect taxes that are levied by the state and municipal governments. There are two specific reasons related to your company in regards to these indirect taxes. They are the indirect taxes that fund social contribution and the indirect taxes that protect domestic industry though import taxes. These are important to your company, because these taxes can be reduced. By reducing your company’s indirect tax burden in Brazil, it makes yourself look much more attractive in operations in Brazil. All of this can be accomplished by aligning your business activities with those that are promoted by the Brazilian National Tax Code.  

The National Tax Code holds authority over all levels of government. It is worth noting that taxes vary greatly across the country as states and particularly municipalities have power to establish significant tax measures. New tax legislation is common in Brazil, and major tax reform is being considered. Tax laws dynamic nature should lead businesses to expect their tax liabilities to fluctuate. The Brazilian government has historically not retroactively changed tax laws, except in circumstances that benefit taxpayers.