We were discussing the differences between having a branch in Brazil or incorporation a new company, owned and controlled by a foreign entity.
- What is the procedure to create a branch. What has changed lately?
The branch (filial) requires express approval by the Federal Government. This is not a new procedure. The approval has been required for decades.
The changes in procedure are regarding the new model of power of attorney that must be used. But this is a relatively small change.
- How much time does the special approval take (on top of the usual time for incorporation of a new company)?
Between 40 to 60 days.
- How could a new company be controlled by a foreign investor?
The procedures for incorporation of a new company with foreign partners are, broadly speaking, the same procedures required to open a regular Brazilian company, with Brazilian owners. Therefore, we will avoid the need for Federal approval, which is part of the process of creating a branch.
The new company would be owned and controlled by the Swiss company. It would also need another partner, which can be another Swiss company, a Swiss investors or a Brazilian investor.
Please notice that the new company may be 100% owned by Swiss investors. There is no need for a Brazilian partner.
- Is there any down side of using a subsidiary (new company) instead of a branch?
Basically, no.
The Brazilian entities would work just the same. Actually, a new company is subject to less government control and scrutiny than a branch.
- Would it be legal for the investing company abroad and the new company in Brazil to conduct transactions and have financial ties?
Yes. They would be subject to the exact same rules (transfer pricing rules, tax rules, etc.) that would apply over a transaction between an investing company and its branch in Brazil.
- How long does it take to open a new company?
About 60 to 90 days, depending on the amount of documents to be translated.
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