segunda-feira, 25 de novembro de 2019

When will Brazil regain the investment grade?

This report from Novus Capital, an investment management firm, shows that, by 2027, Brazil may reach an acceptable debt to GDP ratio for purposes of receiving investment grade, provided that the government does a very good job on the management of the budget. 

In a less than optimistic scenario, the goal of a maximum of 63% of debt to GDP would only be reached by 2040. 

The findings are similar to the reports issued by the Brazilian Central Bank on the matter. 

Although the findings are not stelar, they are positive. The study shows that the country may stabilize and improve its finances without much effort, just by not increasing expenses. 

The cabinet is very much willing to speed up this kind of good news. I would bet that, before long, Brazil will receive at least an update in its rating. 

You can download the full report (in Portuguese) here

quinta-feira, 14 de março de 2019

People purchasing software via credit card also pay withholding tax

A reader asked me interesting questions about the taxation of software licenses sold to Brazilian individuals (end customers). 

He linked me to this article about problems foreign companies face to invoice Brazilian customers. 

The article is very good in laying down a practical business perspective of the problem. 

His questions to me was: "is there realy a withholding tax when you send a normal invoice or get a payment via credit card, made by an individual"?

Apparently, his accountants thought it was very odd that a country would limit its online sales in such way. 

Here is my answer: 

The withholding income tax works the same for companies and individuals, for the greater part. 

In short, withholding tax is due even when payments are made via credit card. However, there is little government oversight so most customers just don't bother to pay it. 

But, if you start selling to hundreds or thousands of customers in Brazil, the local bank, credit card company or payment gateway will probably start asking questions and will try to make you responsible for collectint the income tax. 

Also, you won't be able to sell to corporate clients in Brazil, who simply cannot dodge the taxation. 

The usual solutions are: 

a) sale of a master license to your distributor in Brazil, who will then resell it;
b) incorporate in Brazil"
You may find more information about this topic in this post:

terça-feira, 12 de março de 2019

New Brazilian international trade policy - We want to export soy and iron ore but won't sell our souls

Mr. Ernesto Araujo, the current Minister for Foreign Affairs, has given us some insights on what to expect of Brazil's future trade policy. 

During a public lecture to a class of new ambassadors Mr. Araujo has stated that  "We want to export soy and iron ore but won't sell our souls for that".

Although dramatic (he is very poetic is his speeches), the phrase is a good condensation of the main points of the new policy. 

That is what I can infer from what Mr. Araujo said in his lecture:

a) Brazil will probably try to atract other bidders for big public tenders, such a hydroelectric and railway projects. So far, Chinese investments in these areas has been predominant;

b) Brazil will NOT tax exports to China or impose export quotas; but it will try to make the market lesse dependant on Chinese demand;

c) as discussed in my article about Bolsonaro's plans, Brazil will probably tighten the enforcement of restrictions to the purchase of rural land by foreigners;

d) the Minister alluded to the fact that commerce with China and other socialist/communist nations did not bring as much economic development as expected by the people, or promissed by the previous administrations. This may be interpreted as a pivot towards the US and other countries with freer economies;

e) his comments on the harsh reality of international commerce and international competition seem to be a hint towards Bolsonaro's government plan which clearly stated the objectives of reducing import tariffs and incentivizing high-tech industries.