Power of Attorney for setting up a company in Brazil – new rules

In order to incorporate a company in Brazil, the foreign investor must appoint a local representative who lives in Brazil.

Traditionally, this representative was required to have powers to receive court summoning and to answer to any civil subpoenas directed at the foreign investor.

This makes sense under Brazilian procedural law, that puts a lot of focus on making sure that respondents will be properly summoned to present his defence in administrative or judicial procedures. Rulings “in absentia” are exceptional.  By requesting the nomination of a Brazilian resident as representative of the investor, Brazilian authorities would always have someone close enough to be summoned by ordinary means (without the need for international communications between courts, etc.).

This is the basic idea.

Now, since Brazil is a very bureaucratic place, people soon noticed that is would be a waste of time to issue a one-line PoA, considering that several other actions also require a power of attorney. For example: registration of the investment before the Brazilian Central Bank, clearance of foreign currency exchange agreement, etc.

Not to mention that any alteration to the articles of the company, such as increase in equity or appointment of new directors, would also require the investor to sign the documents himself, or to name a proper representative in Brazil with powers to do so.

All things considered, a proper PoA would have 3 pages and a LOT of very specific powers.

Now, this “excess” of powers has contributed to a problem. Brazilian courts started to consider that this all-powerful attorney would act, in practice, as a company director. Thus, labour and tax courts started to redirect debt collection suits to the Brazilian representative, whenever the company didn`t have enough assets to pay for the debts.

This situation, albeit technically illegal, has persisted for some time.

Recently, the Brazilian Revenue Service has tried to make the representative`s personal liability official. It issued an administrative ruling stating that any foreign company looking for enrolment before the national taxpayer`s registry (the famous CNPJ) must name a local representative with full powers to manage the investor`s assets in Brazil.

By choosing these word, the Brazilian Revenue Service made clear that the local representative will be considered a kind of local manager, not only a representative able to receive summoning.

Please notice that the enrolment with CNPJ is one of the first steps required in order to incorporate a new company in Brazil, in case the foreign investor is a corporate entity (not an individual).  Therefore, there is no way around this requirement.

And this is not the only recent change.

The federal body responsible for standards in corporate regulation issued new guidelines in 2017. They include a provision requiring that all powers of attorney from foreign investors must not have a time limit. This is to say, they must be valid until a formal cancellation is filed before the Commercial Registry.

The two alteration, combined, result in a local representative that:

a)    Has powers to manage the investor`s assets in Brazil (to control the company);

b)    Is liable for company`s debts, since he will be considered a sort of director;

c)    Has power for an unlimited period of time, until he gives up the job or until his PoA is formally cancelled.

The situation is awkward, to say the least.

It has forced the new PoA documents to become even longer. Now they must include:

a)    Provisions for cancellation;

b)    Protection against tax and labour liability;

c)    Restrictions on powers, to prevent the representative from “taking over” the company.

So, there is little chance you will find a good template for a PoA, readily usable.

 The PoA is now a document to be drafted as carefully as the articles of the association of the company.


SEE ALSO:

Incorporating a Brazilian company, step by step
How to incorporate a Brazilian company through foreign direct investment
List of documents for setting up a company in Brazil

Power of Attorney for setting up a company in Brazil

Extrajudicial divorce in Brazil

When it comes to getting a divorce in Brazil when one of the spouses is a foreigner you can either go judicial or extrajudicial.

The second options is faster and cheaper, but there are some requisites that must be observed. First of all, you better have the original marriage certificate in hands. The registry office will demand it and you will have no other option than obtaining a duplicate in case of loss.

There is a lot of other information that will be required, as for instance the personal documents of the spouses, documents of the lawyers (yes! Even if it is extrajudicial, the spouses will need a lawyer for assist them!), description of the sharing of assets (only if there is one), among many others.

This is the case of one of our Clients, Mr. J'onn J'onzz. Here follows our advice to him:

Mr.  J'onn J'onzz, 

I see that you have sent me the translation of the marriage certificate. Do you have the original marriage certificate in portuguese?

I sent you the draft of the Power of Attorney.

Before you sign it, I'll need to fill the information regarding your address, as well as Ms. J'onzz address. I also need to know, one information required by Brazilian law: for how long have you both been separated? 

After we finish drafting the POA and all the documents are duly certified in a public registry office of your country, we'll need to take the documents and the POA to be authenticated at the brazilian consulate or embassy, depending of where you live.

You'll need to fill a form (I send the form attached to this e-mail, and I'll assit you in filling it). You'll also need to bring the original and a copy of both yours and Ms. J'onzz personal documents and pay the value of 20.00 euros at the consulate.

Besides, it is important to note that the extrajudicial divorce is only an option if consensual, i.e., it is mandatory that both parties want to get divorced. Also, it is only possible if you and your wife do not have minor children.

If you have all the documents needed in hands and fulfill all the conditions to be entitled for an extrajudicial divorce, it is preferable do divorce before a registry office since the extrajudicial option might be concluded in only one day.

However, do not dispirit yourself if the extrajudicial option is not possible. You still have the judicial option and, even if it takes longer, it is as effective as the other one.

Regards,

SEE ALSO

How to recognize a divorce in Brazil
HOW TO: Getting Married in Brazil.

Living in Brazil but keeping an income source abroad

From  time to time, I have very interesting discussions with blog readers. Please check this one. You will learn a lot about Brazilian taxation and about international money transferences to Brazil. 

Dear Mr Adler,

With great interest have I heard about you.

As I have plans to immigrate to Brasil but keep working abroad i tried to find out about the brazilian tax system.

Since I will have an average income of above 10.000 USD a month I am curious to learn how much taxes I have to pay and if I can be hold reliable for direct taxes as well as indirect taxes?

Thank you for your time!

Sincere regards,

Daniel Dreiberg,

----------------------

Dear Daniel Dreiberg,

Thanks for the contact.

 Brazilian taxation would be hard on you: 27,5%.

 Maybe you should incorporate a company abroad, and receive dividends, in Brazil, from this company. This would lower the tax burden to about 15% (taxation over capital gains).

A company in Brazil, under the assumed profits system, would pay about 16-18% in taxes over the total revenues. 

This topic is complicated. Depending on the nature of your work/investments, the Brazilian government might think that the companies are not real, and thus apply the 27,5% taxation, as if it were personal income.

Regards,

----------------------

Dear Adler,

Thank you for the nice and helpful inputs in regards to set up an Offshore company.

Nevertheless I think we should compare the possibility to set up a Company in Brasil.

Although we have to pay 15% taxes in Brasil I am sure we are able to deduct several positions from the tax e.g. car, working office in the apartment, travel expenses, health insurance for my wife, as she will be employed as secretary, etc.

The advantage in that model is to have all in hand in Brasil and if necessary we can deal direct with the local authorities. As tax lawyer we would use your expertise.

The questions arising in founding a local Brazilian company are about the bank account.

Will the bank automatically change foreign currencies, e.g USD into local Reals?

Will the bank deduct a fee of 10 cents per USD?

How much of a charge are the transaction fees from Brasil to a foreign bank account e.g Germany?

 How often is a tax declaration necessary and how much is the tax adviser fee?

I believe to compare the advantages and disadvantages in both models we should find the solution which of the two possibilities might work best for me.

Thanks again for your advice

Sincere regards

Daniel

----------------------

Dear Daniel,

The 15% tax we talked about (actually, not 15%. A company would pay 16% to 18%) is a simplified rate, applied over the company's gross revenues, only when the company functions under the assumed profits system.

If you wish to keep a more detailed bookkeeping, we shall use the regular tax system. It is basically 34% over net profits, plus a 3,6% VAT over gross revenue. (The reality is far more complicated than that).

The bank will change USD to Reais automatically. A 0,38% tax is applicable over this operation.

The bank does not charge 0,10 cents per USD. But it will charge a conversion fee (sometimes 200 reais). Also, the bank uses the official exchange rate (there are some details about it that we must discuss).

You must hire an accountant, that will cost you about 350,00 per month. The accountant will take care of all tax assessments.

You must collect at least 60 USD every month as social security for the company director.

I hope this overview helps your decision.

Regards,

----------------------

See also:

International Bank Account Number (IBAN) - Sending money to Brazil

How to get cash back from Brazil to Europe

List of documents for setting up a company in Brazil 

NGOs and protection of intellectual property in Brazil. Real legal advice by Pigs in Maputo comic strips

I love "Pigsinmaputo.". It is a comic strip series published by Iris,  a Brazilian PHD who has an unorthodox life style.

Check this one. My comments on the side.




The lawyer she has met is very good! He mentioned some very important topics.

NGOs in Brazil:

i) there are several ways to organize a NGO (which in our acronym is called ONG). But in any of them, extra care with the bylaws (articles of association) is required. There are several acts regulating NGO's activities, as well as the statutory objectives that will make a conventional association become a NGO.
ii) the tip about tax exemption hits the bull's eye. Tax exemptions are only granted to previously selected NGOs. To make it to the list, it is necessary to apply the resources in Brazil. Most of the time, at least.

ART WORK

i) a GOOD CONTRACT. That says it all. There is a considerable number of acts and regulations about intellectual property in Brazil, covering art, software, books, etc. But few lawyers know about it. These regulations often demand mandatory clauses to be inserted into such agreements, or, on the other hand, prevent certain unfair clauses to be upheld by courts. A GOOD CONTRACT, in this sense, is not only comprehensive, but also follows Brazilian rules.

ii) Theft of intellectual property is a crime! The creator/publisher can fight against it, and WIN. Piracy is a huge problem in Brazil, but there is still hope.

Finally, the last sentence sums up all I have been trying to say in this blog. If you are coming to Brazil, YOU SO NEED A LAWYER, AND DIDN'T KNOW IT!

PS: I promises you I didn't ask Iris to write this specific strip. But I'm thinking about asking her to draw others like it.

How to obtain a CPF (Brazilian Taxpayer registry)

       When a foreigner decides to live or to invest in Brazil, one of the first things that he will have to do is obtaining a CPF document ("cadastro de pessoas físicas").  Every person that has a CPF registration recieves a number, which is a requirement for all kind of brazilian procedures, as for instance, to become a partner in a brazilian company, to open a bank account in Brazil etc.

With that in mind, here follows some basic information regarding CPF obtention:

    Foreigners may request the CPF through the website of the Brazilian Federal Revenue (http://www.receita.fazenda.gov.br/aplicacoes/ATCTA/CpfEstrangeiro/fcpf.asp) and then attend the nearest Brazilian embassy with all the document required for a personal interview (the interview is merely ceremonial).

       If they are already here in Brazil, they may request the CPF in post offices, or in any branch of "Banco do Brasil" or Caixa Economica Federal (both are very famous banks). Not all  agencies and post offices offer such service, so we advise you to call before atteding in person. 

       You should bringh with you (i) passport, (ii) adress, (iii) and a document bearing your mother's name. There will be a small fee (maybe 2USD).

     After that, you must go to the nearest Revenue Service office bringing the proof of paymentof the fee and request a CPF number. It should be granted on the spot. 

SEE ALSO:

Opening a Brazilian Bank account for non-residents

Visa options for investors in Brazil

Brazilian Law Blog among the top 8 international law blogs in the world

The International Business Development blog has ranked the top 8 international law blogs. e Brazilian Law Blog made it to the list, as the best in Brazil.

It is very gratifying to be in this ranking alongside blogs that have inspired BrazilianLawBlog’s creation, as is the case of China Law Blog (to which I frequently pay my respects).

I started this blog a few years ago and, over time, I realized how it has been a rewarding project. Despite the great events planned for Brazil, the country is, in fact,  little known outside. Writing this blog is an opportunity to provide knowledge about the real Brazil (or about the real legal Brazil) to foreigners, and a way to curb stereotypes.

My sincere thanks to the colleagues from the International Business Development blog and to the readers! We hope this blog continues to be a reference for all of you seeking information on how to invest in Brazil.

For those who want to check out the other blogs listed in the ranking, please click the link: 

http://internationalbusinessdevelopmentblog.com/2013/08/05/8-international-law-blogs-worth-following/

New Brazilian antidumping Rules

Newsflash for foreign exporters to Brazil.

On the last 26^th July, Ms. Dilma Roussef (president of Brazil) has promulgated the Decree nº 8.058/13 that details the Brazilian anti-dumping rules.

Among all the new measures brought by the Decree, some should be highlighted, as follows:

• The Department of Foreign Trade of the Ministry of Development, Industry and Foreign Trade (SECEX) and the Council of Ministers of the Foreign Trade Chamber (CAMEX) concentrates a lot of power when concerning dumping investigation. The first one is responsible for starting and ending investigation and the second one decides when to impose the anti-dumping measures and when to suspend such application. (art. 2º and 5º);
• Clear (albeit very broad) concept of dumping under the Brazilian understanding, which is the exportation of products with costs lower than its regular value in comparison with similar products (arts. 7º, 8º and 9º);
• Establishes the deadline for examining an application for anti-dumping investigation shall not exceed 60 days (art. 150);
• Determines the provisional application of anti-dumping measures during the investigation process (until 120 days counting from the start of the investigation process). (art. 65);
• The reduction of the maximum investigation term from 15 to 10 months (art. 72);
• The investigation starts with a petition from the domestic industry that feels jeopardized. The petition must include evidence of dumping, injury to the domestic industry and causation (Art. 38);
•   Sets up a deadline of 15 days for the review of the claim (art. 41);
•   The investigation may be closed if the exporters involved in the dumping commit to adjust the pricing (art. 67);
•   The penalties applied under the anti-dumping duty shall be proportional to the damage caused by the dumping activity (art. 78).

But you will have time to get used to these new rules. They will only be in force from October the 1^st onward. 

 Meanwhile I suggest the exporters who are into dumping to try and adjust their business. The Brazilian government seems to be quite serious about those rules.

You may find the full text of the rules in this link, in Portuguese.

See also:

Selling Chinese shoe products and insoles in Brazil. Anti-dumping measures, brand registration and other considerations

Selling Chinese shoe products and insoles in Brazil. Anti-dumping measures, brand registration and other considerations.

Dear Adler,

I hope my message finds you well.

I came across your blog while looking for information on subsidiaries in Brazil and hope it's ok. I reach out with a few questions. I am based in Shangri-La with a small company which produces cosmetic insoles - a product I believe would be a great fit for the Latin American market. I have a potential business partner in Brazil who is foreign as well (no permanent visa) so it would make sense to start there. His name is James Hilton. 

I am wondering however if you could recommend establishing my company as a subsidiary - I've heard that importing products to Brazil can be rather expensive if being done by a company from abroad so local presence might make sense? And though I have known my business partner for a handful of years, I'd still like to make sure that I have more or less full control of the company.

I hope that you can spare a moment to guide me in this matter.

Barbara Kopetski

-----------------------

Dear Barbara,

Thank you for you message. People from Shangri-La are indeed very polite. 

If the products are going to be imported into Brazil, the taxation will not be different, regardless of it being imported by an independent agent or by a subsidiary/controlled company. The only difference might be the total price, which is supposedly lower in an inter-company transaction (although transaction between companies belonging to the same group can't be too distorted, or Brazilian transfer pricing rules will apply).

If the products are going to be at least partially produced in Brazil, then you might have a tax advantage. 

I'd love to help you out more, but you must share more about your plans. 

Regards, 

-----------------------

Hi Adler,

Wow – thanks for the speedy response, I’m sure you are very busy!

I am currently exploring my options regarding production in Brazil, so far it seems that its best for me to stick to China where my production takes place at the moment. Also, I’d like to avoid complicating things too much in the beginning so my main concern now is how to establish myself in Brazil (if at all necessary to get my product into the country) and ensure that my partner who is very well connected in Latin America doesn’t run off with my product.

So I understand from your email that the import taxes, levies, duties etc are the same regardless of who imports my product (my own subsidiary, my partner as a local representative, a local company). I’ve learned that a subsidiary might be complicated and perhaps taking it too far considering the stage I’m at – would “exporting” or simply “appointing a representative” be good options to start? 

Perhaps the most simple option would be for my partner to open her own company in Brazil and register for import without my involvement? And a standard contract between my company in Shangri-La and her company in Brazil including a clause preventing her from launching a similar product in Latin America if we decide to go separate ways would be the link between us?

Thanks so much and I totally understand if you don’t have time to go through all this.

Kind regards,

--------------------------------

Dear Barbara, 

Don't worry. You got me in a good mood. 

Your conclusion is very reasonable, and in fact a good one. I see you never lost horizon in your plannings. 

I would only add that you must register your design and brand before the Brazilian Intellectual Property Institute (INPI). 

Also, your partner does not have to start a company. You may make use of many trading companies already operatingin Brazil, which are able to import the product and resell it. Your partner might act as a salesman for the trading companies. Your agreement can provide for the incorporation of a company in the future. 

Since you are a blog reader, I may draft the agreement for you and manage the registration of the brand and design before the INPI.

Good luck!

Regards, 

----------------------- 

Hi Adler,

Always a pleasure to bring out the good mood. Have you ever been in Shangri-La?

I’ve found a list of trading companies who specialize in importing the type of goods I am dealing with so I’ll start by approaching them and see which type of compensation they expect for their services. I imagine its rather costly so might not work! So you wouldn’t  recommend my partner to establish a firm to begin with?

Regarding brand registration, I’m not sure what the rules are in brazil, but cant imagine they are much different from the ones in Europe. I just realized that there is a footwear company in Brazil with the same name of my company. Would it be a problem?

-----------------------

Dear Barbara, 

I have never been to Shangri-La, but I have friends that tell wonders about the place. 

Your friend may start his own company, and I can help him with it. It will take about 3 months to have everything ready. I just mentioned the trading companies because they would allow you to start right away. Also, depending on the amount of imports you plan to do, minimum capital requirements are applicable (for example, for more than 150 thousand US dollars per semester)

The brand may be registered if the Brazilian company has not registered the brand in all applicable categories. We must check it.

I look forward to hearing from you. 

Regards

-----------------------

Dear Adler,

Yes its great here – you should visit!

My partner is off for the weekend (some far flung place) so don’t expect to hear from her until this upcoming week. Meanwhile, I read your post on Brazilian import costs to get a better sense of the costs associated to my product specifically but it proved more or less impossible. 

Who should we approach in order to get an idea of the full cost – do you think my shipping agent or a potential trading company would be able to help?

Kind regards,

-----------------------

Dear Barbara, 

Please note that this is an informal conversation, with no legal value. 

Under normal conditions, the importation of your product would have a total taxation of about 60% (not including port and insurance expenses). 

Again: you must hire professional advice before making plans. 

However, you mentioned that the product is made in China. In this case, a series of anti-dumping measure may apply. These measure vary from the application of a flat penalty (usually about USD 14.00) over each unit/pair, to the application of an additional tax of 182% of the product's value.

Many Chinese exporters will take their products to be finalized in Vietnam or other nearby countries in order to avoid these penalties. This practice, however, may be considered illegal by the Brazilian government, specially where there is no real manufacturing in Vietnam.

Regards, 

See also: 

Importing to Brazil, Setting up a Subsidiary/Sending a representative to Brazil

Can the matrix company pay for the goods purchased by the Brazilian subsidiary/affiliated company?

Gerdau case: exemption of taxation over foreign subsidiaries

Automatic taxation of subsidiaries ruled unconstitutional 

How can foreign companies fight unfair public biddings in Brazil

Here follows an email forwarded to a client that was having problems with competitiveness in Brazilian public biddings, in which we suggested some measures to resolve it.

Dear Patrick "Eel" O'Brian,

We have evaluated several document, emails and news reports regarding the current and planned public biddings to be performed in Minas Gerais state, regarding the purchase of software.

The most important issues have proved to be the unfair competition in the public bidding, due to a pre determined technology being explicitly or implicitly favored in the public call for offers;

We have been asked about legal alternatives for forcing Minas Gerais government and public companies to provide a more competitive selection of suppliers.

In response to that, we shall make a number of considerations.

a)   Brazilian constitution and federal laws explicitly reject unfair public biddings.

b)   The existence of pre determined bids (licitações dirigidas) is well known in Brazil. There is massive jurisprudence that condemns such practice.

c)   The most usual legal action against unfair bidding procedures is the “mandado de segurança”, an emergency injunction that can be filed whenever a public officer or public agent is engaged in illegal activities, provided that the illegality is clear to see and not dependent on the production of evidence. For example: formal or procedural mistakes, lack of publicity, lack of competence, clear violation of the due process of law.  A mandado de segurança can be used before, during or immediately after a public bidding takes place. It usually cannot be used after the conclusion of the agreement between the public agent and the winning company. In this last case, an ordinary procedure shall be filed.

d)   In this specific case, we believe that the use of Mandado de Segurança is justified. We must survey the current status of the contract before advising if it is still possible to file it against all the public biddings relevant to the case, or only against the ones not yet completed.

e)    The Mandado de Segurança may be filed by any person. This includes ordinary citizens, associations, companies and, of course, public agents (attorneys at law, etc.). It is not common for foreign companies to file a Mandado de Segurança. But there is no prohibition to that.

We hope these considerations help you in advancing your resolutions.

How to recognize a divorce in Brazil

“I already got a divorce from my brazilian wife in my country, now she called me saying that we must get divorced again in Brazil. What should I do?”

This is a very common problem in Brazil. According to the brazilian laws, it is mandatory for all brazilians who got divorced abroad to ratify this divorce at the brazilian courts. If this is not carried out the individual will, for all legal purposes, remain married. Often I receive this kind of question from my clients or from my clients former spouses, asking why they should get divorced twice. However, it is important to realize that without this procedure in Brazil, the divorce will not be recognized.

In Brazil, the divorce must be ratified by the Superior Court of Justice - not to be confused with the Supreme Federal Court, the highest court of the country.

UPDATE FROM 2017: Simple divorces, where there are no children and no special partition of assets, now can be reigistered directly in a local cartório (public notary office), skipping the lawsuit.

The documents required for this process are:

1) power of attorney to represent the client in the divorce ratification process;

2) original foreign divorce decree, duly certified by a public notary in the country of origin AND in the Brazilian consulate;

3) translation of the foreign divorce decree to brazilian portuguese;

4) certified copy of marriage registration in Brazil (if any);

5) former spouse's address for the formal judicial notice;

6) if possible, power of attorney granted by former spouse, with powers to accept the recognition of the divorce in Brazil, duly certified by a public notary in the country of origin AND in the Brazilian consulate;;

7) certified copy of your identity card or passport.

The entire process before the Superior Court of Justice generally takes about 01 year. With the acceptance of both spouses, the powers of attorney of both and the declaration of acceptance of  divorce ratification, the time may be reduced.

I have been working in this type of procedure for quite some time. If you have any questions, just send me an email or a comment here on this blog!

See also:

- HOW TO: Getting Married in Brazil

- When marriage ends what happens to the foreigner's permanent visa in Brazil?