Is Brazil the most complex place in the world to do business?

Brazil offers massive potential for business growth if you can navigate the incredibly complicated registration and tax system. In this special feature, we guide you through the main challenges you need to overcome.

Do business if you dare could be the motto for trading in Brazil, widely regarded as the most difficult place on the planet to achieve financial compliance.

The tax system is particularly convoluted in this part of the world. Only Romania, Indonesia and Colombia have a worse system to navigate, according to the Tax Complexity Index. Nevertheless, this very same system is highly automated, which, once everything is done properly, makes life a bit more bearable for accountants. When it comes to doing business, Brazil is now the undisputed champion of red tape, according to TMF Group’s Global Business Complexity Index (GBCI) 2021. In the latest rankings, Brazil moves from second to first for complexity, ahead of France, Mexico, Colombia, Turkey and Indonesia. The GBCI 2021 report states: “Complexity in Brazil is driven by a multi-layered system of governance, where federal, state-level and city-level authorities all have significant legislative power. Brazil is one of the few jurisdictions where incorporating companies must register with all three of these levels of government. Various taxes are also levied at each level of government, meaning that tax rates differ from city to city and state to state.”

Wesley Figueira, Managing Partner at independent accounting firm VBR Brasil, a member of Praxity Global Alliance, describes his country as “tough to enter, tough to incorporate and tough to pay taxes”.

So, why do companies from overseas consider opening new business operations here at all? The answer is simple: Brazil is the 13th largest economy in the world (and was 5th largest before the economic crisis of 2014) with vast untapped resources. There is great potential in Brazil for investors willing to take a risk on a country on a tentative road to recovery.

“It’s easier to make money here than people would think”, Wesley says, but he insists it is imperative that companies looking to do business in Brazil seek expert help to avoid costly mistakes due to the complexities of doing business in the country.

“We have failed miserably to convey the correct message on how much specialized help is needed.”

Wesley and his colleagues have spent many years helping international companies get to grips with the Brazil tax system, often through collaborating with other firms within Praxity Global Alliance, but he admits more could be done to warn businesses and independent accounting firms around the world about what to expect.

“In all our years of bringing companies to Brazil and helping them to be established here, we have failed miserably to convey the correct message on how much specialized help is needed in Brazil, so that a foreign company can navigate these waters,” he says.

This article, compiled with help from experts at VBR Brasil, attempts to redress the balance. It provides an introductory guide for accounting firms and their clients on the main challenges of opening business operations in Brazil and how to overcome them. To do business in Brazil, companies need to navigate the following hurdles:

  • Taxpayer numbers
  • Incorporation documents
  • Power of attorney
  • By-laws
  • Full incorporation
  • State registration

"More than once, we have seen POA holders misrepresent their patrons.”

Tough to enter

The first step is to obtain a taxpayer number which is needed for a foreign investor company or individual. This is done through the Central Bank. It sounds relatively easy but there are several hurdles to overcome.

Wesley explains “Documents evidencing the constitution of a company must be received already apostilled (the Madrid Accord) and submitted to the Central Bank and Brazil IRS (Internal Revenue Service) through its byzantine website structures. This is difficult to navigate and filings are commonly denied due to the smallest of mistakes or failure to include some information.

Once obtained, your taxpayer number will be provided in the form of a CNPJ document (for companies) or CPF document (for individuals), both of which are used for incorporation.

A Power of Attorney (POA) must then be named. This person must be a Brazilian national, resident, and local taxpayer and will act on behalf of the foreign investor and sign for them. “Again, this is a tricky business,” Wesley says. “The named individual must have public faith (fiducia) and be someone trustworthy. More than once we have seen POA holders misrepresent their patrons.”

Tough to incorporate

After having obtained the CNPJ/CPF and named a POA, a company type must be chosen. Fortunately, Brazil has made it easier for foreign companies to incorporate a Limited Liability Company, or “Limitada” owned by a single person or company. A Limitada, otherwise known as a Ltda., is the simplest and safest form of incorporation in Brazil. The alternative is a Sociedade Anônima (SA), which requires at least two shareholders and is designed to offer greater financial flexibility but is far more complex.

Next up, your by-laws must be created. The by-laws in Brazil contain all the basic information of a company and must have some important definitions, chief among others:

  • The name of the company, which must be submitted to the Board of Trade beforehand, so that no conflicting names arise;
  • The legal address, which will depend on the nature of the business activity. If only services of a non-polluting nature are provided, a simple office will suffice. For other activities such as manufacturing and traditional industries, the legal address must be adequate for the activity;
  • The National Code of Activities (CNAE), a four-digit standard code that will define the nature, or natures of the business endeavour. This document is then signed, notarized and filed with the Board of Trade. If all goes well with the Board of Trade, it is possible to obtain a local, operational CNPJ from the Brazilian Inland Revenue Service (IRS).

“If you don’t give up, and obtain proper, support you will be good to go.”

Tough to declare and pay taxes

Now that you have your CNPJ with your Federal Taxpayer Number you still have one or two more levels of government to be registered in: state and county. The state levies and controls the VAT, namely the ICMS tax on the circulation of goods and transportation and communication services). The county levies and controls the Tax on Services (ISS).

If you are a commerce or Industry company, you must obtain the State Taxpayer Number or “Inscrição Estadual” which enables you to calculate and pay VAT – ICMS. If you render services, you need to register in the municipality where your headquarters are located, and obtain the Country Taxpayer Number or “Inscrição Municipal”.

With that you are good to do business in Brazil, providing you are not a special case such as a polluting company, or a company that operates goods controlled by the Army (guns, powder, TNT, etc) or medicines (controlled by the National Health Agency, or ANVISA). And if you import or export, you will have to obtain a special permit, called RADAR.

And it doesn’t stop there. As you might expect, there are further registration steps involved at local level. Wesley comments: “Don`t forget, all the documents relating to taxes, bookkeeping, ancillary obligations and electronic files submitted to the three levels of government will need a “localized” Enterprise Resoure Planning (ERP). Your local ERP, if not prepared specifically to operate in Brazil, may or may not be used here. But even if it is possible, you will have to buy the local version with all its ‘add-ons’ to perform the required tasks properly. I could go on, but I think the picture is clear. If you don’t give up and obtain proper support, you will be good to go.”

Easy to make money?

Wesley is confident that if you successfully navigate the system “you will make money” in Brazil provided you have the proper knowledge of the market and choose the right professionals to help you.

He explains: “Brazil is a market of 215 million inhabitants, very much eager for technological advances, with intuitive and smart people, eager to consume. Many companies, regardless of size and sector, have failed in Brazil due to several factors, including lack of proper support or inability to ‘read’ and understand the market.

Companies like HSBC, Kentucky Fried Chicken, and more recently, Ford Motor Company have exited the country after decades, having lost touch with the market.

“Others have thrived, in a very competitive and difficult environment, such as JetBlue (Azul Airlines), Chevrolet and Coca-Cola. What differentiates both are the willingness not to impose a foreign view on the local business environment and consumers. By navigating Brazil in this way, companies can reap the benefits of the second largest market in the Americas and one of the largest in the world.

Local expertise

Obtaining advice on registration, tax and compliance from local experts is, of course, highly recommended in any country for companies wishing to expand international operations, but more so in countries that top the tax and business complexity rankings.

The local complexities in Brazil, and indeed across Latin America and worldwide, has driven numerous successful collaborations between independent accounting firms within Praxity Global Alliance to support clients wishing to set up business operations in new jurisdictions. Many of these collaborations involve Corporate Hosting Services, including an acclaimed service in Brazil.

Wesley is keen to further develop this type of service to provide greater support for companies in Brazil. He explains: “In my former years in Praxity, our partners and myself, as a junior partner at the time, helped establish Corporate Hosting Services in association with Moores Rowland. It was a great initiative, with firm protocols and high client-care standards that was the envy of other professional organizations. This was done so that a single body of professionals in each country could have the modus operandi to perform the necessary acts to incorporate, book and calculate taxes in a given jurisdiction. A Praxity colleague in the US commented that it set a high standard, difficult to match anywhere else. It was great to see how spectacularly well this worked. We are willing to re-establish that very same service level we enjoyed in the past, with the same excellent results.”

Similar Praxity collaborations, which draw on local expertise, can help international companies set up an entity in Brazil and make informed decisions about key trading considerations including:

  • Location (a Free Trade Zone exists in Manaus, Amazonia, and certain states offer VAT incentives)
  • Choice of Type of Company to Incorporate
  • Choice of taxation method (Real Profit vs Deemed Profit, and Cumulative vs Non-cumulative PIS/Cofins taxes)
  • Tax on Services and the dangers of double taxation
  • Ancillary obligations and electronic filings
  • Pros and cons of exporting, selling and producing in Brazil – Studying specific cases and, in some of them “SKD or CKD” products to best tax effects.

Taxation, like many aspects of doing business in Brazil, is not for the faint-hearted, but with a little perseverance and plenty of sound advice from local experts, it is possible to steer a clear path towards a successful business operation in an exciting market.

Further information: Praxity has published a guide to doing business in Brazil as part of a series of ‘doing business’ guides available exclusively for member firms. For details,

please contact

On behalf of Praxity by Ian Lavis thewritingroom