Ms. Claudia Low is the co-author of the book “They Don’t Speak Spanish in Brazil,” which provides a complete insight on how to do business in Brazil, in the cultural, economic, tax and regulations and legal aspects – along with providing very useful information for you to know before you seek your business opportunities in Brazil.
Cláudia Brito Low, a Brazilian bar (Ordem dos Advogados do Brasil – Sao Paulo ) registered attorney who is internationally recognized for being an expert in the field of Brazilian taxation. Claudia Low joined Kafuman Rossin in 2014 as a manager in the tax department. She provides a variety of tax planning and compliance services for high-net worth individuals and privately held businesses. Her experience includes the development and implementation of tax planning strategies for both domestic and cross-bordering international transactions. She also works in the international consulting department at Kaufman, Rossin & Co.
To learn more about Claudia Low, visit her profile at the following link.
To read more about the book, and to know how to purchase it, click here.
We asked Claudia Low questions about the tax and regulation information needed for foreign businesses to know before seeking to enter the Brazilian market. Below are her very informative answers.
1. Many foreigners don’t understand how business in Brazil works, especially relating to taxes and regulations. How is the structure of the Brazilian tax and legal system different from other regimes that foreign businesses might be more familiar with?
When it comes to Brazil, most of my clients immediately are surprised with the number of taxes imposed in one transaction. In addition, the tax calculation is of course dependent on the specific tax regime and associated transaction – i.e export, import, or domestic transaction. While other countries do have VATs (value added taxes) and many are familiar with the mechanics of offsetting current VAT with VAT credits imposed on purchases related to the final product, the mind blowing part specific to Brazil is that the VAT rates not only vary per state (which in Brazil would be 26 states and one DF), but also per product, and by the destination or location of the purchaser. Non-Brazilian too are normally shocked when presented with the depth of state and federal incentives available to them and their enterprises or planned entities in Brazil. Or, in other words, many people are “sold” on the cities of São Paulo or Rio de Janeiro being the only options for their business entity in Brazil. This is understandable as São Paulo traditionally is the main (and often times only) municipality non-Brazilians will visit on business related trips.
2. What are some of your strategies for helping foreign businesses and investors become comfortable with the Brazilian regulatory regime and position themselves for success?
First, I would recommend that they understand their responsibilities as a foreign national doing business in Brazil. Be fully aware that if you establish a presence in Brazil, you could be treated as a Brazilian taxpayer and ultimately be responsible for a chain of tax and regulatory compliance laws. For example, I often times witness a foreign entity hiring a person in Brazil to be their representative or agent. That’s fine. No problem. However, all proper documentation and caution must be taken so this structure is not ultimately treated as an employer-employee type of relationship in which payroll obligations would be required of the entity in Brazil.
If you are selling to Brazil and taxes are being withheld from your Brazilian customer on your behalf, ask for the withholding certificate of taxes. This way you will clearly establish the responsible party for the tax payment and might be able to even credit back some of the taxes paid in Brazil on your foreign tax returns.
3. What are the biggest challenges facing companies looking to enter the Brazilian market and what are some examples of strategies to overcome them?
Basic knowledge of Brazil (economy, culture..), the Brazilian market (Brazil is not only Rio and São Paulo…), and a basic level understanding of Portuguese. Portuguese is the language spoken in Brazil – not Spanish, and, unfortunately, not as much English as many visitors mistakenly presume.
4. They might not be well-known, but what are some of the benefits of the Brazilian tax and legal system, and are there ways for foreign businesses and investors to take advantage?
There are numerous incentives provided by cities, states and by the federal government. Most of the incentives require a financial investment or a certain number of increase in jobs for the location. The incentives might vary between reduction of tax rate, funds or governmental grants, to the deferral of tax payments and even the concession of land or property to run your business. Most of the municipalities, states and federal governmental sites will provide information on the incentives available and how to apply for them.
5. What advice would you give to companies who are looking to expand into Brazil but are unsure of where to start?
The opportunity is there, but you need to work with those who not only know, but those who are honest and willing to roll up their sleeves via hard work on your behalf.
6. How important is it to have local legal representation and local partners who are well versed in helping foreign businesses and investors achieve success in Brazil?
Legal representation or local partners are not immediately needed for studying a business opportunity there. However, after doing their proper due diligence outside of Brazil, I do recommend they make certain to eventually speak with bar registered attorneys in Brazil and individuals with whom they truly can communicate – i.e solidly fluent English.