Navigating the Brazilian Investment Landscape: A Comprehensive Guide for Foreign Investors

Brazil stands as the largest economy in Latin America, ranking among the top 10 global economies. The agribusiness and technology sectors propel the nation's sustained growth, with expectations of reaching the top 5 in the coming decade. Furthermore, the devalued Brazilian currency, coupled with favorable tax benefits for foreign capital, positions Brazil as an accessible and promising destination for investments. To engage in a thriving economy such as Brazil, however, it's essential to conduct due diligence in order to comprehend the legal and commercial nuances, and to seek the guidance of qualified legal counsel. Investing through the stock market can be done by opening a foreign account, which can be facilitated by a Brazilian bank. However, in this article, we will focus on direct investment, guiding you on how to invest in Brazilian companies, start your own business, and clarify certain legal and procedural matters. To learn about tax implications in investments, please refer to our other article, "Taxation of Foreign Investments in Brazil: Strategies to Minimize Tax Burdens Legitimately."

Understanding Regulatory Framework

Legal Structures for Investment

Land Acquisition and Real Estate

Conclusion

Understanding Regulatory Framework

In Brazil, foreign investments are primarily regulated by two public agencies: Banco Central do Brasil (Brazilian Central Bank, equivalent to the American Federal Reserve Bank) and Receita Federal do Brasil (the agency responsible for tax regulation in Brazil).

To invest through a legal entity, the investor needs to get an CNPJ (national registration of legal entities) from the Central Bank, which is used for holding the company accountable before the court or tax authorities. For individuals, it’s necessary to obtain a CPF (national registration for individuals) from the Federal Police for the same purpose. In both cases, however, it’s mandatory for the investor to appoint a legal representative residing in Brazil, with broad powers to receive correspondence, represent in court and sign on behalf of the investor.

After that, the investment needs to be registered with the Central Bank, appointing the beneficiaries, and presenting all the required documentation, such as a certificate of good standing, proof of the authority of the person who signed the power of attorney, among others that may be necessary. The documents require a Hague Apostille Certificate and a translation recognized by the Brazilian government.

Legal Structures for Investment

In Brazil, the two most used ways to invest in an existent company is capital injection and convertible loan.

Capital injection: It’s the most common way to invest in a company, where the value is injected directly through an increase in share capital. Despite being common, capital injection can pose some challenges, such as the need to transform the company into a joint-stock corporation to allow the distribution of shares according to the agreed terms (which is unfeasible in limited liability companies, as it may incur tax obligations, unregulated transfers of values between partners, etc.); Obstacles to remaining in or joining the Simples Nacional tax program, which is advantageous for the majority of microenterprises and small-sized companies; increased risk for the investor, who becomes a shareholder in the company instead of assuming the position of a creditor; and also higher risk for the existing partners, as they will have to share ownership with unfamiliar individuals.

Convertible loan: It's the most recommended way to invest because it safeguards the investor, shareholders, and the low-cost structure of a limited liability company. The parties enter into a loan agreement with conditions to convert the payment obligation into shares of the company. They only need to transform the company into a joint-stock corporation if or when the loan is converted to shares, and the liabilities, dues, and rights of each party can be determined in the investment agreement.

An attention point that needs to be analyzed in the moment of choosing the way that you going to invest in Brazil, is the labor and employment legislation. It is, besides the tax obligations, the most critical point for Companies in Brazil. They provide a considerable protection for labors and can be very unpredictable sometimes, and it is not uncommon for companies to go bankrupt due to labor lawsuits. Therefore, is highly recommended to have a good legal assistance to avoid labor-related issues.

To start your own business in Brazil, certainly the most recommended way is starting a new company, even if your business already exists in other countries. That happens because the Brazilian law requires different authorizations when a foreign company want to stablish a branch. However, that doesn’t happen when is started a new company with a foreign individual or company as the shareholder, which requires only the documents and registers already abroad in this article.

Land Acquisition and Real Estate

If you are considering immigrating to Brazil or purchasing real estate or land in the country for your business, we can address your inquiries. In most cases, the primary requirement for foreign individuals is to obtain a CPF (Brazilian Tax Identification Number) to acquire real estate or land, along with a duly translated birth certificate. However, there are some exceptions:

• Rural areas can be acquired by foreigners only if they obtain Brazilian nationality or possess a permanent residence visa.

• Border areas require authorization from the National Defense Council.

• Naval areas cannot be acquired by foreigners.

For foreign legal entities, the law permits the acquisition of real estate or land if they have authorization to operate in the national territory. In other words, obtaining a CNPJ (National Register of Legal Entities) is generally sufficient. However, the exceptions mentioned earlier and other specific conditions also apply to foreign companies. To circumvent limitations, it is advisable to establish a national subsidiary company. This subsidiary can operate, with some exceptions, under the same conditions as any other Brazilian company.

Conclusion

While Brazil presents lucrative investment opportunities, seeking legal assistance is paramount. The complex regulatory landscape, coupled with potential challenges in labor and tax matters, necessitates professional guidance. For personalized assistance and further inquiries, feel free to leave a comment, contact us through WhatsApp or send us an email on contato@albuquerquegabriel.com, and let us help you expand your investment horizons.