Setting up a Company in Brazil

The following text is a concise summary of the bureaucratic and legal obstacles an entrepreneur needs to overcome so that they can incorporate and register a new firm in Brazil. It looks at the steps required in setting up a new commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per-capital gross national income (GNI).

1. Check company name with State Commercial Registry Office
The entrepreneur needs to inquire if the company name exists in the state of São Paulo. Normally, this procedure takes an hour to undertake. A request for extension needs to be sent to the Board of Trade (Junta Commercial) for a federal inquiry. The maximum charge of R$10.00 for checking the company's name was approved by Resolution No. 2, outlined by the Board of Trade of the State of São Paulo on June 5, 2008 (effective as of November 1, 2008), who are presently charging a R$9.00 fee to check for the company's name in the state of São Paulo.

2. Pay registration fees
Receipt of payment of registration fees is required for use in the Procedure 3.

3. Register with the commercial board of the state where the main office is located and obtain identification number (NIRE)
The company's corporate acts (articles of association and amendments) need to be registered with either the Board of Trade (Junta Comercial) or with the Registry of Civil Companies, depending on the company actions (simple or business companies). The registration fee for limited liability companies before (i) the Board of Trade of the state of São Paulo is about BRL 75 (according to Administrative Rule No. 178, issued on September 23, 2009 by the Ministry of Development, Industry and Foreign Trade) (ii) Registry of Civil Companies charges are dependent on the total company corporate capital. The articles of association and amendments that require registration with the Registry of Civil Companies need to be notarized before a Notary Public. At present, particular State of São Paulo Board of Trade offices (e.g., Rua Cel. Xavier de Toledo, 99 - 1º andar – Centro - 01048-100 - São Paulo - SP), also arrange expedited registration of corporate documents. The website of the State of São Paulo Board of Trade is www.jucesp.fazenda.gov.br.

The majority of entrepreneurs decide to register either with Sindicato da Micro e Pequena Indústria de São Paulo (SIMPI) at www.simpi.com.br or with Associação Comercial de São Paulo (ACSP) at www.jucespacsp.com.br , in order to take advantage of expedited registration of the company's articles of association and amendments with the Board of Trade of the State of São Paulo. An extra charge of BRL50 is applicable for expedited service, and registration will be finished within 24 hours.

According to administrative rule (Portaria) N. 021, the Board of Trade of the State of São Paulo put in place the electronic system, on April 4th 2008, and this allows the entrepreneur to fill in the forms online (at www.jucesp.fazenda.sp.gov.br). These forms are filed with the articles of association to be registered directly with the Board of Trade.

4. Register for federal and state tax (Secretaria da Receita Federal do Ministério da Fazenda, SRF/MF), obtain the CNPJ number, which also registers employees with the National Institute of Social Security (Instituto Nacional da Seguridade Social, INSS)
It is required that the company's Articles of Association registered before the Register of Commerce of State of São Paulo and the CNPJ Certificate are shown to the INSS , in order to register the company before the Institute of Social Security (INSS).

The relevant company is required to provide licenses from Compania de Tecnologia de Saneamento Ambiental (CETESB) and / or from the Sanitary Surveillance Department (depending on its main actions). This is in accordance with the Normative Rule (IN) No. 748, as of June 28, 2007, outlined by the Federal Revenue Services. Licenses must be administered before registration in the CNPJ is allowed (enrollment for the taxpayer’s tax). For example, before applying with the CNPJ, pharmaceutical and industrial companies need to get a previous license from the CETESB. However, the procedure at the CETESB, will only be completed by getting the installation permit and operating license from the CNPJ. The licenses from CETESB and / or the Sanitary Surveillance Department are required to finish the state regular procedure. The CNPJ registration procedure is regulated by Normative Rule IN 748, but not the licenses from Sanitary Surveillance Department and CETESE.

Issued by the Federal Revenue Services, the Normative Rule (IN) No. 632 as of March 17, 2006, has been changed a few times and the most recent amendment was done by the Normative Rule No. 1,006 as of February 8, 2010. This amendment updates the Programa Gerador de Documentos do Cadastro Nacional da Pessoa Jurídica (PGD CNPJ). The registration procedure is synchronized only across the Brazilian Federal Revenue Services and the State Tax Authorities. The Municipality of São Paulo has not been accounted for in this procedure yet.

The registration procedure was synchronized with the federal revenue and tax authorities of both the city and state of São Paulo, and therefore enables the sharing of company registry data. If the company applies for the CNPJ number, The SRF / MF informs the tax authorities of São Paulo, through an internal system. The company's legal representative visits the Office of Federal Revenue when the company receives CNPJ registration. The legal representative is required to authenticate the information outlined in the forms given to Secretaria da Receita Federal do Ministério da Fazenda (SRF/MF1).

Before registration approval, state tax authorities organise an official inspection of the company's head office. Simultaneous registration of businesses is completed before the SRF/MF (to receive the CNPJ number) and before the tax authorities of the state of São Paulo.

5. Receive state tax inspection

6. Get the approval to print receipts/invoices from the Secretaria da Fazenda Estadua
A special form (known as the AIDF) is required by the authority, when the company is registered with the Secretaria da Fazenda Estadual.

7. Register with the Municipal Taxpayers’ Registry (Secretaria Municipal de Finanças) of the City of São Paulo
It is a requirement that an enrollment form CCM named the Cadastro de Contribuintes Mobiliários is sent to the municipality. The IPTU is one of the documents you have to show in order to receive it. The municipal taxpayer enrollment is made via an electronic form that can be completed online on the website of the City Hall (www.prefeitura.sp.gov.br.)

8. Pay TFE to the Municipal Taxpayers’ Registry
The proof of payment of the location, installation, and operation tax (TLIF) has been replaced by a new tax, the taxa de fiscalização de estabelecimento (TFE). The basis for the yearly rate is the major difference between the TLIF tax and the TFE tax: The TLIF is dependent on the company’s number of employees, and the TFE is dependent on the company’s corporate purpose.

According to the Ordinances outlined by the Municipality of São Paulo, no. 05, as of January 01, 2003, no. 75, as of September 18, 2003, and no. 09, as of January 01, 2006, and also as per the Normative Rule no. 04, as of March 2, 2007, outlined by the State Treasury Affairs, the fees were changed (values related to the fiscal year 2009). As a result, the yearly rate of TFE changes from R$ 141,82 to R$ 17.018,51. This depends on the company's corporate purpose,.

The company must pay a yearly fee for the control and fiscalization of the compliance with municipal laws, when it is registered with the Secretaria Municipal de Finanças. After company activities have started, this fee is due on the 10th day of the 2nd month. The TFE tax is connected to the operations permit (alvará de funcionamento).

9. Get the approval to print receipts / invoices from the Secretaria Municipal de Finanças
The company is required to file a special form (known as the AIDF) and show it to the authority, once the company is registered at the Secretaria Municipal de Finanças. They also need to present Book No. 51 and Book No. 57.

10. Order receipts/invoices (notas fiscais) with CNPJ numbers from authorized printing companies

11. Apply to the municipality for an operations permit (auto de licença de funcionamento)
The company has thirty days to apply for the operations permit by completing the appropriate forms and sending the requested documents, once they are registered with the Secretaria Municipal de Finanças. The operational license is a required in order for the company to commence activities. As a result of practicalities and the long processing time to receive the license, municipalities have allowed companies to begin operations once they pay the TFE. Using a random sample, the municipality undertakes ex-post inspections to particular companies.

Eight out of the thirty-one districts in Sao Paolo are operating under the new electronic operational permit system, since May 2009. All districts are expected to be using the system within a year. With the electronic system, applicants can apply and obtain the authorization for an operational license online immediately.

12. Register the employees in the social integration program (Programa de Integração Social, PIS)
The employer is required to register the employees in the social integration program (Programa de Integração Social, PIS/PASEP), once they have registered the new hire in the employee registry book (livro de registro de empregados). The PIS/PASEP registry is designed to identify the worker in order to set up an unemployment guarantee fund (FGTS) account, to request unemployment insurance, and to be put in the National Registry of Social Information (Cadastro Nacional de Informações Sociais).

To establish an FGTS account and to be eligible for unemployment insurance, if required, the employee therefore needs to be registered into the PIS/PASEP. This completed bt the employer who needs to fill in a PIS/PASEP registry form (documento de cadastramento do trabalhador, DCT), to be sent to the federal savings bank in charge of the FGTS account. Once all enrollment prerequisites are met, the enrollment is finished in about five to ten business days from application. Once entered, the employee is enrolled with the Social Integration Program (Programa de Integração Social, PIS), and if they already have a PIS/PASEP registry, the employer only needs to let the Federal Savings Bank know of the new employment relationship. Receipt of the application to PIS will be received by the employer within 15 days.

13. Open a special fund for unemployment (FGTS) account in bank
Once the new employees are registered in the social integration program (Programa de Integração Social, PIS/PASEP), the employer is required to open an Fundo de Garantia por Tempo de Serviço (FGTS account for each employee). The company's representative or attorney-in-fact is required to go to any local branch of the federal savings bank (Caixa Economica Federal) to open the account. They need to bring the following: A copy of the company's taxpayer registry number (CNPJ/MF), the list of employees, the adhesion form issued by the Federal Saving Bank (Caixa Economica Federal) and the company's articles of association or bylaws. The company will make monthly deposits equal to 8% of the total payroll, once the employee FGTS accounts are opened, and employees are allowed to withdraw those deposits for special events covered by law such as termination without cause, serious disease or disability and more.

A new online process (Sistema Empresa de Recolhimento do FGTS e informações à Previdência Social, SEFIP) was implemented to make FGTS payment and information exchange faster between the employer and the federal savings bank, and can be accessed through the Federal Savings Bank’s Web site. This process allows the online transfer of data, setting up a company file with all information needed by the FGTS and Social Security. The program produces a tax payment form (guia de recolhimento do FGTS) which is required for employer contribution payment, after the referred data transmission.

14. Notify the Ministry of Labor (Cadastro Geral de empregados e desempregados, CAGED)
According to Law No. 4.923, as of December 23th, 1965, the employer needs to tell the Ministry of Labor (Delegacia Regional do Trabalho) of any new hires or employees dismissals, by the 7th day of the month subsequent to the month of the event. This can be done by either a written notice sent by postal mail or the Internet. The company could be given a fine if there is a delay in receiving that information. The fine would be calculated depending on the number of employees in question and the length of the delay. Each year, the company is required to send to the Ministry of Labor the "yearly report of social information" (relação annual de informações sociais, RAIS), which includes information on company employees (vg. name, salary and date of hiring).

15. Registration with the Patronal Union and with the Employees Union.
In accordance with labor law, employees union registration is compulsory and confirms that the company is abiding by employee labor rights. Each municipality and state is required to have unions that represent company operations. Employees and employers are required to pay in an amount equal to 1 day’s salary (regardless of whether they are associated to the union or association) to their representative employee unions and employer associations, once a year. This amount must be withheld from the employee’s pay and submitted to the respective union by March of each contribution year or when recruiting the employee. Consequently, the company needs to look over each new employee’s employment booklet to check if any union contributions have been recorded for the year of hire. If none were recorded, the company needs to ignore the union contribution from the employee’s pay at the end of the 1st month after hire and needs to send the contribution to the employee’s union.

The payment of the company’s contribution to the employer's association will be proportional to the company’s corporate capital, with payment due in January of each year. The 1st payment is an exception to this rule, as it is due in the month of the company’s registration. The time can change for different employers union and employees union.

* Paragraphs 5, 7, 8, 11, 12, 13, 14 and 15 should be undertaken at the same time.