Brazil is Latin America’s largest economy and, since 2009, China has been its top trading partner. This makes Brazil a prime destination for Chinese investors – but it also means navigating an extremely complex “baroque” tax and accounting system. For example, Brazil’s corporate tax burden (IRPJ + CSLL) is a combined ~34%, and dozens of indirect taxes (ICMS, ISS, PIS/COFINS, IPI, IOF, etc.) apply to different goods, services, and imports. Business owners must also handle labor contributions (INSS, FGTS) and register foreign investments with Brazil’s Central Bank. CLM Controller specializes in personalized accounting services for foreign entrepreneurs, offering “international know-how” to help Chinese companies establish and run businesses in Brazil.

Learn more, listen to the content in the podcast made by CLM Controller below:

 

Opening a Company in Brazil

Foreigners can open and own companies in Brazil, but certain local requirements apply. Brazilian law permits 100% foreign ownership of Brazilian companies; in practice, Chinese investors often form a subsidiary (a new Brazilian corporation) with the Chinese parent as a shareholder. Two common forms are the Limitada (Ltda.), a limited-liability company, and the Sociedade Anônima (S.A.), a joint-stock company. A Limitada typically requires at least two quota-holders (though one-quotaholder “unipessoal” is now possible). There is no minimum capital requirement, and foreign individuals or companies may be quota-holders.

All new companies must be registered with the state trade registry (Junta Comercial) and obtain a CNPJ tax ID. Incorporation normally takes about 30 days, but involving foreign partners (documents needing sworn translation) can extend it to 45–90 days. A Brazilian resident must serve as the company’s legal representative or administrator. In other words, Chinese entrepreneurs will need at least one local officer (often a Brazilian partner or nominee manager). Throughout this process, CLM Controller can handle the entire setup online: they prepare the company constitution, choose the optimal tax regime, and file all registrations (at the federal Revenue, state and municipal tax agencies, INSS, FGTS, trade board, etc.) for you. This allows foreign owners to focus on business strategy while CLM manages bureaucracy.

How to open a foreign company branch in Brazil: a complete guide

 

Corporate Taxes and Accounting Rules

Brazilian companies pay two main taxes on profits: IRPJ (Imposto de Renda de Pessoa Jurídica, corporate income tax) and CSLL (Contribuição Social sobre o Lucro Líquido). IRPJ is 15% on taxable profit, with a 10% surtax on annual profit above BRL 240,000. CSLL is generally 9–10% of profit for most companies (22% for banks/insurers). Together, IRPJ+CSLL usually total about 34% of profit. (A recent 2024 reform also reintroduced a 10% withholding tax on dividends sent abroad, so repatriated profits are now taxed at roughly 40% combined.)

China and Brazil have a tax treaty, so Chinese companies should ensure foreign withholding is reduced per that treaty. Importantly, small Brazilian companies normally can use the Simples Nacional tax regime (a simplified unified tax) to pay only 4–33% on revenue. However, Simples is not available to companies with foreign ownership. In other words, Chinese-owned businesses must use the standard “Lucro Real” (actual profit) or “Lucro Presumido” (presumed profit) regime, with all the regular tax filings. CLM Controller’s experts can help analyze which regime is most efficient for your business.

Brazilian accounting must follow Brazilian GAAP (aligned with IFRS for most companies) and be fully documented. Since 2007 Brazil’s SPED digital accounting system requires annual online filing of bookkeeping: the Escrituração Contábil Digital (ECD) and the electronic tax return (ECF) must include financial statements and details of income, expenses and taxes. These digital submissions must be done every year, and companies also file monthly and quarterly tax reports (e.g. withholding taxes, VAT declarations). Non-compliance carries heavy fines. Therefore, foreign businesses nearly always hire local accountants. CLM Controller offers complete outsourced accounting services: a professional team takes care of bookkeeping, payroll, tax filings and financial reporting, giving “peace of mind” that all obligations are up to date. They even provide online dashboards and management reports via Power BI, so you can track the company’s finances in real time.

 

Indirect Taxes and Payroll Contributions

Brazil’s tax system is also famous for its many indirect taxes. Key examples include ICMS (a state-level VAT on goods, 17–18% in most states), ISS (a 2–5% municipal tax on services), IPI (a federal tax on manufactured products) and PIS/COFINS (federal social contributions on gross revenue, cumulatively or non-cumulatively levied). (The new tax reform is gradually replacing PIS/COFINS/IPI with a single federal VAT called CBS.) Foreign businesses importing goods must also pay PIS/COFINS on imports (currently 2.1% and 9.65% respectively). Navigating these layers often requires careful tax planning; CLM’s tax consultants stay updated on reforms (like the upcoming VAT unification) and can help maximize credits and exemptions.

Brazilian employers face significant payroll taxes. On top of withholding income tax from salaries (progressive 7.5–27.5%), companies must pay social security contributions (INSS) and FGTS. Employers contribute a flat 20% of payroll to INSS, plus an additional 1–3% risk rate. (Employees pay 7.5–14% withheld from wages.) Employers must also deposit 8% of each salary into the FGTS fund for workers, plus smaller “Sistema S” fees and union dues. CLM Controller explicitly offers payroll and labor compliance services: their labor consulting team ensures payroll taxes are calculated correctly and timely, and they advise on labor law issues. For example, CLM guides companies on INSS contributions to avoid fines. By outsourcing payroll to CLM, Chinese investors avoid missteps in Brazil’s complex labor regulations.

 

Hiring Employees in Brazil

Brazilian labor law is protective of workers. Employment contracts (whether standard CLT or service agreements) must observe minimum wage, vacation pay, social benefits, FGTS deposits, and termination rules. Foreign workers need work visas (VITEM V) and a local work permit. Many Chinese companies hire Brazilian staff or second Chinese nationals on work visas. In any case, CLM Controller’s HR/labor consultants can assist with recruitment and compliance, converting contracts and payroll into full legal order. They help set up payroll systems and calculate severance, 13th-month salary, vacations, etc., all in accordance with CLT rules. This ensures smooth HR operations so the focus remains on growing the business.

Do you need a company in Brazil to hire employees?

 

CLM Controller: Local Expertise for Foreign Investors

One major differential for Chinese businesses is CLM Controller’s personalized, multilingual service. CLM emphasizes its “international know-how” – “bring your company from abroad… with the know-how and security of CLM Controller” – which is especially valuable to foreign entrepreneurs. They maintain an English-language portal (MyBusinessBrazil) to clearly explain Brazil’s bureaucracy, and their staff routinely assists clients from around the world. Whether it’s setting up the company (paralegal services), running day-to-day accounting, or filing taxes, CLM offers end-to-end support. Clients benefit from CLM’s 40+ years of experience: all routine filings (tax returns, financial statements, social contributions) are handled by experts, and CLM’s professional liability insurance adds an extra layer of security. In short, CLM acts as a one-stop accounting partner for Chinese companies – from company opening (with optimal tax planning) to ongoing bookkeeping, tax payments, and payroll management.

 

FAQ

• Can a Chinese citizen or company register a business in Brazil? Yes. Brazilian law allows new companies to be formed by foreign individuals or entities. In practice, a foreign-owned company must appoint at least one Brazilian resident as its local administrator or legal representative. CLM Controller can advise on the structure (e.g. 100% foreign-owned Ltda. or S.A.) and handle all legal registration steps.

 

• How long does it take to open a company? Typically about 30 days for the standard paperwork. If foreign documents need notarization and translation, it may extend to 45–90 days. CLM works to expedite filings (especially online applications) to meet these timelines.

 

• What is the corporate tax rate in Brazil? For most companies, the corporate tax rate is effectively 34% on profits (15% IRPJ + 10% surtax + ~9% CSLL). Financial institutions face up to 47% (IRPJ 25% + CSLL 22%). Note: In 2024 Brazil reintroduced a 10% tax on dividends paid to foreign shareholders, raising the total effective tax on profit repatriation.

 

• Are there simplified tax options? Small Brazilian enterprises often use “Simples Nacional” to pay one tax instead of many. However, foreign-owned companies cannot elect Simples. All foreign-invested companies must file under the regular profit taxation system.

 

• What accounting system does Brazil use? Brazil requires accounting records under Brazilian GAAP (aligned with IFRS) and digital submission. All companies file an annual digital bookkeeping report (SPED) including audited financial statements (if large). Payroll and tax statements are reported monthly/quarterly. It’s practically mandatory to engage a local accountant or firm to handle these filings on time.

 

• What taxes come with hiring employees? Employers pay social security (INSS) and FGTS contributions. Typically, a Brazilian company pays 20% of total payroll to INSS and deposits 8% of each salary into FGTS. Payroll taxes (and income tax withholdings) are remitted monthly. CLM Controller can manage payroll processing to ensure all labor obligations are met.

 

Curiosities

• Brazil’s tax bureaucracy is infamous: one report found a medium-sized company spends an average of 2,960 hours per year (123 days!) on tax compliance. The Brazilian newspaper O Globo even calls it “the most opaque, complex and expensive tax system in the world”.

 

• Dividends used to be tax-free. Until 2023, Brazil was one of the few countries that did not tax dividends. (In 2024 a 10% withholding tax on dividends for foreign shareholders was introduced.) This exemption meant foreign owners could repatriate profits tax-free – a unique incentive for multinationals.

 

• Simples Nacional covers 50%+ of companies. Over half of Brazilian companies use the Simples regime to simplify taxes. However, any foreign participation disqualifies a company from Simples, which surprises many foreign founders.

 

• SPED Digital Bookkeeping. Brazil was an early adopter of a fully electronic tax bookkeeping system. The SPED platform means all accounting entries are submitted online (ECD and ECF filings). It’s a curiosity for foreign accountants, but a handy reform that streamlines audits and tax checks.

 

• Federal tax overhaul underway. As of 2024 Brazil began unifying multiple federal taxes into a single VAT (the CBS). This aims to simplify (turn PIS, COFINS, IPI into one tax) – a big change Chinese investors should watch.

 

By understanding these rules and enlisting expert help, Chinese companies can successfully enter the Brazilian market. CLM Controller provides exactly that expertise: handling the paperwork, taxes and payroll so you can focus on business.