If you are a foreign company or international investor interested in expanding your operations to Brazil, a common question arises: is it necessary to open a company in Brazil to hire a local employee? In most cases, the answer is yes — especially when it comes to formal employment contracts governed by the CLT (Consolidation of Labor Laws), the country’s main labor regime.

With one of the most detailed labor legislations in the world, Brazil requires companies that wish to hire under the CLT regime to be formally established in the country, with a valid and registered CNPJ (National Register of Legal Entities). This means that a foreign company cannot simply sign the work card of a Brazilian employee or hire an employee directly from abroad without following the proper legal procedures.

In addition to the formal hiring requirements, it is also important to consider the costs and obligations involved in the process, such as labor charges, social contributions, tax obligations, and registration in the eSocial platform, a digital platform that unifies labor information. Ignoring these requirements or attempting to outsource a CLT relationship by hiring as a legal entity (PJ) may expose your company to serious legal risks in Brazil, including lawsuits for disguised employment.

Hiring under the CLT Regime

 

To hire under the CLT (Consolidation of Labor Laws) regime, it is necessary to have an active CNPJ (National Register of Legal Entities) in Brazil. According to Article 2 of the Brazilian CLT, “employer” is defined as the legal entity or equivalent that assumes the risks of economic activity and directs the work of its employees. This means that a foreign company without a registered branch in the country cannot formalize a hiring under the CLT regime — it would be considered illegal.

To comply with the legislation, the foreign company needs to open a branch or subsidiary in Brazil, obtain a CNPJ, and register the worker in the eSocial system. This process involves bureaucracy and deadlines: while the company registration for Brazilians may take 30 to 45 days, for foreigners, the time can extend up to 180 days, depending on the acquisition of documents such as CPF (Individual Taxpayer Registry), power of attorney, and visas.

Cost of Hiring under the CLT Regime

Hiring under the CLT (Consolidation of Labor Laws) regime involves significant labor charges. In addition to the gross salary, the employer must bear:

• 20% of the employer’s INSS (Social Security) contribution;

• 8% for FGTS (Severance Indemnity Fund);

• 1% for PIS/Pasep;

• 2.5% for the Salary-Education contribution;

• Between 5% and 7% for contributions to the S System (SENAI, SESI, SEBRAE, among others).

When adding all the taxes, employer charges range between 30% and 50% of the gross salary, not including additional costs such as the 13th salary, paid vacation, notice periods, and other legal obligations.

Hiring as a Legal Entity (PJ)

 

Another common form of hiring is through service provision as a Legal Entity (PJ). In this model, the professional opens a company (usually under the MEI or Simples Nacional tax regimes) and issues invoices for the services provided. The relationship does not follow CLT rules: there is no work card registration, FGTS, 13th salary, or paid vacation. The contracting company, including foreign companies, simply makes payments based on the invoices issued, while the service provider is responsible for paying their own taxes — such as ISS, INSS (as an individual contributor or under Simples), IRPJ, CSLL, among others.

This model exempts the contracting company from needing a CNPJ in Brazil. However, attention is needed: Brazilian labor law prohibits the use of PJ when, in practice, there is an employment relationship. Article 442-B of the CLT allows the hiring of freelancers but prohibits “pejotização” — that is, hiring through a CNPJ when typical employment characteristics are present, such as subordination, regularity, personal work, and remuneration (as outlined in Articles 2 and 3 of the CLT).

In practice, if the service provider works fixed hours, serves only one client, and is subject to direct orders, there is a risk that the Labor Court will recognize the employment relationship, even with a CNPJ. This understanding is reinforced by statements from the Labor Law Journeys, based on the principle of reality over form.

In summary, hiring via PJ can be an efficient alternative for specific, outsourced projects without exclusivity or direct subordination. When properly structured, it is a common practice — but it requires attention to avoid disguising an employment relationship, which could result in penalties for the company.

Freelancers and Independent Contractors

Hiring freelancers or independent contractors (individuals without a company) is another option. In these types of contracts, there is no formal employment relationship: the worker issues a Receipt for Payment to the Self-Employed (RPA) or invoices as a Microentrepreneur (MEI), for example. In general, the freelancer assumes their own taxes (they must pay INSS as an individual contributor — around 20% of their earnings — and file Income Tax returns). There is no FGTS, 13th salary, or paid vacation.

One advantage of hiring a freelancer/MEI is that the contracting company does not need a CNPJ in Brazil: the foreign company simply pays for the services rendered, and the Brazilian professional issues an RPA or invoice for the completed work. However, there cannot be an employment relationship: if the contract includes fixed hours and exclusivity, it will be characterized as a CLT contract in court. In case of doubt, it is better to advise the contractor to open an MEI or EIRELI to issue an invoice.

Regarding invoice issuance: only companies (PJ) can issue Electronic Invoices (NF-e). A pure freelancer (without a CNPJ) cannot issue NF-e — they can use an RPA to prove the service, but this receipt is for the Brazilian contractor. In the case of international hiring, if the Brazilian is an MEI or a company, they can issue NF-e normally (and pay ISS on the revenue, typically 2% to 5%).

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

Taxation and Charges

 

Taxation varies depending on the model:

• CLT: The foreign company (via CNPJ) deducts INSS from the employee (8% to 11%) and pays the employer’s 20% contribution. It also pays 8% for FGTS, and collects PIS (1%), Salary-Education (2.5%), and contributions to the S System. The employee receives their net salary and all legal benefits.

• Contracted PJ: The foreign company only pays the invoice (gross amount). In theory, no INSS or FGTS is withheld from this amount. The service provider is responsible for their own taxes: if they are MEI, they pay reduced microtaxes and simplified INSS; if they opt for Simples, they pay ISS and INSS (as a partner), along with IRPJ/CSLL; if not opted into Simples, they pay regular taxes on profit/revenue. In any case, the service provider’s tax burden is much lower than the CLT charges.

• Independent Contractor: Since there is no company involved, the independent contractor pays INSS as an individual contributor (about 20% of their earnings, capped at the ceiling) and files IRPF according to the progressive tax table. The foreign contracting company typically does not withhold anything (unless there is payment to a foreign individual, in which case there may be withholding tax of 15% to 25%).

An additional concern is double taxation or the obligations of international remittances. It is recommended to check whether there is an agreement between the foreign company’s country and Brazil to avoid double taxation and understand the taxation on remittances (ISS on imported services, IOF on currency exchange, etc.).

Risks of Irregular Hiring

 

Hiring in Brazil without following the rules carries serious risks. Hiring someone under the CLT regime without registration (work card) is illegal — it can result in extremely high labor fines and the requirement to pay all overdue benefits. In fact, the legislation states that “hiring an employee without registration may cause many problems and financial losses to the company.” Furthermore, if there is “fraud to the law” (simulating a PJ or independent contractor contract), the foreign company may be dragged into the Brazilian Labor Court to pay CLT rights retroactively. In case of litigation, the principle of “reality over form” applies: the judge will analyze the practical life, not the formal contract. Therefore, acting in accordance with the law — whether by opening a company in Brazil or adjusting the hiring model — is the best way to protect yourself.

In the international context, it is recommended to use solid contracts: define the applicable law (which can be Brazilian), jurisdiction or arbitration, compliance clauses, and confidentiality clauses. This helps protect the foreign company from Brazilian labor and tax contingencies. The contract should clearly outline the work regime (independent services, PJ, etc.) to avoid claims of an employment relationship.

Can I Hire Remotely in Brazil?

 

Yes — remote work (telecommuting) has been legally recognized under Brazil’s CLT since the 2017 labor reform. A CLT employee can work from home or even from abroad, but remains subject to the same employment rules and protections. You do not need an additional Brazilian CNPJ just because the employee works remotely; what matters is where the employment contract is registered and who is responsible for payroll.

For freelancers or contractors (PJ), remote work also makes no legal difference — the service provider can work from anywhere, as long as the deliverables are met. However, the same legal precautions apply when distinguishing between independent service and employment. Regardless of whether the work is remote or on-site, Brazilian labor laws assess the substance of the relationship — including elements like subordination, exclusivity, and regularity.

Do I Need to Open a Company to Hire in Brazil?

If your goal is to hire under the CLT regime (Brazil’s formal employment law), then yes — you must establish a legal entity in Brazil with a valid CNPJ. The CLT does not allow for a foreign employer to operate without a registered company or branch in the country.

However, if you plan to hire a service provider — such as a freelancer or a contractor (Pessoa Jurídica or autonomous worker) — it’s not strictly necessary to open a Brazilian company. You can simply pay invoices (nota fiscal) or autonomous payment receipts (RPA) without creating a local entity. That said, you should carefully evaluate the legal protections of the worker and the risk of misclassification. If the working relationship resembles that of an employee (with regular hours, exclusivity, and subordination), it could be reclassified as a CLT employment, exposing your business to legal liabilities.

In summary: to hire formally under CLT, you must open a company or subsidiary in Brazil. To hire freelancers or independent contractors, a local CNPJ is not mandatory — but compliance with Brazilian labor regulations is still essential.

How CLM Controller Can Help Your Company Hire in Brazil

Navigating Brazil’s legal and bureaucratic landscape requires local expertise — and that’s where CLM Controller Accounting makes the difference. We specialize in assisting foreign companies at every step of the process: from setting up a legal entity in Brazil to hiring local employees, managing tax planning, and ensuring full labor compliance.

Our team has in-depth knowledge of Brazilian labor laws (CLT), civil regulations, and the country’s complex tax system. We help you determine the most appropriate hiring model, estimate costs, draft international contracts, and stay compliant with both the Brazilian IRS (Receita Federal) and the Ministry of Labor.

Whether you need to open a CNPJ or structure legally sound agreements with service providers, CLM Controller ensures your foreign business is protected and fully compliant throughout the hiring process in Brazil.