Brazil is one of the fastest-growing technology markets, making it an attractive destination for foreign entrepreneurs looking to establish an IT company. However, to operate legally in the country, one must follow certain bureaucratic requirements and comply with all tax obligations, just like any Brazilian entrepreneur.

If you are a foreign entrepreneur in the technology sector and want to open a startup, software house, or development company, this article explains everything you need to know—from legal requirements to choosing the best tax regime.

 

Requirements for opening an IT company in Brazil

 

Before starting operations in Brazil, a foreign entrepreneur must meet some essential requirements.

1. Obtain a CPF

The Cadastro de Pessoa Física (CPF) is mandatory for any foreigner who wants to be a partner or owner of a company in Brazil. This document is issued by the Brazilian Federal Revenue Service and can be requested at Brazilian consulates abroad.

2. Appoint a Legal Representative in Brazil

If the entrepreneur does not reside in Brazil, they must appoint a legal representative residing in the country. This representative will have the authority to sign documents and legally represent the company. This role can be fulfilled by a lawyer or a specialized accountant.

3. Register the Company

The company must be registered with the Commercial Board of the state where it will operate and obtain a CNPJ (National Registry of Legal Entities) from the Brazilian Federal Revenue Service. For technology businesses, it may also be necessary to register software with the National Institute of Industrial Property (INPI) to secure copyright and intellectual property rights.

4. Obtain Permits and licenses

Although IT companies primarily operate online, some cities require specific licenses, such as a municipal operating permit, especially if there is a physical office.

 

Tax obligations for IT companies in Brazil

 

Every technology company in Brazil is subject to taxes, which vary according to the chosen tax regime. Below are the main taxes that a foreign entrepreneur needs to be aware of:

1. Corporate Income Tax (IRPJ)

This tax is levied on the company’s profit at a rate of 15%, with an additional 10% on profits exceeding BRL 20,000 per month.

2. Social Contribution on Net Profit (CSLL)

A federal tax calculated on the company’s profit, with a rate of 9% for IT companies.

 3. PIS/PASEP and COFINS

Technology companies pay PIS (1.65%) and COFINS (7.6%), which are levied on revenue. Startups may seek specific tax regimes to reduce these costs.

 

Read also: How to start a business in Brazil: a step-by-step guide for foreign

4. ISS (Service Tax)

Since IT companies provide digital services, they are subject to ISS, which varies between 2% and 5%, depending on the municipality.

5. ICMS on software and digital services

Brazilian states charge ICMS (4% to 25%) on software licensing and digital services. Since Supplementary Law 157/2016, states have started taxing online services, requiring proper tax planning.

 

What Is the best tax regime for IT companies?

 

Choosing the right tax regime can help reduce the tax burden and increase the company’s competitiveness. Here are the most common options:

1. Simples Nacional

• Beneficial for IT companies with annual revenue up to BRL 4.8 million.
• Simplifies taxation by unifying multiple taxes into a single payment.
• Tax rates range from 6% to 15.5%, depending on revenue.

2. Presumed profit (lucro Presumido)

• Recommended for IT companies with annual revenue up to BRL 78 million.
• The government assumes a fixed profit margin, reducing tax complexity.
• Taxes range between 13.33% and 16.33% of gross revenue.

3. Actual profit (lucro real)

• Mandatory for companies with annual revenue above BRL 78 million.
• Suitable for companies with high operating costs, as it allows expense deductions.
• Often preferred by companies with low profit margins.

 

Frequently asked questions

 

1. Can a foreigner open a startup in Brazil?

Yes! Brazil encourages foreign startups, especially in the technology sector. In addition to meeting legal obligations, foreign entrepreneurs can access government incentives, incubators, and accelerators.

2. Can a foreign business owner operate remotely?

Yes, but they must appoint a legal representative in Brazil to receive official notifications and sign necessary documents.

3. Do IT companies pay fewer taxes in Brazil?

Depending on the tax regime and business activity, technology companies may qualify for tax incentives and exemptions. Programs such as Inova Simples can benefit tech startups.

4. How long does it take to open an IT company in Brazil?

The average processing time is 15 to 45 days, depending on the state’s bureaucracy and business complexity.

5. Are there tax exemptions for foreign startups in Brazil?

Yes! Some cities and states offer reduced ISS and ICMS rates for technology companies. Additionally, programs like Startup Brasil and Finep provide benefits for innovative startups.

 

Conclusion

 

Brazil has enormous potential for technology companies, making it a great opportunity for foreign entrepreneurs looking to open an IT business. However, it is crucial to comply with all legal procedures, choose the right tax regime, and ensure full tax compliance.

To ensure your business is legally registered and optimized for growth in Brazil, count on CLM Controller Contabilidade. With expertise in the technology sector, CLM provides full support for company formation, tax planning, and fiscal compliance, helping foreign entrepreneurs expand their businesses safely and efficiently.