Brazilians Favor Remote Work, But Legislation Brings Challenges for Employers
The Covid-19 pandemic greatly changed the previously existing working landscape. Especially in Brazil, the vast majority has approved the experience of remote working.
Important Insights on the Global and Brazilian Health Technology Markets
Health tech companies have gained significant global market share over the years. What you need to know especially about the Brazilian market.
05 Economic Trends Fueled by the COVID-19 Pandemic
We listed five economic trends that were fueled by COVID-19. And they are expected to remain important in a post-pandemic world.
Legal Update on Coronavirus in Brazil
COVID-19 Measures in Brazil COVID-19 Measures in Brazil COVID-19 impacted various sectors of the Brazilian economy and public services. As of April 2, 2020, Brazil reported approximately 7,000 COVID-19 cases and 141 fatalities. To curb the spread of the virus, federal, state, and municipal governments enacted extensive measures, including significant lockdowns in São Paulo, Rio de Janeiro, and other states. These restrictions have severely impacted many economic sectors. In response, the Brazilian government implemented several emergency measures to support businesses, with additional measures anticipated as the situation evolves. Labor Law Measures Employee vacation advancement: Employers can unilaterally require employees to take vacation with 48 hours’ notice, including those who haven’t accrued vacation rights. 25% salary reduction: Salaries can be reduced by up to 25%, adhering to legal minimum wage rules and justifying economic hardship. Special home office rules: Employers may require employees to work remotely with 48 hours’ notice, including agreements on equipment and expense reimbursement. Tax Measures Emergency rules for tax payment deferral are limited. FGTS contributions can be deferred into six installments, provided the taxpayer notifies authorities appropriately. In the absence of comprehensive rules, some taxpayers have pursued legal actions to defer federal tax payments, with mixed outcomes. Medical Product Imports The government eliminated import taxes on medical products essential for combating COVID-19, including alcohol, protective gear, and respiratory devices. These measures, effective until September 30, 2020, prioritize expedited processing by federal agencies. Public Authority Service Suspension São Paulo Board of Trade: Public services suspended until April 30, 2020, except for new entity incorporations via the electronic system. Federal Revenue Service: Limited to essential services by appointment; administrative procedure deadlines are suspended. INPI: Services suspended, with administrative deadlines extended to April 14, 2020. Trademark applications remain available online. Courts: In-person meetings suspended until April 30, with remote services available. Registry of Deeds and Documents: Operating from 11:00 am to 3:00 pm on business days. If you need more information or wish to consult with a business expert, fill out our contact form or reach out via message or phone.
SaaS in Brazil: A Growing Market
SaaS Market in Brazil SaaS Market in Brazil The SaaS market is rapidly growing in Brazil, presenting significant opportunities. The Software as a Service (SaaS) market is growing globally. According to experts, the Brazilian market is still underserved but is also growing at a rapid pace. What is SaaS? Software as a Service (SaaS) is a software licensing and delivery model in which software is licensed by subscription and centrally hosted. It is also known as web-based software, on-demand software, and hosted software. Globally, Gartner predicts that SaaS revenues will grow to $278 billion by 2021, up from $145 billion in 2017. Brazil, as an underserved market with significant opportunities, is expected to play a key role in this growth. Keiretsu Software Initiative Keiretsu Software, established with an initial capital of R$ 100 million, aims to acquire 40-70 SaaS startups by the end of 2020. This highlights the rapid growth and scalability potential of the SaaS market in Brazil. Key Insights from the SaaS Landscape Research SaaS enterprise companies in Brazil are growing faster than those focused on B2C or SMEs. 60% of companies take less than six months to recover CAC costs. 67% of companies have an LTV/CAC ratio higher than three. Inside sales is the preferred go-to-market strategy for SaaS startups. 26% of companies have a marketplace component. 71% of SaaS startups in Brazil are bootstrapped and have never raised external funding. Top SaaS Startups in Brazil Tracxn listed the top 10 SaaS startups in Brazil out of a total of 750. Some of the most prominent include: Olista: A multichannel sales platform for SMEs. ContaAzul: Online accounting and billing solutions for SMEs. Zoop: A white-label payment solution. Xerpa: An HRMS platform. SMEs as Key SaaS Clients According to a study by Superlógica, 51.4% of SaaS clients in Brazil are SMEs. André Baldini, CEO of Superlógica, emphasized the importance of understanding SME pain points to provide tailored solutions that foster strong client relationships. If you need more information or wish to explore SaaS opportunities in Brazil, contact us for further assistance.
The Standard Benefits Package in Brazil
Employee Benefits in Brazil Employee Benefits in Brazil Common employee benefits in Brazil include health insurance, meal vouchers, and transportation allowances. In addition to a fixed salary, companies in Brazil generally offer a social package to their employees. Below, we list the most common benefits. Standard Benefits In Brazil, benefits packages can be freely negotiated between employees and employers, depending on specific circumstances. However, standard benefits typically include: Health insurance Dental plans Meal or food vouchers Transportation vouchers and/or fuel allowances Offering a transportation voucher is legally required if requested by the employee, and the amount depends on public transport costs. Employers can deduct up to 6% of the base salary for this benefit. Health Insurance and Meal Vouchers Health and dental plan costs depend on factors like the provider, company size, and employee age. Providers include Bradesco, SulAmérica, Amil, and Unimed. Specialized consultants help small and medium-sized companies select appropriate plans. Meal vouchers typically cover daily meal expenses during work hours. Employers should consider the average meal cost in their region. Service providers like Alelo offer free research on regional meal costs (see Alelo’s website). Social Packages for Expatriates Expatriates moving to Brazil often receive standard benefits plus additional perks, such as: A company car, often rented from car rental services One flight per year to their home country Rental cost coverage for an apartment, within reasonable limits Large international companies may offer these additional benefits to attract expatriate executives. Flexible Benefits Employers can enhance their benefits packages by including options like: Flexible working hours Educational incentives Gym memberships or vouchers Depending on the company’s values and culture, these additional perks can make the workplace more appealing to employees. If you need more information about employee benefits in Brazil or wish to customize a benefits package for your team, contact us today.
Business Talk #2: How to Define Compensation for Partners and Directors in Brazil
Compensation for Partners and Directors in Brazil How to Define Compensation for Partners and Directors in Brazil For our Business Talks, we invite international and Brazilian experts to discuss various topics related to Brazil, from market insights and business development to HR, legal, and tax issues. Business Talk #2 – Featuring Julia Silva e Lima Julia Silva e Lima, tax lawyer, shares her insights on compensation for partners and directors in Brazil. Julia Silva e Lima is a tax lawyer and associate at FCR Law – Fleury, Coimbra e Rhomberg Advogados. With extensive experience advising national and international clients on Brazilian tax law, she specializes in cross-border operations, assessing tax risks, and mitigating tax impacts. Key Compensation Methods 1. Dividends Dividends are paid based on net income after taxes. In limited liability companies (LTDA), they can be distributed proportionally or disproportionately, as defined in the entity’s articles of association. In corporations (SA), dividends must be distributed proportionally, but preferred shares can grant shareholders fixed or minimum dividends. Dividend distribution is tax-free for recipients but not deductible for corporate income tax purposes. 2. Interest on Equity (JCP) JCP compensates partners/shareholders for capital invested in the company, calculated using the Long-Term Interest Rate (TJLP). JCP payments are deductible for corporate tax purposes but are subject to a 15% withholding income tax. This method provides a 19% tax benefit to the company compared to dividends. 3. Pro-labore Pro-labore is compensation for directors’ services, established in the company’s bylaws or specific resolutions. It is subject to withholding tax (up to 27.5%) and social security contributions. Employers also pay a 20% social security contribution. Pro-labore is tax-deductible for the company. Choosing the Right Method Each compensation method has its pros and cons. Dividends are tax-free for recipients but not deductible for companies. In contrast, JCP and pro-labore are taxable for recipients but offer tax-deductible benefits to companies. Businesses must carefully evaluate the implications of each method to determine the most beneficial approach for both the company and its stakeholders. Julia concluded the talk by emphasizing the importance of a tailored approach to compensation methods, considering the unique financial and operational circumstances of each entity. For more information about compensation strategies in Brazil, contact us today.
Checklist – How to Establish a Brazilian Subsidiary
Establishing a Brazilian Subsidiary Establishing a Brazilian Subsidiary To successfully incorporate a Brazilian subsidiary, a foreign entrepreneur must fulfill a list of strategic and, above all, bureaucratic obligations. Below, we summarize the main To-DOs. Complying with Brazilian regulations is crucial for setting up a subsidiary. Part 1 – Strategy and Foreign Partners Business Structure: Define a tax plan and business objectives to determine the legal structure for the subsidiary. Appoint a Legal Representative: Foreign entities must designate a Brazilian resident with specific powers to act as their representative. Register with Authorities: The foreign partner must register with the National Register of Legal Entities (CNPJ) or Individuals (CPF). Document Legalization: Ensure foreign documents comply with Brazilian standards and register them with the Civil Registry of Titles and Documents. Part 2 – Articles of Association Prepare Articles of Association: Define the rights and responsibilities of partners, adhering to Brazilian legal requirements. Register Articles: Submit the articles to the Board of Trade or Civil Registry of Legal Entities, depending on the business type. Social Security Registration: Register with social security and other authorities as needed. For healthcare companies, registration with the National Medical Council may be required. Contact Us If you would like information on doing business in Brazil or wish to speak with one of our business consultants, fill out our contact form or contact us by message or phone. We look forward to hearing from you! For expert guidance on establishing a business in Brazil, get in touch with our team today.
What Investors and Companies Can Expect from the Brazilian Economy in 2020
Optimistic Business Outlook for Brazil Optimistic Business Outlook for Brazil Although last year was less satisfactory from the perspective of many economists, most Brazilian business leaders expect 2020 to be a positive year for their companies, according to a recent survey. © Donatas Dabravolskas – stock.adobe.com After two years of severe recession between 2015 and 2016, the Brazilian economy has been recovering moderately. With the election of President Jair Bolsonaro, economists initially predicted significant GDP growth and increased foreign investments. However, recent political and economic challenges have tempered these expectations. Fitch Ratings cited political instability, corruption, and difficulties in implementing fiscal reforms as key obstacles. This led to a downward revision of GDP growth expectations for 2019, eventually registering a modest 1.1% growth, similar to the previous year. Survey: 2020 Will Be a Positive Year A survey conducted by Deloitte revealed that seven out of ten Brazilian business leaders are optimistic about 2020. The survey included 1,377 companies, representing R$ 3.5 trillion in annual revenue, equivalent to half of Brazil’s GDP. Key findings include: 72% of respondents plan to maintain their workforce. 58% intend to increase the number of employees. Altair Rossato, CEO of Deloitte Brazil, attributed the optimism to positive GDP growth of 0.6% in Q3 2019, reflecting gradual economic improvement. “The third-quarter GDP results align with business leaders’ positive expectations, as they see signs of improvement day by day,” said Rossato in an interview with Exame.com.br. Priority Actions for Brazil’s Economy Survey participants identified key priorities for economic growth: 79% emphasized job creation. 57% highlighted the need for infrastructure investments (railways, highways, waterways, and ports). 54% supported expanding Brazil’s participation in foreign trade. 52% called for more concessions and auctions. Investments in these areas are critical to boosting Brazil’s economic potential and competitiveness in the global market. For more insights on the Brazilian economy and business opportunities, contact us today.
Business Talk #1: What Makes Brazil an Attractive Market for International Business?
Why Brazil is an Attractive Market for International Business What Makes Brazil an Attractive Market for International Business? For our Business Talks, we invite international and Brazilian experts to discuss various topics related to Brazil, from market insights and business development to HR and tax issues. Fabian Peters shares insights into Brazil’s business potential and challenges. Business Talk #1 – Featuring Fabian Peters Fabian Peters is the CEO of ILM Group. With extensive experience in the Brazilian market, he previously founded a subsidiary for a German internet technology company in 2012 and held various leadership roles in Brazilian companies. His expertise spans business development, finance, and strategic growth initiatives. What makes Brazil an attractive market for international business? Brazil is the 5th largest country in the world, with over 200 million people, making it the largest market in the Americas after the U.S. Despite some challenging years, the economy is showing signs of growth, providing foreign companies with opportunities in a vast market with less competition compared to other economies. What issues and challenges should companies consider before establishing operations in the country? Brazil’s complex tax system and bureaucratic processes pose significant challenges. Labor laws are also intricate, making it essential to hire local experts to navigate these complexities. However, establishing a local entity in Brazil offers undeniable advantages for market entry. Which sectors are most attractive in Brazil? Traditional sectors like Agribusiness remain promising due to favorable regulations. Renewable Energy and Environmental Solutions are also gaining traction, driven by international pressures and rising interest in sustainability. In the tech space, demand for SaaS, IaaS, and PaaS solutions is growing, fueled by Brazil’s expanding e-commerce market, which accounts for 50% of Latin America’s total. How can ILM Group support companies entering the Brazilian market? ILM Group helps clients focus on their core business by managing risks and complexities. Services include tax structuring, company incorporation, and administrative support like issuing electronic invoices. Think of ILM Group as a “complexity and risk outsourcing” partner for businesses entering Brazil. For more information on how ILM Group can assist your business, contact us today.