domingo, 21 de maio de 2017

Branch or subsidiary in Brazil?

Here is part of an email exchange with a potential client. 

We were discussing the differences between having a branch in Brazil or incorporation a new company, owned and controlled by a foreign entity. 

  • What is the procedure to create a branch. What has changed lately?
​The branch (filial) requires express approval by the Federal Government. This is not a new procedure. The approval has been required for decades. 

The changes in procedure are regarding the new model of power of attorney that must be used. But this is a relatively small change.  

  • How much time does the special approval take (on top of the usual time for incorporation of a new company)?
​Between 40 to 60 days. ​
 

  • How could a new company be controlled by a foreign investor?
​The procedures for incorporation of a new company with foreign partners are, broadly speaking, the same procedures required to open a regular Brazilian company, with Brazilian owners. Therefore, we will avoid the need for Federal approval, which is part of the process of creating a branch.

The new company would be owned and controlled by the Swiss company. It would also need another partner, which can be another Swiss company, a Swiss investors or a Brazilian investor. 

Please notice that the new company may be 100% owned by Swiss investors. There is no need for a Brazilian partner.

  • Is there any down side of using a subsidiary (new company) instead of a branch?
​Basically, no. ​
 
​The Brazilian entities would work just the same. Actually, a new company is subject to less government control and scrutiny than a branch. ​

  • Would it be legal for the investing company abroad and the new company in Brazil to conduct transactions and have financial ties?
​Yes. They would be subject to the exact same rules (transfer pricing rules, tax rules, etc.) that would apply over a transaction between an investing company and its branch in Brazil.

  • How long does it take to open a new company? 

​About 60 to 90 days, depending on the amount of documents to be translated. ​

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