Luciana Magnolo Onofre
Lawyer at Marcos Martins Advogados
There are many reasons why entrepreneurs seek to internationalize their businesses, from investments to business expansion, but the fact is that in order to open a company abroad, a series of procedures must be followed.
Finding out about the viability of the business in the country where the company is to be established is the first and perhaps most important step to be taken by those who want to open a company abroad. And this doesn’t just mean finding out about the local practice of selling products or services, but also looking at the regulations (legal, fiscal, accounting, governmental) regarding the business you are trying to establish.
It is equally important to assess the costs involved in this operation, given that each country has its own rules for establishing a company in its territory, as well as minimum requirements for its regular maintenance. Some countries require the payment of fees for routine company activities.
In addition to the fees and taxes involved in setting up a company abroad, it is worth highlighting the need to translate all the documents required for submission to the competent authorities, the provision or hiring of a specialized person or company that can follow the registration procedures locally (paralegal services), defining where the company will be based, renting space, opening a bank account, local representation, hiring professionals, expatriating employees, among other procedures that involve costs that are often not initially calculated.
It should be noted that the corporate composition of the Brazilian company and the tax regime adopted by the company in Brazil may make it impossible to open a branch or subsidiary abroad, as is the case with companies under the simple national tax regime which, by virtue of a legal determination, cannot participate in the results of other companies, including those established abroad. There are also situations in which the bylaws or articles of association prohibit such an operation. In these cases, it will be necessary to make changes to the Brazilian companies in order to operate abroad.
With regard to legal particularities, it is of fundamental importance to define whether a new company will be set up that will form part of the same economic groupas the Brazilian company or whether a branch of the company will be established abroad. This choice will require a corporate analysis to determine which type of operation best suits the business to be established abroad, taking into account local requirements for the establishment of each of these modalities.
Still from a legal perspective, it is necessary to define the type of company that the company will adopt in foreign territory. Each country, or even state within a federation, has the possibility of establishing different types of company with their own local peculiarities, so the type of company chosen must be versatile enough to operate the business that is to be established abroad.
As soon as the type of company has been defined, certain issues must be dealt with in order to apply to open the company, without which the registration bodies will not open the process. Always observing the local legislation of each country, we can cite as examples the determination of a tax domicile in the country, the opening of bank accounts since the Central Bank of Brazil requires the registration of operations abroad, the appointment of a representative for tax purposes (it is generally necessary for this representative to be domiciled in the country).
It is important to note that some countries have international treaties that avoid double taxation with Brazil, and from this point of view they end up being very attractive options in terms of the cost that incorporating a company in foreign territory can generate.
Most attractive foreign countries for investment
The United States leads the way as the most attractive country for foreign investment, according to the ranking of the most reliable countries for foreign direct investment (FDI). In the first 10 positions of this ranking we also find Canada, Germany, Japan, France, the United Kingdom, Australia, China, Italy and Switzerland. See the full list.
A.T. Kearney’s Foreign Direct Investment (FDI) Confidence Index (the US consultancy responsible for the analysis) is an annual survey carried out since 1998 with executives from the 500 largest companies in the world. Its parameter is the interest in the investment of capital by a foreign company in a company in a different country, which may be a foreign direct investor, a company resident in another economy or a foreign affiliate company.
Without prejudice, it should be noted that trade agreements between countries and special conditions linked to international treaties must also be taken into account to identify the best option among foreign countries when it comes to investment or business expansion.
In order to be more assertive about the ease of doing business in a foreign country, the World Bank carries out research and ranks 190 world economies according to certain indicators such as starting a business, obtaining building permits, registering property, obtaining credit, international trade, among others. These indicators can help the investor or entrepreneur assess where to make their investment.
Is this subject of interest to you? The team at Marcos Martins Advogados has extensive experience in setting up and providing legal advice to companies of all sizes in various locations, and is qualified to deal with all demands aimed at guaranteeing your company’s maximum performance.
