Lya Doria Maeda
Lawyer at Marcos Martins Advogados
Many Brazilian entrepreneurs, when they experience success in Brazil, look for information on how to set up a branch abroad. Generally speaking, the main countries where entrepreneurs initially look are Argentina, the United States and Paraguay.
To open a company or even a subsidiary in another country, there are a number of procedures to follow, not all of them legal. The first step is to research the local market and analyze the viability of the business in the country. Each location has its own specifics regarding regulations, the cost of starting a business, renting space, among other things, which require calculations and studies before any legal steps can be taken.
Once the business plan in another country has been duly outlined, attention must be paid to the legal particularities of each country. The first of these is to identify whether it is preferable to open a new company in the location, controlled by the national parent company, or a subsidiary. In this case, a corporate analysis is needed on the bureaucracy for each type of operation and the estimated costs.
After that, it is necessary to define the type of company the company will adopt. Each country, or even state within a federation, has the possibility of setting up different types of company with their own local peculiarities, so the type of company chosen must be versatile enough for the entrepreneur’s operation.
Once the above topics have been defined, there are a series of bureaucratic issues that must be aligned between the lawyer and the entrepreneur in order to comply with local law and make the company’s operation viable. Some examples are the location where the operations will be carried out (whether owned or rented, with their respective contracts), all local registrations and updates, opening of bank accounts, proper registration of the operation abroad with the Central Bank of Brazil, among others.
Despite the purely operational issues, it is important to consider how the company will be taxed. Some countries have double taxation treaties with Brazil and therefore have a competitive advantage in this area. However, it is necessary to carry out a tax study and plan with lawyers specializing in the subject to see what is the best scenario for the entrepreneur.
Another aspect to consider is the question of succession. In the event of the death of an entrepreneur who has assets abroad, the legislation of the country in which he resides may determine how he will be included in the inventory. In the case of Brazilian legislation, for example, art. 10 of the Law of Introduction to the Rules of Brazilian Law states that “succession by death or by absence obeys the law of the country in which the deceased or de cujus or the missing person was domiciled, whatever the nature and situation of the assets”. What’s more, it’s possible that the local legislation of the country where you want to set up a company has peculiarities regarding succession that should be taken into account, especially by those who have children.
Which countries are the most popular?
Undoubtedly, the countries that Brazilian entrepreneurs are most looking for are Argentina, the United States and, in recent years, Paraguay.
Due to its proximity and long trade relations, Argentina is mainly considered by businesspeople from the South and Southeast regions of the country. Some legal changes in recent years have made it easier to set up businesses in the country. However, the economic crisis in which the country finds itself must be taken into account, as well as certain protectionist policies previously practiced. One facility, however, is the issue of easier residence for Mercosur members.
Another country sought after by Brazilians is usually the United States. Considered a country with greater ease of doing business, due to its federal state model, each state can create specific commercial legislation, in addition to following certain federal legislation. The most popular states are Florida, California, New York and Delaware, the latter of which has advantageous tax incentives and highly specialized courts for settling corporate disputes. However, one must consider certain protectionist policies taken by the US government and the migration issue for those wishing to settle there, which creates additional costs and bureaucracy.
Finally, in recent years Paraguay has stood out for the creation of new companies, with the attraction of its Free Trade Zones, with reduced taxes, and the Maquila Law, which makes life easier for an exporter. What’s more, there is lower taxation than in Brazil and some advantages in terms of labor legislation. However, there are conditions stipulated by the Maquila Law itself, such as the requirement for a minimum of 40% of the added value of the good/product to be of Paraguayan origin in order to enjoy the legal benefits. In addition, the issue of transporting production must be delimited, taking into account the Paraguayan and Brazilian transportation matrices and the needs of the entrepreneur.
Recommendations
Finally, regardless of the country in which you are looking to set up a subsidiary, it is advisable to research the country’s indicators. The main ranking for analyzing the ease of doing business in a country comes from the World Bank, called Doing Business. It ranks the world’s 190 economies according to the following indicators: starting a business, obtaining building permits, obtaining electricity, registering property, obtaining credit, protecting minority investors, paying taxes, trading across borders (international trade), enforcing contracts and resolving insolvency. These indexes, although they are no substitute for an economic and legal analysis of the specific case, can help the entrepreneur to choose some countries to evaluate for setting up their new company and/or subsidiary, and from there to contact their lawyer.
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. Contact us.
