Question

Answer Question: Thank you so much! Due 4/22/18

1. Explain laws affecting international business and travel in Brazil?

Answer 1

The main legal development in recent times affecting businesses in Brazil is probably the adoption of anti-corruption laws and regulations, in response to protests against corruption and other matters. Decree No. 8,420 of 18 March 2015, was adopted as the implementing regulation of the Anti-Corruption Law. The new legal framework provides for the strict liability of companies for acts of corruption of local and foreign government officials. As a result of the new regulations, companies in every sector are expected to establish or improve compliance programmes.

Brazil has also taken steps to modernise its dispute resolution procedures. On 16 March 2015, a new Civil Procedure Code was adopted and is expected to expedite cases brought to the judicial system. Arbitration procedures are also being improved, with the amendments to the Arbitration Law introduced by Law 13,129 of 26 May 2015..

Brazil is a Federative Republic and its legal system is based on civil law. Brazil is generally open to foreign investment, but investments in certain sectors are either restricted to nationals or subject to governmental authorisation, such as the following-

- Financial institutions.

- Press and broadcasting services.

- Airlines with domestic flight concessions.

- Postal services.

- Private security and transport.

- Nuclear energy.

- Property of rural land.

- Activities near international borders.

- Cabotage (that is, where foreign aircraft from one country travel into another country and pick up foreign nationals or citizens of that country and provide transportation to and between points within that country).

Foreign direct investment must be registered in the Brazilian Central Bank and, for investments in capital markets, in the Brazilian Securities Commission. Additionally, foreign investors must obtain registration to invest in the country and appoint a representative that is resident in Brazil.

As a member of the United Nations, Brazil implements the United Nations Security Council Resolutions, some of which impose economic sanctions that restrict certain types of trade with certain countries.

Cross-border transactions must be registered in the Brazilian Central Bank's Information System. Additionally, the parties to a cross-border transaction must enter into exchange agreements with financial institutions authorised by the Central Bank to operate in the foreign exchange market.

In certain cases, there are other regulatory requirements that need to be observed before funds can be remitted abroad. For example, registration of technology transfer or IP licensing contracts with the National Institute of Industrial Property is required before royalties can be remitted.

Brazil offers a wide variety of incentives to investors, at the federal and regional or local levels, such as-

- Taxation incentives to sectors considered strategic by the Government.

- Incentives in the context of development of infrastructure projects in several sectors (energy, telecommunications, oil and gas, logistics and transportation) through public bidding process and public-private partnerships.

- Tax incentives in "Tax Free Areas" (for example, the Zona Franca de Manaus) and Export Processing Zones.

- Funding from public banks, in particular the Brazilian Development Bank.

- Lower taxation on investment by non-residents in the capital markets.

- Distribution of dividends is not subject to income tax.

The most common forms of business vehicles used in Brazil, including by foreign investors, are-

- Limited liability companies (sociedades limitadas), which cannot issue securities, are subject to less formalities and disclosure requirements and are governed by more flexible and less detailed legal rules. They must have two or more shareholders and are typically appropriate for investors that do not have relevant partners.

- Closely-held corporations (sociedades anônimas fechadas) must have two or more shareholders and-

- can issue securities;

- are subject to additional formalities and disclosure rules compared to limited liability companies;

- are governed by legal rules that allow the use of more sophisticated corporate structures and capital raising options.

Registration and formation

There are important registration requirements concerning both limited liability companies and corporations. For example, the corporate name must make reference to the activity the vehicle will develop. Additionally, the formation documents must be filed with the Board of Trade of the state where the company is headquartered. Before the filing, the foreign shareholder must enrol with the national taxpayers' registry. The vehicle must also be registered with the national and, depending on its activities, with state and municipal taxpayers' registries.

Management structure- Limited liability companies are managed by one or more individuals (officers). Corporations are managed by at least two officers (diretoria) and can also have a board of directors with powers to make strategic decisions and approve certain matters. The board of directors is not mandatory, unless the corporation is publicly held or has authorised capital.

Directors' and officers' liability- Directors and officers have duties of loyalty and care towards the company. They are not personally liable for obligations regularly undertaken on behalf of the company. However, they are liable if they violate the company's bye-laws or the applicable law or perform their duties with negligence or wilful misconduct.

Parent company liability- In corporations, shareholders are liable up to the limit of the share capital subscribed by each of them and for the valuation of the assets used by them as payment of such capital. In limited liability companies, partners are liable up to the limit of the total share capital not yet paid up and for the valuation of the assets used by all of the partners as payment of the share capital. Additionally, all shareholders are liable for damages caused by the improper exercise of voting rights (conflict of interest) and controlling shareholders are liable for losses caused by the abuse of such controlling power. It is also possible to hold shareholders liable as a result of the piercing of the corporate veil in cases of fraud or abuse of entity for other purposes.

Laws, contracts and permits

Employment relationships in Brazil are regulated primarily by the Consolidation of Labour Laws (CLT) and the Brazilian Constitution 1988. The CLT and other special laws that regulate specific matters of Labour Law apply equally to Brazilian employees and to foreign employees working in Brazil.

A written employment contract is not required under the law. However, it is common practice for employment contracts to be written. A written contract is advisable, as it helps formalise the employee's working conditions. If the employer chooses to adopt a written contract, it is important that such documents include-

- The type of contract (if for a definite or an indefinite term).

- The term of the contract and the reason for hiring (if a contract for definite term).

- The location where the employee will work and the possibility of transferring the employee to other locations, if necessary.

- The position of the employee.

- The salary.

- The possibility of discount on the employee's salary as a result of damages he may cause to the employer.

- Collective bargaining agreements apply to employment relationships and prevail over contractual arrangements if the collective bargaining terms are more beneficial to the employee than the terms of the contract.

Foreign employees must obtain work permits and visas to enter and remain in Brazil. Different types of visa are applicable depending on the situation of the employee. At the start of the process, employers must apply for work permits to be granted to the employees.

These are available (subject to specific requirements depending on the type of work) to foreigners that are hired as employees in positions that do not involve powers of administration or representation of the company in Brazil. The authorisation to work and stay in Brazil is valid for up to two years, but it is possible to extend it for another two years, as well as to convert it into a permanent visa. An employee's dependants can also work in Brazil with their respective temporary visa, which is issued with the same validity period as that of the employee.

These are available to foreigners that will work in Brazil in administrative positions, such as officers with management powers (power to sign documents on behalf of the company) or directors. The maintenance of the authorisation is subject to the lawful exercise of the management role by the employee. To obtain this type of authorisation a foreign investment of at least BRL600,000 (per hired foreign employee) must be made in the Brazilian company. Alternatively, an investment of BRL150,000 (per hired foreign employee) is allowed, provided that ten new employment positions in Brazil are created within the following two years.

Taxes on employment- Once qualified as a tax resident, a foreign citizen is subject to Brazilian taxation. Tax residency varies according to the type of visa granted to the foreigner-

- Permanent visa. The immigrant is considered as a resident on entry into Brazil.

- Temporary visa. Tax residency depends on having paid employment or a 183-days stay in Brazil during a 12-month period.

Brazilian citizens are taxed in Brazil when they qualify as Brazilian residents, which occurs in various cases including-

- In the event of permanent residence.

- Temporary absence and permanent absence without a prior official communication of permanent leave.

The international business law in Brazil can now be easily understood.