How to set up a subsidiary in Brazil: a step-by-step guide for foreign companies

Setting up a subsidiary in Brazil is not hard because the rules are hidden. It is hard because the steps involve several authorities that do not talk to each other on your schedule: the commercial registry, the federal tax authority, the Central Bank, state and city tax offices, and your bank. This guide walks through the process in the order it actually happens, explains the decisions that are expensive to undo later, and shows what the subsidiary must keep doing once it is open.

Subsidiary or branch: the first decision

Foreign companies usually picture two options: open a branch of the parent company or incorporate a separate Brazilian company. In practice, almost everyone chooses the second.

The reason is in the Brazilian Civil Code. Article 1,134 says that a foreign company cannot operate in Brazil, “even through subordinate establishments”, without authorization from the Federal Executive. A branch therefore depends on a government authorization process before it can do business, and the foreign company must keep a permanent representative in Brazil with powers to resolve any matter and to receive service of process (article 1,138). The branch is also not a separate legal entity: its obligations are the parent’s obligations.

A subsidiary, by contrast, is a Brazilian company like any other. It is registered with the state commercial registry (the Junta Comercial), it has its own tax ID, and its liability is, as a rule, limited to its own assets. The foreign parent simply holds the equity. That is why the subsidiary route is the default for operating companies, and branches of foreign companies are rare in practice.

Which legal form: Ltda or S.A.

Brazil has two main corporate forms for a subsidiary.

For most foreign groups entering Brazil, the Ltda is the practical choice. It is cheaper to run, the rules are simpler, and a single foreign company can hold all the quotas, which an S.A. does not allow. The S.A. makes sense when the group plans to bring in local investors, needs a board structure that mirrors the parent’s, or expects to access the capital markets.

Who you need on the ground

This is the point that surprises foreign companies most. Brazilian law does not require a Brazilian co-owner, but it does require people in Brazil who can legally receive notices on behalf of those who are abroad.

A representative for the foreign parent

The foreign company that holds the quotas must be enrolled in Brazil’s corporate taxpayer registry, the CNPJ. Under the Federal Revenue’s CNPJ rules (Normative Instruction RFB 2,119/2022, article 6), the representative of a foreign entity in the CNPJ must be its attorney-in-fact or legal representative domiciled in Brazil, with powers to manage its assets in the country and to represent it before the tax authority. If the foreign entity does not keep a reachable representative, its CNPJ can be declared unfit (article 38).

The commercial registry rules point the same way. Normative Instruction DREI 81/2020, as amended in 2022, requires a quotaholder or administrator resident abroad to file a power of attorney granted to a representative in Brazil, and extends that rule to foreign companies that hold equity in a Brazilian company.

The administrator

Since 2022, the administrator (managing director) of an Ltda may live abroad. The condition is a power of attorney to a representative in Brazil with powers to receive service of process and notices in judicial and administrative proceedings, valid for at least three years after the end of the term. For an S.A., the Corporations Law has the same rule: a director resident abroad can only take office after appointing a resident representative with those powers for at least three years after the end of the term (article 146, paragraph 2, as amended by Law 14,195/2021).

Being legally allowed is not the same as being practical, though. Opening a bank account, signing with a digital certificate, dealing with landlords and suppliers, and answering tax notices on short deadlines all go faster when someone in Brazil holds real authority. Many groups appoint a local administrator alongside a foreign one, or give a broad power of attorney to a trusted local professional.

Step by step: from decision to first invoice

1. Define the structure and the tax regime before you file

Choices made in the articles of association are cheap to get right and expensive to change: the corporate purpose (which drives tax codes, licenses and, in some activities, the tax regime), the capital amount, the city where the company is seated, and who signs for the company. The expected revenue and margin also decide which income tax regime the subsidiary should elect. More on that below.

2. Prepare the parent company’s documents

The registry will ask for proof that the foreign parent exists and that the person signing on its behalf has authority to do so: typically a certificate of incorporation or good standing, the current bylaws or equivalent, and the resolution or power of attorney appointing the Brazilian representative.

Documents issued abroad must be legalized for use in Brazil. Brazil joined the Hague Apostille Convention, which entered into force in the country through Decree 8,660/2016, so documents from other member countries can be apostilled instead of going through consular legalization. Documents in a foreign language also need a sworn translation (tradução juramentada) by a translator registered with a Brazilian commercial registry. This step is often the longest in the whole process, because it depends on notaries and authorities in the parent’s country. Start it first.

3. Enroll the foreign parent in the CNPJ

With the documents and the power of attorney in hand, the foreign parent is enrolled in the CNPJ, with its Brazil-domiciled representative. Individual quotaholders resident abroad, if any, need a CPF (the individual taxpayer number). Without these numbers the Brazilian company cannot be registered with the parent as its owner.

The CNPJ rules also require information on the beneficial owners of the foreign entity, that is, the individuals who ultimately own or control it. Groups with layered holding structures should map this chain in advance.

4. Register the articles of association

The articles of association (contrato social, for an Ltda) are filed with the Junta Comercial of the state where the company will be seated. Once the registry approves the filing, the Brazilian company receives its own CNPJ. Most registries today work through integrated online systems that also handle part of the tax enrollments.

5. State and municipal registrations and licenses

After the CNPJ, the company enrolls with the city (for the services tax and the operating license) and, if it sells goods or provides transportation or communication services, with the state (for the goods and services tax, ICMS). Some activities need additional permits from sector regulators, fire department or health authorities. The corporate purpose defined in step 1 decides which of these apply, which is why it deserves careful drafting.

6. Digital certificate and bank account

Brazilian companies sign tax filings and many official documents with an ICP-Brasil digital certificate (the e-CNPJ). The certificate is also used to access government portals. With the CNPJ and the certificate, the company can open a local bank account. Expect the bank to run its own know-your-customer review of the foreign parent and its beneficial owners, using the same documents from step 2.

7. Bring in the capital and report it to the Central Bank

The parent pays in the capital through a foreign exchange transaction with a Brazilian bank. Brazil’s foreign capital framework is set by Law 14,286/2021 and regulated by Central Bank Resolution BCB 278/2022, and foreign direct investment is reported in the Central Bank’s SCE-IED system. The reporting party is the Brazilian company that receives the investment.

According to the Central Bank’s official service page, the company must declare transfers with a non-resident investor, and capital movements such as capitalizations, conversions of credits and profit distributions, of US$100,000 or more (or the equivalent in other currencies). It must also file periodic declarations based on its total assets:

There is no annual declaration in years with a five-yearly declaration. Keeping this registration correct matters beyond compliance: the foreign investment record supports future remittances of dividends and the repatriation of capital.

8. Set up accounting, tax and payroll before the first transaction

The first invoice, the first hire and the first import all trigger obligations. Electronic invoicing, the chart of accounts, payroll enrollment in eSocial and the monthly tax calendar should be ready before the company starts operating, not after the first fine.

How long it takes

There is no single official deadline for the whole process, and anyone who promises a fixed number of days without knowing your case is guessing. In our experience the timeline is driven mostly by three variables: how fast the parent’s documents are legalized and translated abroad, how quickly the bank completes its review, and how many licenses the activity requires in the chosen city. Registration itself, once the documents are in order, tends to be the fastest part.

Taxes: the regime decision you make on day one

Simples Nacional is not available

Brazil has a simplified tax regime for small businesses, the Simples Nacional, and foreign companies often read about it. It is closed to subsidiaries: the regime’s law excludes any company whose capital is held by another legal entity, and any branch or representation in Brazil of a company headquartered abroad (Complementary Law 123/2006, article 3, paragraph 4, items I and II).

Lucro Presumido or Lucro Real

The subsidiary will pay corporate income tax (IRPJ) and the Social Contribution on Net Income (CSLL) under one of two main regimes:

• Lucro Presumido (presumed profits method). Tax is calculated on a fixed percentage of revenue set by law for each activity, regardless of the actual margin. It is available to companies with gross revenue of up to R$78 million in the previous year (Law 9,718/1998, article 13). It is simpler, and it tends to favor businesses with high real margins. Since 2026, the presumed percentages are 10% higher on the portion of annual revenue above R$5 million (Complementary Law 224/2025, article 4).
• Lucro Real (actual profits method). Tax is calculated on the accounting profit with legal adjustments. It is mandatory above that revenue limit and in some other situations, and it is usually better for businesses with low margins, early-stage losses or heavy costs.

The election for Lucro Presumido is made with the first tax payment of the year and applies to the whole calendar year (Law 9,430/1996, article 26). For a new subsidiary with start-up losses, Lucro Real is frequently the better choice, but this deserves a projection with real numbers, not a rule of thumb.

Transfer pricing now follows the arm’s length principle

Transactions between the subsidiary and the parent or other group companies (services, royalties, loans, goods) are subject to transfer pricing rules. Since January 1, 2024, Law 14,596/2023 aligns Brazil with the OECD approach: the terms of a controlled transaction must match those that unrelated parties would agree in comparable transactions. For groups used to OECD guidelines this is good news, but intercompany agreements, pricing policies and documentation now need to be built from the start.

Dividends sent abroad are taxed from 2026

For decades, Brazil did not tax dividends. That changed with Law 15,270/2025: since January 1, 2026, profits and dividends paid, credited or remitted abroad are subject to a 10% withholding income tax (Law 9,249/1995, article 10, paragraph 4, as amended). The law exempts, among others, profits from results up to 2025 whose distribution was approved by December 31, 2025, under the conditions it sets, and it creates a credit mechanism for non-resident beneficiaries when the combined tax burden on the profits exceeds the nominal corporate rates (article 10-A). The rules on how to claim that credit depend on regulation. Any repatriation plan should now include this tax.

The consumption tax reform is already running

Brazil is replacing four consumption taxes (PIS, Cofins, ICMS and ISS) with a dual VAT: the federal CBS (Contribution on Goods and Services) and the state and municipal IBS (Tax on Goods and Services), while the IPI is reduced to zero for most products. The legal basis is Constitutional Amendment 132/2023 and Complementary Law 214/2025. 2026 is a test year, and the transition runs until 2033. A subsidiary opening now will live through the whole transition, so its systems, invoicing and pricing need to handle both the old and the new taxes at the same time.

What the subsidiary must keep doing after it opens

Opening the company is a one-time project. Keeping it in good standing is a monthly routine. The main recurring obligations are:

• Bookkeeping under BR GAAP, which is largely converged with IFRS, with the ECD (digital accounting bookkeeping) and the ECF (corporate income tax bookkeeping return) filed every year through SPED, the Public Digital Bookkeeping System.
• Monthly tax calculations and filings at the federal, state and municipal levels, depending on the activity.
• Payroll and labor reporting through eSocial, if the company has employees.
• Central Bank reporting in SCE-IED, for transactions and periodic declarations within the thresholds above.
• Annual approval of accounts. In an Ltda, the quotaholders must meet at least once a year, within four months after the end of the fiscal year, to approve the administrators’ accounts and the financial statements (Civil Code, article 1,078).
• Keeping representatives and registrations up to date, including powers of attorney, beneficial ownership information and the administrator’s term.
• Reporting to headquarters in the parent’s format and calendar, which usually means a month-end close fast enough to feed the group consolidation.

Five mistakes we see often

1. Starting the document legalization late. It is the longest step and the one you control least. Start it as soon as the decision is made.
2. Writing a vague corporate purpose. It drives licenses, tax codes and sometimes tax treatment. Generic wording creates problems with the city and the state.
3. Choosing the tax regime by habit. Lucro Presumido looks simpler, but for a loss-making start-up year it can mean paying tax on profit that does not exist.
4. Treating intercompany charges as an afterthought. Services and royalties billed by the parent need contracts, pricing support and the correct withholding and consumption taxes on cross-border payments.
5. Forgetting the Central Bank. Capital that is not properly reported creates friction exactly when the group wants to send money back.

How Solidy can help

Solidy is a Brazilian accounting and advisory firm that already serves subsidiaries of multinational companies. Our consultants support foreign groups from the structuring decision to the monthly routine: entity setup and registrations, tax regime planning, accounting, tax compliance, payroll and reporting to headquarters. If your company is planning to open in Brazil, or already operates here and needs better support, talk to our consultants.