Inves'ng in Brazil
Legal and Economic Aspects Prepared by André Elali Advogados Law Firm Singapore – February, 2014.
www.andreelali.com.br
André Elali is the Main Partner of the firm and leads a team of experts in Brazilian and Interna:onal Law. Elali holds a Master Degree in Tax Law and a Doctor Degree (PhD) in Economic Law and is a Full Professor at UFRN Law School and the Vice Coordinator of the Master Program. Elali was a Visi:ng Scholar at the Department of Taxa:on and Public Finance at the Max-‐Planck-‐Ins:tüt, in Munich, Germany, and is a Member of Several Law Organiza:ons as American Bar Associa:on, Brazilian Academy of Law, Brazilian Academy of Tax Law and Brazil-‐Germany Law Society.
1. Brazil Overview 2. Economy 3. Legal System 4. Investments and Finance
1. Brazil: An Overview → According to Goldman Sachs, Brazil is likely to become the world’s fiWh largest economy, overtaking Britain and France; → By 2025, São Paulo will be its fiWh wealthiest city, according to “The Economist”; → Brazil has been the stronger member of “BRIC”; → 70 airports serving over 75 million passengers per year; → 54 ports with a capacity of over 500 million ton/year; → 31.000 km of railways (11th in the world) and 1.6 million km of highways (3rd in the world, but only 12% covered in asphalt); → Telephone lines are 100% digital; → Investments of $ 20 billion in highways, $ 5 billion in railways and $ 4 billion in ports.
1. Brazil: An Overview → Brazil is a Democracy and all races and religions are legally protected; → Brazilian Government has been moving the “poor people” to “middle class”, crea:ng a huge market for industries, services and commerce; → Brazil is receiving billions of interna:onal direct investment year aWer year; → Brazil has one of the most profitable financial markets in the world; → Social programs are helping poor people to buy houses and to have access to Colleges and Universi:es; → Brazilian Agencies control in a very efficient way the exchange of capital in order to avoid money laudering and corrup:on. New laws are increasing the efficiency of the legal system.
1. Brazil Overview 2. Economy 3. Tax System 4. Investments -‐ Finance
2. Brazilian Economy → FiWh largest country in the world. → Largest na:onal economy in La:n America. One of the largest in the World. → Large market for agricultural, manufacturing and service sectors. → Tenth largest energy consumer – energy comes from many sources (hydroeletricity, ethanol, oil and natural gas). → A global power in agriculture and natural resources. → An important oil producer and exporter, having recently made huge oil discoveries.
→ Brazil faced the crisis with a strong economy; → Emerged from it stronger than before; → Most countries emerged with low growth and inbalances; → Expanding investments, domes:c markets and product commodi:es; → Interna:onal investments → Industries, Tourism, Energy, Infrastructure, Financial Market... à Stability since 1994; à Strong financial market (most profitable for banks for several years).
1. Brazil Overview 2. Economy 3. Legal System 4. Investments -‐ Finance
Federalism
→ Federal Government → Federal District → 27 States → 5.667 Municipali:es
FOUNDATIONS OF BRAZILIAN LEGAL SYSTEM
Freedom – Equality -‐ Private Property Protec'on – Free Compe''on – No Discrimina'on – Peace – Environment and Consumer Protection.
3. Brazilian Legal System Recently, new Federal Laws were created to avoid problems as corrup:on, tax evasion and money laudering. Brazilian Courts are becoming more efficient due to new Laws and changes in the control of Jus:ce (CNJ).
3. Brazilian Legal System A very conserva:ve and efficient legal system for property rights. A very safe method of protec:on of real state, intelectual property and financial assets. A very efficient regula:on of the financial market: CENTRAL BANK – COAF – RECEITA – POLÍCIA FEDERAL – MP.
3. Brazilian Legal System An:-‐laudering laws and trea:es. An:-‐evasion laws and trea:es. Criminal coopera:on trea:es. An:-‐corrup:on laws (2013/2014).
à Tax Incen'ves in Brazil → No double taxa:on à Tax incen:ves for construc:on (6.93% of burden) à Tax incen:ves for new hotels and industries (up to 0% of revenue tax and contribu:ons) à No taxes for exports à No taxes on books and magazines à No taxes on non-‐profit educa:on and social organiza:ons (R&D) à Special Zone at MANAUS (Free trade/export zone)
A) REIDI (Regime Especial de Incen:vos para o Desenvolvimento da Infra-‐Estrutura) → Incen:ves to Development of Infrastructure → Brazilian Federal Law nº. 11.488/2007 → Companies → infrastructure → sectors of transporta:on, ports, energy, sanita:on and irriga:on.
→ Taxes without REIDI COFINS: 3% or 7,6% PIS/PASEP: 0,65% or 1,65% COFINS-‐Importação: 7,6% PIS/PASEP-‐Importação: 1,65%
→ Taxes with REIDI COFINS: 0% PIS/PASEP: 0% COFINS-‐Importação: 0% PIS/PASEP-‐Importação: 0%
B) REPENEC
→ REPENEC (Special Incen:ves for Development of Infrastructure of Oil Industry in the North, Northeast and Midwest Brazilian Regions) → Brazilian Federal Law nº. 12.249/2010). → DEFINITION: Tax incen:ve for companies working with the development infrastructure for the oil and gas sector. The tax incen:ves are guaranteed in the case of sales in the Brazilian market or import of new machinery, instruments, equipment and building materials for use or incorpora:on in the infrastructure works. → Incen:ves for companies that act in the infrastructure fields in the North, Northeast and Midwest Brazilian Regions, in the sectors of petrochemical, oil refining and produc:on of ammonia and urea from natural gas. → REGULAR TAX RATES: II: 0% to 35% IPI: 0% to 365,63% COFINS: 3% or 7,6%
→ WITH REPENEC
0%
0%
0%
PIS/PASEP: 0,65%
0%
0%
PIS/PASEP-‐Importação: 1,65%
0%
COFINS-‐Importação: 7,6%
C) PROGRAM “MINHA CASA, MINHA VIDA” (MY HOME, MY LIFE)
→ Brazilians Federal Law nº. 11.977/2009 and nº. 10.931/2004. → More than R$ 65 billions of Federal Investments on the last years. → The program aims to create mechanisms of incen:ves to the produc:on and acquisi:on of new housing estates, redevelopment of urban proper:es and construc:on or reform of rural housing, for families of low or middle income. The program guarantee tax incen:ves for the construc:on sector. → Regular Taxes: → With the Incen:ves: IRPJ: 15% or 25% Total Federal Tax → 1% CSLL: 9% COFINS: 3% or 7,6% PIS/PASEP: 0,65%
D) RECOPA (WorldCup)
→ RECOPA (Special Taxa:on for Construc:on, Expansion, Reform and Moderniza:on of Soccer Stadiums) → Brazilian Federal Law nº. 12.350/2010. → DEFINITION: Tax incen:ve for companies working with the development infrastructure for the FIFA World Cup 2014 soccer stadiums. The tax incen:ves are guaranteed in the case of sales in the Brazilian market and import of machinery, tools, new equipments and building materials for use or incorpora:on into the soccer stadiums. → HOST CITIES OF FIFA WORLD CUP 2014: Rio de Janeiro (RJ), São Paulo (SP), Belo Horizonte (MG), Porto Alegre (RS), Brasília (DF), Cuiabá (MT), Curi:ba (PR), Fortaleza (CE), Manaus (AM), Natal (RN), Recife (PE) and Salvador (BA). → There are several tax incen:ves granted by States and Local Gov.
TAX RATES: II: 0% to 35% IPI: 0% to 365,63 COFINS: 3% or 7,6% PIS/PASEP: 0,65% COFINS-‐Importação: 7,6% PIS/PASEP-‐Importação: 1,65%
WITH THE INCENTIVES:
0%
0%
0%
0%
0%
0%
à NO DISCRIMINATION FOR FOREIGN INVESTORS
à Registra:on of Investors (CPF) or Corpora:ons (CNPJ) à No taxes on Direct Investment à 15% Tax on Capital Gain / 32% for Corpora:ons à Safe Realty Registra:on System (Notary)
à Purchase of Property à different than use of property
IMPROVEMENTS ¤ New International Airport of Natal – Operatins in April/2014 ¤ Public and Private Partnership (First in this sector)
IMPROVEMENTS ¤ Infra-structure/mobility – Billions of investiments.
IMPROVEMENTS ¤ Public Governent is investing more than US$ 4 billion in airports.
Stadium Investiments and Urban Infrastructure
1. Brazil Overview 2. Economy 3. Tax System 4. Investments -‐ Finance
4. Investments -‐ Finance Major Investments Sectors • Energy – Oil & Gas • Real State • Financial Market • Infrastructure • Industry and Exports
Thank You! 謝謝
André Elali
andreelali@andreelali.com.br + 55 84 4005.5555
www.andreelali.com.br