Tatiana Andrade
Partner at Kreston KBW Auditores
Doing business in Brazil: Understanding Brazil’s investment appeal
November 3, 2025
Doing business in Brazil has become increasingly attractive, as the country has recently regained its position as the world’s eighth-largest economy and remains one of the leading destinations for foreign investment in Latin America. Its appeal lies in the scale of its domestic market, its relevance in the global commodities trade, and the resilience of key sectors such as services and retail. In recent decades, Brazil’s technology sector has also experienced significant expansion, fuelled by a vibrant startup ecosystem.
However, investing in, opening, or expanding a business in Brazil requires careful planning, specialist guidance, and a level of strategic preparation that goes well beyond assessing financial feasibility or market potential. Brazil’s regulatory and tax environment is among the most complex in the world, and overlooking its nuances can be costly for both companies and individual investors.
Legal foundations for foreign investors
When entering the Brazilian market, the first step is to understand the legal requirements involved in establishing a company with foreign capital. Every international investor must appoint a legal representative resident in Brazil, who will be responsible for responding to the company’s administrative and legal matters.
This representative plays a crucial role within the company’s structure, acting as the link between the foreign-capital organisation and the local authorities. In addition, it is necessary to appoint an administrator, who may or may not be the same individual, to oversee managerial activities and fulfil the company’s corporate and tax obligations.
Another fundamental requirement is the establishment of a fiscal address, which serves as the company’s registered base for official purposes, issuance of invoices, and communication with public and tax authorities, such as the Federal Revenue Service and state tax agencies.
Strategic location and tax considerations
The selection of the company’s address should be made strategically, considering not only logistical factors but also tax implications. Depending on the municipality and state in which the business is located, the tax burden can vary considerably, directly affecting operational margins.
As a general rule, it is advisable to establish a company in major cities such as São Paulo or Rio de Janeiro. Alternatively, if the investor intends to import products within a continuous supply chain, it may be advantageous to set up operations close to a port, such as in the state of Santa Catarina.
Tax planning as a cornerstone of success
Effective tax planning is an indispensable step in the process of setting up a business in Brazil. Even before formalising a CNPJ (Corporate Taxpayer Identification Number), it is essential to understand how federal, state, and municipal taxes apply and to evaluate the available tax regimes, such as the Actual Profit or Presumed Profit models, along with the implications of each option for the business.
This analysis should consider not only the industry sector but also the company’s corporate structure and international capital flows. Well-structured tax planning can make the difference between operational success and failure in the medium term.
Navigating Brazil’s tax reform
With the recent approval of the Tax Reform, through Constitutional Amendment No. 132/23, Brazil’s fiscal landscape is entering a period of major transition, one that demands close attention from foreign investors.
The existing model, which fragments taxation across multiple levels and regimes, will be gradually replaced by a dual value-added tax (VAT) system, comprising the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IGS). Although the reform aims to simplify and increase transparency, the transition period, expected to continue until 2033, presents significant operational and accounting challenges.
During this phase, old and new rules will coexist, increasing the need for specialist oversight. Foreign companies entering Brazil during this time must navigate a hybrid and evolving system in which complementary legislation is still being defined. This underscores the importance of engaging experienced local advisers who can ensure compliance and help prevent tax assessments arising from differing interpretations.
Meeting ancillary and compliance obligations
Beyond direct tax requirements, companies must also comply with a range of ancillary obligations, including statutory reporting, accounting submissions, and labour records — each with specific deadlines and formats. Non-compliance, even when unintentional, can result in substantial fines or, in severe cases, suspension of business activities.
It is equally important to estimate the ongoing maintenance costs of a company in Brazil, which include not only taxes but also labour charges, accounting fees, and compliance expenses.
The “Brazil Cost” and its business implications
The so-called “Brazil Cost”, a term that summarises the bureaucratic, tax, and operational burden associated with doing business in the country, remains a key factor in investment decisions. In 2023, the Brazil Cost was estimated at R$1.7 trillion, equivalent to 20% of the nation’s GDP.
While Brazil offers a vast and dynamic consumer market, inadequate planning can quickly transform opportunity into risk. A thorough scenario analysis, simulations of applicable tax regimes, and careful consideration of the business’s location are all essential to reducing exposure and maximising growth potential in a market that is both promising and complex.
Aligning global vision with local execution
Ultimately, investing in Brazil requires more than just capital; it requires a strategic approach. Success depends on understanding the local context, establishing reliable partnerships, mapping tax impacts, and adapting operations to Brazil’s evolving regulatory environment.
Long-term sustainability is achieved by aligning a global vision with local execution and recognising that, in a country of continental scale and intricate legal frameworks, meticulous planning is the foundation of operational success.
For more information about doing business in Brazil, click here.
