Webinar - Unlocking Brazil’s Business Potential
Brazil's Tax System
Bruno Eduardo Di Giulio, Legal Director of The Brazilian Chamber of Commerce in Hong Kong, provided insights into Brazil’s business environment from the legal and political prospectives. He pointed out that Brazil adopts a continental law system and, due to its multi‑party political structure, its trade policies can shift with changes in the ruling party.
Bruno noted the strong business ties between Hong Kong and Brazil. While Brazil’s fruits, beverages, fashion apparel and health products have much potential to tap into the Hong Kong market, its high‑quality beef and coffee are well‑positioned to carve out larger market shares in the city.
Hong Kong companies should note that the Brazilian government is striving to simplify its tax system. A key reform measure is to establish a new value‑added tax (VAT) system by consolidating five long‑existing taxes (industrial product tax, income tax, social integration tax, tax on circulation of goods and services, and service tax) into a VAT with a uniform rate of 28%. The new tax regime, expected to gradually take effect in 2026, will help attract investment and raise Brazil’s economic competitiveness. Brazil’s current tax system is complex, with multiple layers of taxes administered at the federal, provincial and municipal levels, such as a consumption tax for purchases of not more than US$50 (inclusive of shipping and insurance), a 20% import tariff and an over 17% tax on circulation of goods and services (ICMS).
Respect Cultures
Bruno reminded Hong Kong companies intending to venture into the Brazilian market of the importance of understanding local business practice and respecting cultural differences. While the Brazilian economy is vibrant and innovative with a huge consumer market, local businesses tend to focus on domestic sales. Additionally, the volatility of exchange rates can impact business planning.
Bruno suggested that Hong Kong companies entering the Brazilian market as an e‑commerce entity should first enrol in the government’s E‑Commerce Compliance Programme to enjoy tax breaks and quicker customs clearance. Companies so enrolled can enjoy a drastic reduction in import duty from 60% to 20%. Furthermore, Brazil has already signed logistics and customs agreements with various countries and regions. For example, Hong Kong companies can utilise the related logistics services offered by Hong Kong Post to mitigate the risks associated with mailing merchandise.
He also stressed that Hong Kong companies intending to hire personnel in Brazil should pay close attention to local labour laws. For example, the country has a designated department for handling labour disputes and only allows limited unmonitored negotiation between employees and employers. Companies can proactively reach collective agreements with labour unions on employment policies and benefits to ensure compliance with local labour laws, thereby avoiding potential issues that may affect business development.