Yes. A foreign company may enter into cross-border agreements with individuals or legal entities in Brazil without necessarily establishing a Brazilian subsidiary. This possibility, however, does not amount to authorization to conduct business activities in Brazil on a permanent basis.
The distinction between contracting with Brazilian parties from abroad and operating directly in Brazil is essential. Direct contracting may be appropriate for specific transactions or activities performed predominantly outside Brazil, but it requires a tax, labor, corporate, regulatory, and foreign-exchange assessment before the agreement is signed.
What is possible
A company based abroad may, for example:
• provide technical, consulting, or advisory services to Brazilian clients;
• supply products to importers established in Brazil;
• license software, trademarks, patents, and other intellectual property rights;
• enter into distribution or commercial representation agreements;
• enter into technical or commercial cooperation agreements.
In these situations, the foreign company acts as an offshore service provider, supplier, or licensor. The Brazilian party generally assumes the customs, foreign-exchange, and tax obligations assigned to it by law, including any applicable withholdings or payments connected with the remittance abroad.
A foreign company is not required to establish a Brazilian legal entity merely because it enters into an international agreement. The need to register with the Brazilian National Registry of Legal Entities (CNPJ), however, must be assessed in light of the acts performed, the assets or rights held in Brazil, and the applicable registration rules. It is therefore unsafe to state categorically that a foreign company will never require a CNPJ.
Contracting with Brazil is not the same as operating in Brazil
Under Articles 1,134 to 1,141 of the Brazilian Civil Code, a foreign company may not operate in Brazil, including through a branch, agency, or other subordinate establishment, without authorization from the Executive Branch and the corresponding registration. An authorized foreign company must also maintain a permanent representative in Brazil with authority to resolve matters and accept service of process.
Accordingly, without an appropriate legal structure, a foreign company should not:
• maintain an office, branch, agency, or stable operational base in Brazil;
• habitually conduct business activities in Brazil as though it were a local company;
• issue Brazilian tax documents or present itself as a supplier established in Brazil;
• maintain a local team under its day-to-day direction without complying with the applicable labor, social security, and registration obligations;
• carry out a regulated activity that requires authorization or a local corporate presence.
Personnel, premises, representation powers, negotiations, or contract execution activities in Brazil may indicate that the company has moved beyond purely cross-border transactions and is conducting business in the country. The assessment should consider both Brazilian corporate law and any applicable double taxation treaty.
Permanent establishment and taxable presence
The concept of a permanent establishment is especially relevant when a double taxation treaty exists between Brazil and the foreign company’s country of residence. Depending on the wording of the treaty, the definition may include a fixed place of business, certain projects, or the activities of an agent with authority to conclude contracts.
No automatic conclusion can be drawn solely from the presence of an address or an individual in Brazil. The facts and the applicable treaty must be examined. Even if the arrangement does not constitute a permanent establishment for treaty purposes, it may create tax, labor, registration, or corporate obligations and, depending on the circumstances, may amount to the unauthorized operation of a foreign company in Brazil.
Taxation of payments remitted abroad
Tax treatment is not determined solely by the name given to the agreement. The economic nature of the payment, place of performance, place where the result of the service occurs, existence of a transfer of technology, beneficiary’s jurisdiction, and applicable tax treaty must all be considered.
Taxes that may apply include:
• Withholding Income Tax (IRRF): the domestic rate is frequently 15% on service fees and may reach 25% for certain remittances to beneficiaries located in low-tax jurisdictions. Some payments are subject to different rules or rates, and an applicable treaty may alter this treatment;
• CIDE on remittances: a 10% contribution may apply to royalties, agreements involving a transfer of technology, and certain technical, administrative assistance, and similar services. It should not be assumed to apply to every service. Licenses to use or commercialize software without a transfer of the corresponding technology have specific statutory treatment;
• PIS/Pasep-Import and Cofins-Import: these contributions may apply to services provided by an individual or legal entity resident or domiciled abroad when performed in Brazil or when, although performed abroad, their result occurs in Brazil;
• ISS: this municipal service tax applies to services originating abroad or whose performance began abroad, subject to the list of services in Complementary Law No. 116/2003 and the applicable municipal legislation. As a general rule, the Brazilian service recipient or intermediary is responsible for payment;
• IOF on foreign-exchange transactions: IOF may apply to the foreign-exchange transaction used for the remittance, depending on the nature and purpose of the transaction and the rules in effect when the exchange contract is entered into.
These taxes do not necessarily apply simultaneously to every transaction. Before signing, the parties should prepare a tax calculation and specify whether the contract price is net or gross of taxes, who will bear each charge, and how any gross-up will be handled.
Double taxation treaties
A treaty between Brazil and the foreign company’s country of residence may alter the IRRF treatment. The relevant income article, the treaty protocol, and the characterization of the payment as business profits, royalties, technical services, or another category must be reviewed.
The outcome is not uniform. Some protocols treat certain technical services as royalties, while other treaties may permit business-profits treatment when the foreign company does not have a permanent establishment in Brazil. Decisions of the Brazilian Superior Court of Justice and applicable administrative guidance should also be considered in the specific case.
Technical services and transfer of technology
The distinction between technical services, technical assistance, administrative assistance, licenses, and transfers of technology remains relevant for IRRF, CIDE, contract registration, and treaty application.
Classification must be based on the obligations actually undertaken and the manner in which the agreement is performed. Generic provisions or the label chosen by the parties do not prevent the tax authorities from assigning a different legal characterization to the payment.
Transfer pricing
When a legal entity domiciled in Brazil enters into controlled transactions with related parties abroad, or transactions covered by other statutory circumstances, the Brazilian transfer pricing rules must be observed.
Law No. 14,596/2023, which became generally mandatory on January 1, 2024, replaced the former system with a framework based on the arm’s-length principle. The analysis requires delineating the transaction, considering the functions performed, assets used, and risks assumed, selecting the most appropriate method, and conducting a comparability analysis.
It is no longer appropriate to describe the current system solely by reference to the former methods and predetermined margins. Noncompliance may result in adjustments to the IRPJ and CSLL tax bases, disallowed deductions, interest, penalties, and specific documentation obligations.
Labor risks
Engagement by a foreign company does not exclude the application of Brazilian labor law when the work is performed in Brazil and the elements of an employment relationship are present, particularly personal service, remuneration, habituality, and legal subordination.
Engaging a professional through a legal entity does not, by itself, eliminate the risk that an employment relationship will be recognized. To reduce exposure, it is important to:
• clearly define the scope, deliverables, and service provider’s autonomy;
• avoid direct subordination, employment-style working-hour controls, and integration of the service provider into the company’s hierarchical structure;
• avoid imposing exclusivity or personal performance without justification consistent with the nature of the agreement;
• consider local employment, a Brazilian subsidiary, or an Employer of Record (EOR) structure when a genuine employment relationship exists;
• carefully verify the compliance and actual activities of any intermediary, because a formal structure does not eliminate liabilities when it does not reflect reality.
Data protection and consumer relations
Technology, support, marketing, human resources, and digital services agreements may involve the processing and international transfer of personal data. In such cases, the Brazilian General Data Protection Law (LGPD), regulations issued by the Brazilian Data Protection Authority, and the permitted international transfer mechanisms must be observed.
When products or services are offered to consumers located in Brazil, the Brazilian Consumer Protection Code may also apply, including rules on information, advertising, customer service, liability for products or services, and choice of forum. The absence of a Brazilian legal entity does not automatically exclude the application of Brazilian consumer protection law.
When establishing a company in Brazil may be advisable
Direct contracting is generally suitable for specific transactions, defined projects, or commercial relationships that do not require a permanent presence. Establishing a Brazilian legal entity or, in particular circumstances, an authorized branch should be considered when the operation involves:
• the need to issue Brazilian tax documents or enter into local contracts regularly;
• an ongoing presence of personnel, management, premises, or infrastructure in Brazil;
• employment of personnel and recurring compliance with labor and social security obligations;
• inventory, importation, distribution, or habitual local provision of services;
• clients that require a supplier with a CNPJ and a Brazilian operating structure;
• an activity subject to licenses, authorizations, or regulatory supervision;
• an operational or tax advantage demonstrated by a specific analysis rather than merely assumed.
Regulated sectors
In regulated sectors, the presence of an entity incorporated or authorized in Brazil may be mandatory, depending on the activity. This may apply, among others, to operations supervised by the Central Bank of Brazil, the Brazilian Securities and Exchange Commission (CVM), the Superintendence of Private Insurance (SUSEP), the National Supplementary Health Agency (ANS), and other sectoral authorities.
Fintech companies, insurers, health plan operators, capital market participants, and companies active in other regulated sectors should confirm the applicable requirements before offering products, acquiring customers, or commencing operations in Brazil.
What to assess before contracting directly
• the economic nature of the service, product, license, or right involved;
• the place of performance and the place where the result will occur;
• the frequency, duration, and degree of continuity of the transactions;
• the existence of personnel, representatives, negotiation powers, or premises in Brazil;
• the need for a CNPJ, registrations, licenses, or authorizations;
• the applicable taxes and responsibility for withholding or paying them;
• the existence and terms of a double taxation treaty;
• transfer pricing rules for transactions between related parties;
• labor, data protection, consumer, and regulatory risks;
• whether establishing a Brazilian legal entity would be advisable for long-term operations.
Conclusion
A foreign company may enter into cross-border agreements with individuals and companies in Brazil without necessarily establishing a Brazilian legal entity. This structure is common in imports, service arrangements, licensing, distribution, and other international transactions.
Direct contracting, however, does not authorize a foreign company to operate permanently in Brazil. The structure must be determined case by case, considering the substance and duration of the activities, the presence of personnel and premises, applicable taxes, the relevant treaty, transfer pricing, and labor, regulatory, consumer, and data protection risks.
For specific transactions or activities performed predominantly abroad, direct contracting may be the simplest solution. When the business involves an ongoing presence in the Brazilian market, local personnel, management, infrastructure, or a regulated activity, establishing a Brazilian legal entity or adopting another compliant local structure generally provides greater legal and operational certainty.
Principal legal authorities
• Brazilian Civil Code, Articles 1,134 to 1,141;
• Law No. 10,168/2000, regarding CIDE;
• Law No. 10,865/2004, regarding PIS/Pasep-Import and Cofins-Import;
• Complementary Law No. 116/2003, regarding ISS;
• Law No. 14,596/2023, regarding transfer pricing;
• Law No. 13,709/2018, the Brazilian General Data Protection Law;
• the applicable double taxation treaty and its protocol, when relevant.
This article provides general information and does not replace a legal and tax analysis of the specific transaction.