“ASPECTOS LEGALES Y GOBIERNO CORPORATIVO”
LEGAL ASPECTS OF
SERVICES RENDERING IN BRAZIL
October 14, 2010
LEGAL ASPECTS OF
RENDERING SERVICES IN BRAZIL
Presentation summary
• Services rendering in Brazil
o Restrictions on foreign investment
o Branch of a foreign entity
o Incorporation of a company in Brazil
 Sociedade Limitada (Limited Liability Company)
 Socieade Anônima (Corporation)
 Taxation: services in Brazil and remittance of dividends
o Entity providing services from Chile
 Taxation of cross-border services in Brazil
• Labor aspects: overview
o Local employees
o Expatriates from Chile working in Brazil: visa issues
• Intellectual Property
Restrictions on Foreign Investment
Restrictions on Foreign Investment
There are restrictions for participation of foreign capital in
the following activities, for example:
• health services (prohibited)
• aerospace industry (limit of 20% of voting capital)
• newspapers, magazines and other periodicals, as well
as in radio and television networks (limit of 30% of
voting capital)
Branch of a foreign entity in Brazil
Branch of a foreign entity in Brazil
Rendering services through a branch of a foreign entity
•
•
•
•
A foreign company may open a branch in Brazil.
Approval must be granted via Federal decree.
The foreign company must appoint a representative resident in Brazil.
The Branch is ruled by Brazilian Law and must allocate capital to the
operation in Brazil.
• The branch is not a entity independent from the foreign company.
• Foreign investment trough a branch is not common in Brazil: the approval
process is heavily bureaucratic and time consuming.
• As it will be indicated in the following slides, the most widely used entities
in Brazil are the Sociedade Limitada (Limited Liability Company) and
Sociedade Anônima (Corporation).
Incorporation of a company in Brazil
Incorporation of a company in Brazil
Introduction
• Foreign companies are allowed to open branches and incorporate
subsidiaries in Brazil, provided that requirements established by Brazilian
law are accomplished.
• All foreign investments must be registered with the Central Bank of Brazil;
said registration is essential for offshore remittances, capital repatriation
and registration of profit reinvestment.
• Foreign investors must appoint representatives in Brazil.
Incorporation of a company in Brazil
Rendering services through a subsidiary incorporated in Brazil
• Brazilian law provides for the following types of entities: sociedade
simples, sociedade em nome coletivo, sociedade em comandita simples,
sociedade limitada, sociedade anônima and sociedade em comandita por
ações.
• Brazilian companies acquire corporate status after registration with the
competent pubic registry office, becoming legal entities with assets
separated from those of their partners and different levels of
responsibility.
• Organizing a company in Brazil is the most common strategy for a foreign
investor to do business in Brazil. The most usual companies are sociedade
limitada and sociedade anônima.
Incorporation of a company in Brazil
Sociedade limitada (Limited liability company)
• Ruled by articles 1.052 to 1.087 of the Civil Code. It may adopt the form of
sociedade simples or sociedade empresária, according to the corporate
purpose, as well as, its definition of business company.
• Organized through the Articles of Association and has limited liability
quotaholders.
• Since every quotaholder has its responsibility limited to the value of their
quotas, all of them are jointly liable for the payment of the capital stock.
Incorporation of a company in Brazil
Sociedade limitada
• Sociedade limitada has an organic structure, whose corporate bodies are
the Meeting of Quotaholders, the Management and the Audit Committee
all of them fixed by the quotaholders in the articles of association
themselves.
• The Meeting of Quotaholders is the collegiate decision-making body
comprised by the corporate chart, which must always meet whenever the
law or the articles so require.
• The management shall be carried out by one or more individuals,
quotaholders or not, indicated in the articles of association, whereupon
the term, established or not for the mandate will be set forth.
Incorporation of a company in Brazil
Sociedade limitada
• The capital stock is divided into quotas. The quota represents the amount
in money, credits, rights or assets by which the quotaholder contributes
for the formation of the company’s capital. The quotas must be registered
and are not represented by credit securities.
• As the ownership and the number of quotas are defined by the Articles of
Association, any transfer of title over the quotas will require an
amendment to such Articles.
• At the meetings of quotaholders, changes that result in modification to
the articles of association or reorganization act, the corporate status of
the company will depend on favorable votes comprising three fourths
(3/4), at least, in the capital stock.
Incorporation of a company in Brazil
Sociedade anônima or companhia (Corporation)
• Ruled by article 1088 of the Brazilian Civil Code and Law no 6.404/76,
partially amended by Law no 9.457/97, and by Law no 10.303/01 is
fundamentally a business corporation by legal definition, with its capital
represented by previously outstanding shares. It is, in itself, a business
corporation having as purpose to earn profits to be distributed to its
shareholders.
• Sociedade anônima is identified by a name, and the chosen name must be
succeeded by the expression “Sociedade Anônima”, extended or abridged
(S/A), or preceded by the word “Companhia”, extended, or “Cia.”,
abridged.
Incorporation of a company in Brazil
Sociedade anônima or companhia
• Two kinds: a publicly-held company which obtains funds through public
offers and subscriptions and is supervised by the Brazilian Securities
Commission (CVM), and a closed company which obtains capital from its
own shareholders or subscribers, having the option of a simpler
accounting and administration system.
• The capital stock is represented by securities called shares. Depending on
the rights or advantages conferred to their holders, the shares may be
common, preferred or fruition shares.
Incorporation of a company in Brazil
Sociedade anônima or companhia
• Shareholders’ Agreement: the shareholders can enter into an agreement
among themselves as regards the purchase and sale of their shares, to
establish pre-emptive rights for their acquisition, and also as to the
manner in which they exercise their voting rights. The obligations set forth
in the Shareholders Agreement are enforceable by specific performance
and must be respected by the Company.
• Sociedade Anônima may be managed by a Board of Directors and by a
Management Board or only by a Management Board, depending on what
law or the By-laws determine.
Incorporation of a company in Brazil
Sociedade anônima or companhia
• The Board of Directors is a collegiate decision-making body which is
mandatory in publicly held and authorized capital corporations and
optional in closed corporations and must be comprised of at least three
(3) members, which must be shareholders, individuals, residing or not in
Brazil.
• Non-resident directors must appoint a representative who is resident in
Brazil to receive service of process in legal proceedings based on Brazilian
companies legislation.
• The Management Board is the executive body of the sociedade anônima.
Its responsibility is to represent the company and to practice all such acts
as are necessary for its regular operation. It is composed of at least two
officers, who may or may not be shareholders, and who must be
individuals, necessarily residing in the country, and who may be elected
for a maximum term of three years.
Incorporation of a company in Brazil
Sociedade anônima or companhia
• The shareholders are entitled to perform the inspection through an Audit
Committee: the body which polices the company’s accounts and
administration.
• Audit Committee´s operation may be permanent or temporary. Its
installation is based on the need of the company to establish a rigorous
control over the actions of the administration. Whenever installed, it is
composed of at least three and, at most, five members, with an equal
number of substitutes, who may be shareholders or not, elected by the
General Meeting. In special cases, there may be specific representations
for a certain type of shareholders.
Incorporation of a company in Brazil
Publicly-held company
• Law no 6.404/76 makes a distinction between “closed” and “open”
companies. Open (or publicly-held) companies must necessarily take the
form of a corporation and their securities are admitted for trading on the
securities market, allowing them to raise funds from the public.
• Since publicly-held companies are permitted to raise funds through public
offerings of their securities, they are subject to a series of specific
obligations imposed by law and by regulations issued principally by the
Brazilian Securities and Exchange Commission (Comissão de Valores
Mobiliários – CVM).
Incorporation of a company in Brazil
Publicly-held company
• One of the CVM’s purposes is to protect investors. Protection of investors,
through various control and supervisory mechanisms, is ultimately aimed
at stimulating investment of savings in stocks and the financial markets.
• Publicly-held companies must be registered with the CVM in order to have
their securities admitted for trading on the stock exchange or on the overthe counter market, in addition to meeting the registration requirements
imposed by the stock exchange or over-the-counter institutions.
• Only publicly-held companies may issue depositary receipts (DRs), which
are certificates representing shares in the company. DRs are traded on
foreign markets, enabling the company to raise funds outside Brazil.
Incorporation of a company in Brazil
Publicly-held company
• Publicly-held companies are required to have a two-tiered management
structure, composed of a Management Board and a Board of Directors.
• The Board of Directors must have at least three directors elected at the
general annual meeting of the shareholders of the company. Directors
may be non-residents, but must be shareholders of the company. Nonresident directors must appoint a representative who is resident in Brazil
to receive service of process in legal proceedings based on Brazilian
companies legislation.
Incorporation of a company in Brazil
Publicly-held company
• In order to have their securities traded in the stock exchanges, publiclyheld companies must have, in addition to a board of directors, an investor
relations officer to be responsible for providing information to members
of the public who have invested in the company, to the CVM and, if the
company is registered with the stock exchanges or organized over-thecounter market, to those entities, in addition to ensuring that the
company’s registration is up to date, in accordance with CVM regulations.
Incorporation of a company in Brazil
Publicly-held company
• BOVESPA’s “Differentiated Levels of Corporate Governance” are a set of
rules of conduct for companies, their managements and their controlling
shareholders that BOVESPA considers important for increasing the value of
shares and other assets issued by publicly-held companies.
Incorporation of a company in Brazil
Publicly-held company
• There are currently three special listing segments on BOVESPA for
securities issued by publicly-held companies. The listing level depends on
the issuing company’s adherence to the “Differentiated Levels of
Corporate Governance”:
I - Level 1 Corporate Governance;
II - Level 2 Corporate Governance;
III - BOVESPA’s New Market.
Incorporation of a company in Brazil
Publicly-held company
• Voluntary adherence by a company to these rules, and the consequent
adoption of corporate governance practices in addition to those applicable
to all companies by law, allows the company to be listed on Level 1, Level 2
or the New Market, depending on the degree of its commitment to
BOVESPA.
Incorporation of a company in Brazil
Publicly-held company
• A publicly-held company may enter any of the BOVESPA listing levels by
signing a contract that binds it to comply with the set of corporate
governance rules for the selected level, which are contained in regulations
issued by BOVESPA (the Differentiated Levels of Corporate Governance
Regulations, in the case of Levels 1 and 2, and the New Market Listing
Regulations).
Incorporation of a company in Brazil
Tax Aspects
Incorporation of a company in Brazil
Tax Aspects
Taxation on services rendered in Brazil (taxpayer based in Brazil)
• Corporate Income Tax (IRPJ): 15% + 10% = 25%
• Social Contribution on Net Profits (CSLL): 9%
• Contributions PIS and COFINS: 1,65% + 7,6% = 9,25% (non-cumulative)
• Services Tax (ISS): 2% - 5%
Incorporation of a company in Brazil
Tax Aspects
Remittance of dividends abroad
• There are normally no restrictions on the distribution of dividends abroad.
• Dividends payment is exempt from withholding income tax (IRF).
• Brazil has signed a double taxation treaty with Chile.
Entity providing services from Chile
Entity providing services from Chile
Cross border services Chile - Brazil
• As a general rule, entities based in Chile are able to render services in
Brazil.
• Some activities may be subject to restrictions, for example, legal services:
 Normative Ruling (Provimento) n. 91/2000 – Brazilian Bar (OAB).
 Foreign Law Firms are allowed only to provide legal advice on foreign
law, but may work “in cooperation” with Brazilian law firms.
Entity providing services from Chile
Tax Aspects
Entity providing services from Chile
Taxation of cross-border services in Brazil
• Withholding Income Tax (IRF): 25% or 15% (with CIDE assessment)
• CIDE: 10%
• Contributions PIS and COFINS Services Import: 1,65% + 7,6% = 9,25%
• Services Tax (ISS): 2% - 5%
• Gross-up: high cost!
Labor Aspects
Local employees
Labor Aspects - Local employees
Labor rights
• The Consolidation of the Brazilian Labor Laws (CLT), the primary legal
system that rules labor relationships, accounts for more than 900 articles.
• The labor rights provided for by the Federal Constitution, the CLT, and
specific labor laws are the following:
o minimal salary;
o 44-hour weekly working hours;
o salaries not decreased;
o unemployment insurance;
Labor Aspects - Local employees
Labor rights (cont.)
o
o
o
o
o
o
o
13th salary;
profit sharing;
additional pay for overtime;
annual vacations;
maternity leave;
paternity leave;
prior notice;
Labor Aspects - Local employees
Labor rights (cont.)
o
o
o
o
o
o
o
o
approval of collective norms;
employment-related accident insurance;
transport pass;
food voucher;
children’s aid;
unhealthy work-conditions allowance;
risk premium;
night premium;
Labor Aspects - Local employees
Labor rights (cont.)
o transfer allowance;
o paid weekly rest; and
o employment record in Work Booklet.
Labor Aspects
Visas
Labor Aspects - Visas
Individuals from Chile working in Brazil: visa issues
• The law establishes 7 (seven) categories of visas:
• Transit
• Tourist
• Temporary
• Permanent
• Courtesy
• Official and
• Diplomat
• The most commonly used categories of visas are the tourist, temporary
and permanent visas.
Labor Aspects - Visas
Temporary work visas
• For individuals coming to Brazil on a temporary basis for working
purposes, there are several types of visas that may be applicable
according to each specific situation or circumstance:
(a) Professionals with Employment Contract with Brazilian Entity
• This visa is eligible to individuals coming to Brazil to work for a temporary
period employed at a Brazilian company in a position requiring special
knowledge.
• The visa may be valid for no longer than 2 years initially, and may be
renewed for an additional 2 year period.
Labor Aspects - Visas
(a) Professionals with Employment Contract with Brazilian Entity (cont.)
• This type of visa will require proof that the candidate has at least 1 (one)
year experience in the activity he/she will perform in Brazil if he/she has
a college degree, or 3 year experience if he/she does not have a college
degree.
• The foreign national must evidence a degree of proprietary knowledge,
specialized
skills,
distinguished
professional
experience
or
managerial/executive level skill that are not readily available within
Brazil’s domestic labor market.
Labor Aspects - Visas
(a) Professionals with Employment Contract with Brazilian Entity (cont.)
• The Brazilian company must meet the “2/3 rule”, by which 2/3 of total
number of workers of the company and equivalent salary shall belong to
Brazilian citizens, and shall present also information regarding the
Brazilian company, including the company’s salary structure, as well as
regarding the candidate’s salary abroad and in Brazil, which shall be
approximately 25% higher than his/her last salary abroad, provided that
he/she shall receive at least part of the salary in Brazil.
Labor Aspects - Visas
(b) Technicians without Employment Contract with Brazilian Entity
• This visa is eligible to individuals coming to Brazil to render technical
assistance services or transfer of technology, according to a Technical
Assistance or Transfer of Technology Agreement executed by a foreign
company and a Brazilian company.
• Technical visas are not appropriate for foreign nationals coming to the
country to develop managing, administrative and financial activities. In
case the companies are not affiliated, the Agreement must be registered
before the INPI – Brazilian Patent and Trademark Office prior to the visa
applications. In this case, the technicians shall not be employed by the
Brazilian company and shall receive his/her entire remuneration
exclusively from a source abroad.
Labor Aspects - Visas
(b) Technicians without Employment Contract with Brazilian Entity (cont.)
• The sponsoring company shall be responsible for all medical expenses of
the candidate as well as for his/her dependants while the candidate works
in Brazil.
• Work permit granted on such grounds may be valid for 1 (one) year and
may be extended for another year, provided that the required conditions
for the visa extension are met. In case of emergency, this visa may be
granted by the Brazilian Consulate with jurisdiction over the individual’s
residence for a non-extendable period of 30 (thirty) days respected a 90
day grace period for a second application.
• Emergency is defined as fortuitous situations that bring imminent risks to
life, environment, assets or that may generate production or service
rendering interruption for the Brazilian company.
Labor Aspects - Visas
(c) Artist and Sports persons
• The request for this visa must be submitted in Brazil to the Brazilian Labor
Ministry by the Brazilian organization, which is sponsoring the event for
which the individual’s services will be required. Visa application requires
information about the event and respective contract.
(d) Foreign Journalists
• This visa is eligible for foreign journalist working on a temporary basis in
Brazil as the correspondent of a foreign communication company, which
will support the visa application. The candidate must not receive his/her
salary in Brazil. The visa should be requested directly at the Brazilian
Consulate abroad with jurisdiction over the individual’s residence.
Labor Aspects - Visas
(e) Crew Members under charter, service rendering contracts and lease
agreements
• Visa application requires authorization of the ship to operate under
national waters, and report from the Marine Department. Copy of the
respective contract. Part of the crew shall be formed by Brazilian
nationals.
(f) Research Scientists
• This visa is eligible to foreign professors, technicians, scientists and
researchers that intend to perform its activities in a public or private
school or university or a research entity. Visa application requires
Admission Term or Labor Contract with the school, university or research
entity.
(g) Social Assistance
Labor Aspects - Visas
Other temporary visas
• There are other types of visas applicable to foreigners coming to Brazil for
purposes other than work.
• Note that the following visas do not allow its bearer to work in Brazil or
receive any remuneration from a Brazilian source: Mission of Studies and
Religious Mission; Student; Trainees; Internship Programs; Health
Treatment.
Labor Aspects - Visas
Permanent Employment Visa
• The Permanent visa may be issued, basically, under four circumstances:
(a) Family Reunion
• In case the candidate is married to a Brazilian citizen or has a Brazilian
child he/she shall be eligible for applying for a permanent visa at the
Brazilian Consulate abroad, before coming into the country, or at the
Ministry of Justice if the candidate is already in the country. In this case,
the candidate shall be allowed to work in Brazil.
Labor Aspects - Visas
(b) Retirement
• The permanent visa is also eligible for individuals that have already
retired in his/her home country and intend to transfer his/her permanent
residence to Brazil. The individual must provide evidence that he/she
may transfer to Brazil at least US$ 2,000.00 on a monthly basis.
(c) Foreign Officers
• The permanent visa may also be issued in the case of a foreign company
that has a branch or subsidiary in Brazil, and wishes to transfer an officer
to the Brazilian company. Therefore, individuals who will be permanently
transferred to Brazil to work for a subsidiary or branch of a foreignowned company in the capacity of officer may apply for a permanent
employment visa.
Labor Aspects - Visas
•
To apply for a permanent visa for its officer, the foreign company must
have, at least, US$ 200,000 invested in Brazil, for each foreign officer,
provided that such investment must be registered with the Central Bank
of Brazil; or at least US$ 50,000.00 and the commitment to hire, within
the 2 (two) following years, at least 10 new Brazilian employees for the
Brazilian company.
•
Also, the individual must be appointed to a position in the Brazilian
Company’s bylaws, conditioned to the visa approval, and shall be
confirmed in the position once he/she is granted with the visa. If the
foreigner is appointed to act as an officer in more than one company of
the same economic group or conglomerate, he/she shall be previously
authorized by the Ministry of Labor.
Labor Aspects - Visas
(d) Foreign investor - individual
• The permanent visa may also be granted to individuals who invest, at
least, US$ 50,000.00 (fifty thousand north American dollars) in a Brazilian
company, either existing or recently formed. Exceptionally, the Ministry of
Labor may grant a permanent visa to the individual who invests an
amount lower than US$ 50,000.00 (fifty thousand dollars), provided that
he/she presents a business plan, for the 5 (five) following years,
committing the Brazilian company to create, at least, 10 (ten) new job
positions for Brazilian nationals.
Labor Aspects - Visas
• In addition, persons who have been employed in Brazil in a temporary
capacity (regardless of whether the company is Brazilian or foreign owned)
for a period of four years, may apply to convert their status to permanent.
To obtain permanent employment authorization for an individual working
in Brazil on a temporary basis for four years, application must first be
made to the Ministry of Justice at least 30 (thirty) days prior to the
completion of the four-year term.
Intellectual Property
Intellectual Property
Introduction
• As a member of the Stockholm Convention of 14th July 1967 (under which
the World Intellectual Property Organization – WIPO was set up), Brazil
subscribes to both the Paris Convention (for protection of industrial
property) and the Bern Convention (for protection of literary and artistic
works).
• Intellectual property is the genus of which copyright and associated rights
are species; in Brazil, they are governed under Law no 9.610/98, which
seeks to protect literary, scientific and artistic works, as well as industrial
property rights, addressed to industrial and commercial utilization of
inventions, trademarks, patents and industrial designs.
Intellectual Property
• On 5.14.97 a new Industrial Property Code – Law no 9.279 was enacted,
covering utility models, industrial design, manufacturers’ brands,
trademarks and service marks that are distinctive and indicate the origin
and source of the relevant products. The new law further provides on
crimes against industrial property. On 2.14.2001 Law no 10.196 was
published to amend and introduce certain provisions to Law no 9.279/96.
• The National Institute of Industrial Property (INPI) is the government
entity in charge of industrial property rights, and the formal examination
of requests for the granting of patents and registration of trademarks.
Intellectual Property
Patents
• Patents may be granted for the protection of inventions, utility models,
and industrial designs. The protection granted by a patent extends for 20
years for inventions, 15 years for utility models and 10 years, extendable
for three 5 year period for designs, all of them counted as from the date
the request for protection is lodge at INPI. It was created the Certification
of Addition, where it could be protected the improvements introduced in
a patent invention. As an accessory of the patent application, it will have
the same term of it.
• Proceedings for the granting of a patent are lengthy and time-consuming.
Intellectual Property
Trademarks
• Application for a trademark may be either as a foreign or a Brazilian
trademark.
• A foreign trademark is registered under the terms of the Paris Convention,
which establishes an exclusive priority term of six months from the date of
the application in the country of origin for its owner to apply for
registration of this same trademark in other countries which are
signatories to this convention.
Intellectual Property
• In order to file this application in Brazil, it is necessary to submit a certified
copy of the trademark application in the country of origin or the certificate
of registration to INPI.
• The principal objective in registering a trademark within the period of
priority to the convention – apart from securing protection – is to enable
the trademark to be licensed or transferred in return for a royalty
payment.
• Any interested party may apply for registration of a Brazilian trademark,
whether Brazilian or foreign. Application and registration of this trademark
must follow the provisions of the Brazilian Industrial Property Code.
Intellectual Property
• If a trademark is applied for in Brazil by a foreign party without the priority
claim established in the Paris Convention, it is considered a Brazilian
trademark, and therefore the convention benefit will not be afforded.
• Pursuant to Brazilian law and regulations, royalties cannot be charged for
trademark or patent license agreements in the following cases:
o if the trademark or the patent is not duly registered/ granted in Brazil;
o if the trademark or the patent was not filed in Brazil within the priority
term, as mentioned above;
o if the registration of the trademark has not been renewed;
o if the trademark registration has been extinguishes or is in nullity or
cancellation proceedings;
o if the license agreement is executed between the foreign parent
company and its Brazilian branch; or
o in the case of transfer, if the owner was not entitled to remuneration.
Intellectual Property
• Brazilian law requires that the owner of the trademark exercises licit and
effectively the activity for which it is claimed protection for the goods or
services covered by such trademark. In order to apply for registration of a
trademark in Brazil, evidence that the applicant is a company is a good
standing under the laws of its country and of the company’s field of
business is required.
• Trademark registration affords protection for ten years. This period may be
extended for successive ten years period.
• Actual use for a trademark is essential to this protection in Brazil which
registration might lapse if it is not used within five years from the date of
its concession or if its use interrupted for more than five consecutive
years.
Intellectual Property
• The owner of the trademark in Brazil can provide proof of use, or by the
license that actually uses it.
• With respect to the Madrid Protocol, signed in 1999 with a view at
updating the contents of the Madrid Treaty, its main focus in the matter of
international trademark registration is to concentrate trademark
registration in a one place, therefore allowing a company to seek, with a
single international application, registration of its product trademarks in
every country that currently integrates the system.
Intellectual Property
Technology transfer agreements
• Technology transfers involving Brazilian parties or industrial property
rights registered in Brazil are governed by the provisions of Ato Normativo
[Normative Act] INPI n. 135, de 15.5.1997.
• The aforesaid Normative Act 135/97 is intended to regulate annotation
and registration of contract that contain provisions relating to technology
transfer, patent and trademark licensing, supply of technology, technical
and scientific assistance and franchise agreements.
Intellectual Property
• Such contracts must be registered with the INPI in order for them to
generate effects not only between the parties but also to be binding on
third parties, as well as for currency exchange and tax deduction, for
purposes of remittance of payments abroad.
• Other valid documents capable of demonstrating technology transfer and
the conditions that regulate it (such as, for instance, operational expenses)
must be submitted to the INPI’s approval, therefore allowing for tax
deduction of the transfer-related payments.
• Technology transfer agreements must clearly specify their purposes,
consideration, term and means of execution, apart from other industrial
property rights involved.
Intellectual Property
• Such agreements must set forth the actual conditions for commercial
exploitation of patents applied for and granted in Brazil; licensing of
trademarks applied for the granted in Brazil; acquisition of know-how and
technology not protected under industrial property rights; and techniques,
planning methods programming, research, surveys and projects for
execution or provisions of specialized services.
• Although that is not an express requirement, it is advisable to indicate
whether licensing or commercial exploitation is made on an exclusive
basis, and whether subcontracting is permitted. The term of the
agreement should not exceed that of registration of the relevant
trademark or patent.
Intellectual Property
• Technology transfer agreements may contain confidentiality clauses and
provisions pertaining to unavailability of the technology to be assigned.
Such agreements may also contain provisions on liability of the parties
regarding tax liabilities arising from the transfer at hand. It is incumbent
upon the assignor to provide the assignee with all relevant technical
information, as well as technical assistance required for actual assimilation
of the transferred technology
• Technical and scientific service agreements must refer to the time span
required for provision of such specialized services, the number of
technicians required, their specialization programs and training, as well as
their consideration.
Intellectual Property
• With respect to consideration to technology intended for transfer, it may
be in any of the following formats: pre-established, a fixed price for each
item sold; a percentage of the profit or percentage of the net sales price,
net of taxes, duties and other expenses previously agreed between the
parties. INPI shall take into account the domestic and international price
levels for similar operations for determination of the relevant
consideration.
• With respect to tax deductibility, it is crucial to point out that only
royalties for technical assistance up to the limit of 5% calculated on the
net income of production will be allowed deduction from the gross profit.
Such coefficient may be reduced in accordance with the degree of
relevance of the productive industry, that is, the higher the importance of
that industry for the economy, the higher the coefficient used for
calculation of the applicable tax deduction.
Intellectual Property
• Royalties for use of patents shall not be deductible whenever they are
paid by a Brazilian subsidiary for or to a company headquartered abroad,
to the benefit of its parent company.
• With respect to payments to legal entities for technical assistance, they
may only be deducted in the first five years of introduction of the
technology at hand, which term may be extended to a like period as long
as its need may be demonstrated, at the discretion of the Conselho
Monetário Nacional [National Monetary Council].
Intellectual Property
• Application for approval must be submitted by means of a specific form to
the INPI, supported by the original contract or equivalent documentation,
translation – whenever drafted in a foreign language. In addition, an
explanatory letter justifying the contracting, data sheet of the technology
assignee or franchisee and such other documents as the parties may see
fit, apart from evidence of collection of the appropriate fees and power of
attorney pursuant to the provisions of articles 216 and 217 of Law no
9.279/96.
• The INPI may, at its discretion, require submission of additional
documentation.
Intellectual Property
• The INPI’s decision regarding approval or refusal of registration shall be
entered within 30 days counted as of its actual admissibility at the
Diretoria de Transferência de Tecnologia [Technology Transfer Board], at
which point it will be assigned a system number.
• Should the INPI make any requirement regarding additional
documentation, the party will have 60 days to submit it, failing which the
application will be cancelled.
• Upon submission of the required documents, the INPI will review the
application within the terms set forth above. The INPI’s failure to enter
approval of an agreement in a timely manner will entail automatic
approval of the contract or equivalent document.
• The INPI may, at its sole discretion, follow-up and oversee the technology
transfer procedure.
Rodrigo Monteiro de Castro - Partner
rcastro@gnor.com.br
Pedro Miranda Roquim - Partner
pmroquim@gnor.com.br
Guedes Nunes, Oliveira e Roquim – Sociedade de Advogados
Rua Leopoldo Couto de Magalhães Júnior, 146, 12° andar
04542-000 - São Paulo – SP – Brazil
+ 55 11 2856-6226
www.gnor.com.br
Copyright © 2010 Guedes Nunes, Oliveira & Roquim Sociedade de Advogados. All rights
reserved.
Acknowledgement: the publication “Legal Guide for the Foreign Investor in Brazil”, published
by the Brazilian Foreign Relations Ministry (2006) was the source of some information
included in this presentation.