Free Trade Zones in Brazil
- Free Trade Zone Brazil is also known as Export Processing Zones (EPZ) is well-received and an optimal choice for business owners and foreign investors when setting up a business in Brazil.
- Launched in 1988, EPZs are a part of the Brazilian government’s economic diversification initiatives to attract foreign investors and business owners into Brazil.
- The Brazilian government establishes FTZs in remote areas with low population to promote the development of these rural areas. Thus, the Brazilian government initiates and forms economic linkages between the urban and rural areas within the country. As such, these zones promote nationwide urbanisation through these economic linkages.
- Not to mention, preferential and beneficial tax regimes on exports and imports are provided to alleviate the financial fiscal burden of business owners especially with the high corporate tax rates in Brazil.
- Free Trade Zones Brazil serves as a platform for the nation to facilitate the free flow of goods in a well-established and conducive international trade environment. The governments’ relaxed regulations and policies help business owners in increasing export competitiveness and benefitting international trade.
- With the help of FTZs, Brazil’s economy undergoes progressive expansion and transformation with the arrival of foreign investment, intellectual properties, and the latest technology into the nation, expanding the capabilities of the industrial market.
- Along with the increment of business opportunities in Brazil, the government hopes to increase the rate of employment, which facilitates uptake in the nation’s tax revenue and thus reducing any imbalance in the country.
- According to the government policies, 80% of the commodities produced in these zones must be exported outside the country and 20% can be used for internal consumption. However, this policy may soon be amended to 60-40%.
Why set up a company in Free Trade Zone Brazil?
The Brazilian government offers investors various benefits and exemptions to promote foreign direct investment. This includes the tax exemptions they receive, which is dependent on the zone they wish to set up in. These benefits can be enjoyed for twenty years, and more if permission is acquired from the government. Additionally, businesses receive ten years exemption from business license fees.
Such a zone would be well suited for firms looking to manufacture or enter the import-export industry and looking to carry out most of their operations outside the country.
Free Trade Zones in Brazil:
There are presently 24 Export Processing Zone (EPZ) in Brazil, with only one completely operational. The objective of these zones is to provide businesses with administrative, foreign exchange, and tax benefits. There are additional Free trade areas known as FTZs in Brazil.
Manaus Free Trade Zone:
- The Manaus Free Trade Zone is the best known FTZ in Brazil, monitored by the Federal Revenue Secretariat. Under the superintendence of the Ministry of Development, Industry and Foreign Trade, the Manaus FTZ was established to create an industrial, commercial, and agricultural centre in the Amazon region, facilitating the urbanisation and development of the less populated area.
- Companies within the FTZ enjoy up to an 88% reduction in import duties on the inputs of industrial goods and an exclusive 75% reduction on income tax for reinvestments. Moreover, there are additional exemptions on excise duties and social integration program tax. State Value Added Tax is also reduced in this region from 55% to up to 100%, depending on the project. However, for this, companies must reinvest in high education, R&D, or micro-companies. These fiscal incentives have proven to be tremendously useful due to the high corporate tax rates in Brazil.
- The Manaus FTZ has successfully attracted more than 600 renowned and established companies such as Coca-Cola, Samsung, Honda, and Harley-Davidson. Global corporations are attracted to the fiscal incentives provided in this Zone.
- The Superintendence of the Manaus Free Trade Zone (SUFRAMA) also provides land to investors at a subsidised price, with additional much-needed infrastructure.
- Lastly, large areas found in the Manaus FFTZ are suitable for the establishment of industrial enterprises. International warehouses turned out to be beneficial as it enables the storage of taxable goods, with the adjournment of the payment of state taxes.
- To set up a company in this region, the commodities produced by the businesses must be in accordance with the Brazilian PPB (Basic Productive Process) which governs the level of nationalisation needed for all types of commodities. This is compulsory because the objective of this zone is to promote the national industry.
- Today, this zone is a well-established government model that is successfully developed the Amazon region by promoting productivity and social integration of the region with Brazil,
Macapa Free Trade Zone:
- The Macapa FTZ is located near French Guiana.
- Businesses in this zone take advantage of the government fee exemption received on imported commodities and even some duty exemptions received.
- In this zone, companies generally only perform commercial activities.
Tabatinga Free Trade Zone:
- Located at the border of Colombia and Peru, the Tabatinga FTZ was established with the purpose of developing the border regions of the country and allowing for better bilateral relations with the aforementioned neighbouring countries.
- The authorities in this zone can provide companies with up to 75% reduction on income tax, depending on the paid-up capital invested by the company and the industry they are looking to enter.
Boa Vista and Bonfim Free Trade Zone:
- This zone was set up with the objective of improving the bilateral relations with Venezuela and Guyana, neighbouring countries of Brazil.
- In this region, companies will receive exemptions on imports for internal use and any imported and exported goods.
- Moreover, the government has suspended the Indirect Tax (II) and the Federal Tax (IPI) on the companies set up here.
Ceara Economic Processing Zone:
- This zone is a free trade area where there are tax benefits, simplified administrative processes, and more with an objective to increase foreign investments, improve the social and economic development of the country, and increase export competitiveness.
- Exporting companies would be the best suited for this region because of the government policies.
- With high connectivity in ports, airways, and railways, businesses can benefit from setting up their firm here.
- Companies in this EPZ benefit from the 75% reduction in income tax, reduction of service tax by 2%, and more tax exemptions. Additionally, businesses are allowed to have repatriation of all export earnings abroad. These fiscal incentives have proven to be tremendously useful due to the high corporate tax rates in Brazil.
How to set up a company in Free Zone?
- In order to set up a company in a FTZ in Brazil, Tetra Consultants will first need to understand your business activities and needs before recommending which zone would be the best for your business.
- We will then provide you with a recommendation on the best-suited form of legal entity for your business. We will advise you on the optimum share capital for your business, the regulatory environment in these regions, and more.
- Once we have decided on the FTZ and the business entity you wish to set up, we will proceed to get permission from the local authority of the chosen zone.
- We will then search for the availability of your preferred business name and then reserve it with the respective authorities, depending on your chosen FTZ.
- Prior to Brazil company registration, you will have to meet some of the requirements:
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- One director
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- One shareholder
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- Company Secretary
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- Local office address and local resident director
- We will assist you in preparing the incorporation documents needed, which include the Articles of Incorporation (Contrato Social), the application form, the business plan, and more.
- Once the documents are prepared, they must be notarised at the law courts.
- We will then proceed to complete the registration process for your company. Depending on the choice of Zone, the incorporation process should take 12 to 14 weeks to complete.
- We will then proceed to apply for a business license if required by your business.
- Following this, we will complete the registration for tax with the Special Department of Federal Revenue of Brazil, on your behalf.
- Within 4 weeks of company incorporation, Tetra Consultants will assist you in opening a bank account for your business, by leveraging on our banking networks.
- Consequently, you can expect to start your business operations within 16 to 18 weeks upon engaging our firm.
- Once registration is completed, we will send you all the documents including the Certificate of Incorporation and the Tax registration certificate, to your preferred address.
- After the registration process is completed, Tetra Consultants will ensure that your business is compliant with the local laws.
- To know more about the incorporation process in detail, you can refer to our website or contact us for a free non-obligatory consultation.
Accounting and Tax Obligations:
- For a business set up in Brazil, the corporate tax rate is relatively high. Conversely, owing to exemptions and tax benefits, the total tax charged by the government to the companies in the FTZs is relatively lower.
- Tetra Consultants will ensure that you submit the firm’s financial statements, tax returns, and more in a timely manner.
- Additionally, firms are required to file for an annual return on time or they would be subjected to a penalty.
Contact us to find out more about free trade zones in Brazil. Our team of experts will revert within the next 24 hours.
FAQs:
How many free trade zones are in Brazil?
- There are in total 24 Economic Processing Zones (also called Free Trade Zones) in Brazil. However, only one EPZ is in operation presently. Besides this, there are other zones such as the Manaus FTZ and the Tabatinga FTZ that have already been established and are successfully helping in the social and economic development of the country.
Is there a free trade zone in Brazil?
- Yes, there are free trade zones in Brazil. Contact us to find more information about FTZs in Brazil and our team of experts will revert within the next 24 hours.
What is the largest free-trade zone in the world?
- The largest FTZ in the world is the Regional Comprehensive Economic Partnership (RCEP) that was signed by 15 countries, including 10 ASEAN member countries and five Asia-Pacific countries. This agreement will cover around 30% of the world’s GDP. The objective of this free trade zone is to increase investments and businesses within the region.
Who benefits from free trade zones?
- Free Trade Zones are established by the government of the country to increase foreign investments, improve business operations, and lead to the social and economic development of the country. In order to meet their objectives, businesses are offered various exemptions and compensations. Therefore, free trade zones benefit both the local government, where the zone is established, the businesses who set up firms in those zones, and also the locals who may receive employment.
What is an example of a free trade zones?
- Free trade zones are established by the government in different countries, usually around ports and airports. For example: the Manaus FTZ in Brazil is under the Superintendence of the Manaus FTZ (SUFARMA) and offers tax benefits and exemptions for the businesses set up here.
Which country has the freest trade agreements?
- The Dubai Multi Commodities Centre is the world’s top free trade zone. This is because of the advanced infrastructure, services, and more.
What country has free trade zones?
- Free trade zones have been set up in multiple countries especially near ports and airports. For example: Dubai, Brazil, Kenya, Egypt, and more.
What are the pros and cons of free trade zones?
Pros of FTZ:
- There is an increase in foreign investments because of the incentives offered to investors.
- There is an increase in economic growth.
- There is an increase in technology and knowledge transfer as established global companies develop local resources and provide new technologies and knowledge to the locals.
Cons of FTZ:
- There is a reduction in the government revenue as a result of lower rates of tax levied on and fees charged from businesses and additional compensation and subsidies given to them.
- In many countries, intellectual properties are not protected and therefore, can be stolen to produce cheaper knockoffs.
- Companies may shift production to these free zones, leaving their home countries which may be bad for the home country’s economy.
Can a foreigner set up business in a Free Trade Zone?
- Yes, foreigners can set up business in FTZ. They can have complete ownership of the business and do not need to travel to Brazil for the incorporation process.
