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What is normal abroad but works differently in Brazil

Last verified: 2026-10-26 · Status: Changing

Some things foreign investors take for granted at home do not work the same way in Brazil, and each one has a cost or a deadline. You cannot freely price a local contract in US dollars, there is no dismissal at will, a foreign shareholder of an S.A. must keep a representative in Brazil, and paying for services from abroad triggers several taxes on top of the fee. Brazil is also moving closer to practice abroad: arm's length transfer pricing has applied since 2024, and a single VAT style system (CBS and IBS) is being phased in from 2026 to 2033.

USD figures use the Banco Central do Brasil PTAX selling rate of R$5.0377 per US dollar for 23 October 2026, the last business day before verification. Conversions are for orientation only.

Key facts

Local contracts priced in foreign currency	Allowed only in the cases of art. 13; otherwise void Lei nº 14.286 art. 13, as of 2026-10-26 · in force
Monthly FGTS deposit	8 %Lei nº 8.036 art. 15, as of 2026-10-26 · in force
FGTS fine on dismissal without cause	40 %Lei nº 8.036 art. 18 § 1, as of 2026-10-26 · in force
Minimum notice of dismissal	30 daysLei nº 12.506 art. 1, as of 2026-10-26 · in force
Maximum notice of dismissal	90 daysLei nº 12.506 art. 1 sole paragraph, as of 2026-10-26 · in force
S.A. shareholder abroad must keep a representative in Brazil	Yes Lei nº 6.404 art. 119, as of 2026-10-26 · in force
Minimum duration of a foreign resident director's representative after the term	3 yearsLei nº 6.404 art. 146 § 2, as of 2026-10-26 · in force
CIDE on technical services and royalties paid abroad	10 %Lei nº 10.168 art. 2 § 4, as of 2026-10-26 · in force
PIS/Pasep Import plus COFINS Import on services from abroad	9.25 %Lei nº 10.865 art. 8 item II, as of 2026-10-26 · in force
CBS test rate in 2026	0.9 %EC nº 132, ADCT art. 125, as of 2026-10-26 · in force
IBS test rate in 2026	0.1 %EC nº 132, ADCT art. 125, as of 2026-10-26 · in force
Year ICMS and ISS are extinguished	2033 yearEC nº 132, ADCT art. 129, as of 2026-10-26 · pending
Arm's length transfer pricing in force	2024-01-01 dateLei nº 14.596 art. 47, as of 2026-10-26 · in force

The rule

1. Abroad, parties normally agree on any currency for a local contract. In Brazil, a payment in foreign currency for an obligation to be performed in Brazil is allowed only in the cases the law lists: foreign trade contracts for goods and services and their financing and guarantees; obligations where the creditor or the debtor is a non resident, including loans and leasing, but not leases of real estate in Brazil; leasing between residents funded from abroad; the assignment or change of those obligations even between residents; FX purchases and sales; indirect exports; contracts between exporters and infrastructure concessionaires; cases allowed by National Monetary Council (CMN) regulation where the foreign currency term reduces FX risk or makes the deal more efficient; and other cases set by law. A foreign currency term outside these cases is void.
Cost to do it: No fee. The cost is legal: a US dollar price clause between two Brazilian residents outside art. 13 is void, so the contract has to be priced in reais, with any indexation written in reais terms.
Example: A Brazilian subsidiary of a US group sells software support to a Brazilian client for R$100,000 a year. The price must be stated in reais; a clause fixing it at a US dollar amount would be void unless an art. 13 case applies. / About US$19,850 a year at the PTAX rate. If the client were a non resident, a US dollar price would be allowed (art. 13 item II).Lei nº 14.286 of 29 December 2021 (FX and foreign capital law), in force one year after publication, Art. 13 items I to IX and sole paragraph; art. 29, 2021-12-29 official text · verified 2026-10-26

2. Abroad, at will or low cost dismissal is common. In Brazil, an employer that dismisses a worker without just cause must deposit in the worker's FGTS account an amount equal to 40 percent of the FGTS deposits made during the contract, as updated (20 percent for reciprocal fault or force majeure recognized by the Labor Court). This sits on top of the monthly FGTS deposit of 8 percent of pay, due by the 20th day of each month.
Cost to do it: 8 percent of monthly pay throughout the contract, plus 40 percent of the deposited balance on a dismissal without cause.
Example: A worker dismissed without cause with R$60,000 deposited in the FGTS account during the contract: the employer deposits a further R$24,000. / About US$4,764 on a balance of about US$11,910.Lei nº 8.036 of 11 May 1990 (FGTS law), art. 15 as worded by Lei nº 14.438 of 2022, Art. 15 caput; art. 18 §§ 1 and 2, 1990-05-11 official text · verified 2026-10-26

3. Notice of dismissal grows with seniority: 30 days for workers with up to one year in the same company, plus 3 days for each year of service, up to 60 extra days, for a total of up to 90 days.
Cost to do it: Up to 90 days of notice per worker, worked or paid.
Example: A worker with 10 full years of service is entitled to 30 plus 30 days, 60 days of notice. / For a salary of R$15,000 a month (about US$2,978), two months of notice cost R$30,000 (about US$5,955) if paid instead of worked.Lei nº 12.506 of 11 October 2011, Art. 1 caput and sole paragraph, 2011-10-11 official text · verified 2026-10-26

4. In many countries a foreign shareholder simply holds shares from abroad. In Brazil, a shareholder of an S.A. resident or domiciled abroad must keep a representative in Brazil, and exercising any shareholder right in Brazil gives that attorney power to receive service of process. Only natural persons may sit on the board or the executive board, so a parent company cannot be a director, and an officer or board member resident abroad can take office only after appointing a representative resident in Brazil, with powers lasting at least three years after the end of the term.
Cost to do it: The cost of a local attorney or representative under a power of attorney; no official fee is set by these articles.
Example: A foreign parent holding an S.A. appoints a Brazilian attorney for service; each foreign resident director signs a power of attorney valid until at least three years after the term ends. / No statutory amount in US dollars; the cost is the professional fee agreed with the representative.Lei nº 6.404 of 15 December 1976 (Corporations Law), art. 146 as worded by Lei nº 14.195 of 26 August 2021, Art. 119 and sole paragraph; art. 146 caput and § 2, 2021-08-26 official text · verified 2026-10-26

5. Abroad, a business paying a foreign provider for services usually just accounts for reverse charge VAT. In Brazil, paying a non resident for services adds federal charges on top of the fee: PIS/Pasep Import at 1.65 percent and COFINS Import at 7.6 percent, triggered by the payment, credit or remittance to the non resident, and CIDE at 10 percent on contracts for technical services, administrative assistance and similar services from non residents and on royalties of any kind paid abroad. These contributions are scheduled to be replaced from 2027 (see the next rule).
Cost to do it: CIDE 10 percent of qualifying payments, plus PIS and COFINS Import at a combined 9.25 percent on the base set in Lei nº 10.865 art. 7. Income tax withholding and IOF on the FX are separate (see FX and repatriation).
Example: A R$100,000 technical services fee paid to a foreign parent: CIDE of R$10,000, plus PIS and COFINS Import at 9.25 percent on the art. 7 base. / About US$19,850 of fee and US$1,985 of CIDE.Lei nº 10.865 of 30 April 2004, art. 8 as worded by Lei nº 13.137 of 2015; Lei nº 10.168 of 29 December 2000, art. 2 §§ 2 and 4 as worded by Lei nº 10.332 of 2001, Lei nº 10.865 arts. 1, 3 item II and 8 item II; Lei nº 10.168 art. 2 caput and §§ 2 and 4, 2004-04-30 official text · verified 2026-10-26

6. Abroad, most countries run one VAT. Brazil is replacing its several consumption taxes with a dual VAT: CBS (federal) and IBS (state and municipal). In 2026 IBS is charged at 0.1 percent and CBS at 0.9 percent, and the amount paid is offset against PIS and COFINS, or against any other federal tax, or refunded within 60 days on request; taxpayers that meet the ancillary obligations may be excused from paying, under a complementary law. From 2027 CBS is charged and PIS and COFINS are extinguished, and IPI goes to zero except for products with incentives in the Manaus Free Trade Zone. From 2029 to 2032 ICMS and ISS rates fall to 9/10, 8/10, 7/10 and 6/10 of their legal rates, and both taxes are extinguished from 2033.
Cost to do it: In 2026, 1 percent combined on the test rates, offset or refunded as above; systems and invoicing changes are the main cost.
Example: Sales of R$1,000,000 in 2026: CBS R$9,000 and IBS R$1,000, offset against PIS and COFINS due. / Sales of about US$198,503: CBS about US$1,787 and IBS about US$199.Emenda Constitucional nº 132 of 20 December 2023, inserting ADCT arts. 125 to 129; regulated by Lei Complementar nº 214 of 16 January 2025, ADCT art. 125 caput and §§ 1, 2 and 4; art. 126 items I to III; art. 128; art. 129, 2023-12-20 official text · verified 2026-10-26 · changed: Emenda Constitucional nº 132 of 20 December 2023 started the replacement of PIS, COFINS, IPI, ICMS and ISS with CBS and IBS; the test phase began on 1 January 2026, CBS starts in 2027 and ICMS and ISS end in 2033.

7. Brazil now prices transactions between related parties on the arm's length principle used abroad: the terms and conditions of a controlled transaction must be those that unrelated parties would set in comparable transactions. The law applies from 1 January 2024, and taxpayers could opt, irrevocably, to apply it from 1 January 2023. This replaced the old fixed margin method.
Cost to do it: Documentation and benchmarking work in line with practice abroad; no fee is set by these articles.
Example: A Brazilian distributor buying from its foreign parent must support its purchase price with comparable unrelated party terms, rather than with fixed statutory margins. / No statutory amount; the adjustment is whatever brings the price to arm's length.Lei nº 14.596 of 14 June 2023, Arts. 1 and 2; art. 45 caput and § 1; art. 47, 2023-06-14 official text · verified 2026-10-26 · changed: Lei nº 14.596 of 14 June 2023 moved Brazil to the arm's length principle for IRPJ and CSLL from 1 January 2024, with an optional start on 1 January 2023.

Practice abroad	Brazil today	Legal basis	Change under way
Price a local contract in US dollars	Only in listed cases, otherwise void	Lei nº 14.286 art. 13	None
Dismiss at will or with short notice	40 percent FGTS fine without cause; 30 to 90 days notice	Lei nº 8.036 art. 18 § 1; Lei nº 12.506 art. 1	None
Hold shares from abroad with no local agent	S.A. shareholder abroad keeps a representative in Brazil	Lei nº 6.404 art. 119	None
Corporate director	Only natural persons; foreign resident directors appoint a local representative	Lei nº 6.404 art. 146	None
Reverse charge VAT only on foreign services	PIS and COFINS Import 9.25 percent plus CIDE 10 percent on qualifying payments	Lei nº 10.865 art. 8; Lei nº 10.168 art. 2	PIS and COFINS end in 2027 (ADCT art. 126)
One VAT	Several taxes in transition to CBS and IBS	EC nº 132, ADCT arts. 125 to 129	Full CBS from 2027; ICMS and ISS end in 2033
Arm's length transfer pricing	Same principle since 2024	Lei nº 14.596 arts. 2 and 47	Done

Practices common abroad and the position in Brazil (rules cited above).

Worked example

Hiring and firing. A foreign owned Ltda. dismisses, without cause, an employee with 10 full years of service earning R$15,000 a month (about US$2,978), with R$60,000 (about US$11,910) deposited in the FGTS account. It owes 60 days of notice, R$30,000 (about US$5,955) if paid instead of worked (Lei nº 12.506 art. 1), and an FGTS deposit of R$24,000 (about US$4,764) (Lei nº 8.036 art. 18 § 1), before other final pay items covered on the employment page.
Paying the foreign parent for services. A Brazilian subsidiary pays its foreign parent a R$100,000 (about US$19,850) technical services fee. It pays CIDE of R$10,000 (about US$1,985) (Lei nº 10.168 art. 2 §§ 2 and 4) and PIS and COFINS Import at 9.25 percent on the art. 7 base (Lei nº 10.865 art. 8), on top of the fee; withholding income tax and IOF are separate.

Step by step

1. Price local contracts in reais unless an art. 13 case of Lei nº 14.286 applies, such as a non resident counterparty or foreign trade; write indexation in reais terms.
2. Budget employment as a long term cost: 8 percent FGTS each month, and on a dismissal without cause the 40 percent FGTS fine and up to 90 days of notice.
3. For an S.A. with a foreign shareholder, appoint a representative in Brazil before exercising shareholder rights; for each foreign resident director, sign a power of attorney to a Brazilian resident covering at least three years after the term, before taking office.
4. Before signing an intercompany services or royalty agreement, model CIDE, PIS and COFINS Import, withholding tax and IOF on top of the fee, and document the price on arm's length terms under Lei nº 14.596.
5. Plan billing and ERP changes for the 2026 to 2033 CBS and IBS transition, with the 2027 CBS start and the end of PIS and COFINS as the next milestone.

Common traps

A US dollar price clause between two Brazilian residents outside the art. 13 cases is void, not just unenforceable in part (Lei nº 14.286 art. 13 sole paragraph).
The FGTS fine is 40 percent of the deposits made over the whole contract, not of the last salary, so the cost grows with tenure (Lei nº 8.036 art. 18 § 1).
A parent company cannot be named a director of an S.A.; only natural persons can (Lei nº 6.404 art. 146).
Service of process on a foreign shareholder can be made on its Brazilian attorney once it exercises a shareholder right in Brazil (Lei nº 6.404 art. 119 sole paragraph).
Intercompany fees grossed up abroad still bear CIDE and PIS and COFINS Import in Brazil, and the price must stand up on arm's length terms (Lei nº 10.168 art. 2; Lei nº 10.865 art. 8; Lei nº 14.596 art. 2).

Sources

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