Starting a new business in Brazil may prove difficult because of the many laws in force. In this article, we will learn how to structure a freelance business in Brazil.
First of all, it is important to note that it is not necessary to legally register a freelance business in Brazil. Most freelancers in fact choose not to register themselves, since it would mean paying different taxes and also having to comply with other requirements. However, not being registered has its downsides, as it is much less attractive for companies to hire you.
Registering your business
The first step towards structuring a freelance business in Brazil is to legally register your business.
Freelancers may opt for the MEI modality, which stands for Micro Empreendedor Individual, Portuguese for Individual Small Business Owner and is designed for individual workers that want to legally register their business. All economic activities that can be practiced by MEI businesses are available in Portuguese, in this link.
Another option for freelancers is to register as a Profissional Autônomo, which is Portuguese for self-employed worker.
Individual Small Business Owner
Being legally registered brings some benefits. The main benefits when registering as a MEI are:
- CNPJ number, which allows the issuance of Nota Fiscal, and participation in public tenders
- Access to social security benefits such as retirement, sickness and maternity leave
- Exemption of company registration fee
- Reduction of taxes when hiring an employee - 3% to INSS and 8% to FGTS, on the minimum wage
- Legal security
- Access to special credit lines with lower interest rates
- Right to own a corporate account
It is possible to register online as a MEI via this link, through Portal do Empreendedor, a government website with information for business owners.
Also, being a MEI allows the freelancer to pay less taxes as they are allowed to be part of the Simples Nacional, a simplified taxation system that allows micro and small business to easily register their companies. Being registered as a MEI exempts freelancers from paying the following taxes:
The freelancer is only charged a monthly fee, depending on which kind of activity the freelancer practices. The monthly fee is broken down as follows (values are valid as of January 2015):
- BRL 39,40 to INSS
- BRL 5 for Service Providers - who pay ISS - or BRL 1 for commerce and industry activities - who contribute to ICMS
The payment form for the MEI fee can be generated via this link.
Obligations of being a MEI
Those who want to be registered as a MEI must comply with the following specifications:
- Must have a gross annual revenue of up to BRL 60.000
- Must not own holdings in any other companies, either directly or as a partner
- Must work alone or with only one employee
- Must not have a second branch
If the MEI’s gross annual revenue is higher than BRL 60.000, there are two possible situations.
If the gross annual revenue is more than BRL 60.000 but less than BRL 72.000, the freelancer will be considered as a micro-business. Due to this, taxes will be due on the revenue that exceeded BRL 60.000, ranging from 4% to 17,42%, depending on the business conducted and on the gross annual revenue.
If the gross annual revenue is more BRL 72.000, the freelancer will be disqualified from Simples Nacional and will have to start paying other taxes. The amount that exceeds 60.000 will be taxed based on another tax category.
Self-employed workers that want to be legally registered must register themselves as a service provider in their city’s City Hall. This way, they directly become taxpayers of ISS. This is a good option for those who generate a gross annual revenue of more than BRL 60.000 and thus can not register as a MEI. Furthermore, the registry of self-employed workers is even more simple and cheaper than that of the MEI.
Although self-employed workers can not issue Nota Fiscal, as only companies can issue them, the fact that the individual is registered as a self-employed worker is an appealing feature, as it exempts the company from any labor liability.
To register as a self-employed worker, the freelancer must go to their city’s Municipal Treasury Department and register with the CCM, which stands for Cadastro de Contribuintes Mobiliários, Portuguese for Registry of Brazilian Securities. This way, freelancers will also be able to contribute to INSS and be able to receive a retirement pension and other social security benefits. If the freelancer earns a minimum wage, they must contribute 11% to INSS. If they make more, they must contribute 20%.