When thinking of starting a business, the entrepreneur usually does not calculate all the costs. This article will present all taxes and fees involved in the process.
Opening a company may be a dream shared by many aspiring entrepreneurs, but the realization of this dream can become a nightmare if the costs of starting a business aren't well known. The process of opening a company in Brazil faces some difficulties that must be overcome in order to make the new business a success.
The Bureaucratic Barrier
The process of opening a company, just as any legal process, is somewhat bureaucratic in every part of the world. However, in Brazil, the bureaucracy is so great that instead of organizing and simplifying the process, it has been made more confusing and complicated.
Finding out the costs involved in this process isn't easy mainly because it passes through at least 12 Brazilian governmental bodies. Opening a company in Brazil lasts up to four months and results in high costs. This puts the country at a disadvantaged position internationally, since the same process in other countries is less expensive and can be done completely in four days.
The Lack of Standards between the Brazilian States
Besides the bureaucratic barrier, another problem makes the process of opening a company not as simple as it seems: the non-existence of taxes and fees standards between the states of the country. According to the Federal Constitution, the Brazilian States have autonomy to decide which taxes and tax values would be applied inside their borders, which means that the costs for opening a company can vary depending on the business location due to:
- the nature of the activity practiced (service, trade or industry)
- social capital – capital social
- company size (micro, small, medium or large size)
- type of partnership (limited, by shares, and others).
Calculating the Costs
At the opening of a business many taxes and fees must be paid. The costs spent varies a lot, being the state location of the new business one of the fundamental aspects to be take into consideration. A study performed by Firjan revealed the costs of this process in each state of the federation, as well as the national average of costs: 2,038.00 BRL.
|Location||Opening a Company Costs (BRL)|
|Paraíba||Less than 1,000.00|
|Rio Grande do Sul, Distrito Federal, Tocantins and Acre||From 1,000.00 to 1,500.00|
|Mato Grosso, São Paulo, Pernambuco, Piauí, Ceará, Rondônia, Amapá, Rio Grande do Norte, Mato Grosso do Sul||From 1,500.00 to 2,000.00|
|Bahia, Roraima, Alagoas, Amapá, Maranhão, Goiás and Espírito Santo|| From 2,000.00 to 2,500.00 |
|Paraná, Rio de Janeiro and Pará|| From 2,500.00 to 3,000.00 |
|Santa Catarina, Minas Gerais and Sergipe||From 3,000.00 to 3,500.00|
Based on the national average related to the cost spent for opening a company in Brazil, Firjan provided the percentage composition of this cost:
|Cost||Percentage Over the Total (2,038.00 BRL)|
| Location Feasibility Study Fee ||1%|
| Articles of Association Analyzes ||35%|
|Registry with the Board of Trade||10%|
|City Hall Functioning Permit Fee||11%|
|Fire Brigade Permit Fee||25%|
|Treasury Office Expenses||3%|
Notary Office Fees
The bureaucracy in Brazil also affects the documentation related to the process of opening a company. The application for licenses and permits will require the presentation of many documents. In some cases the presentation of the original or the copy of the document isn't enough, making the notarized copy a requirement. The public notarized authenticated photocopy of a document can be obtained at a notary office by a certain price for the copy and with the payment of a fee charged for the authentication of each one of them.
Location Feasibility Study Fee
The location feasibility study fee is the first cost paid by an entrepreneur in the process of opening a company. The study is performed by the municipality with the purpose of finding out if the property where the company will be located is authorized for business practices.
In some municipalities the feasibility study can be free, but in others a fee is collected with values varying from 10.00 to 60.00 BRL.
| Location Feasibility Study ||Attendance||Online|
|Free||Ceará, Maranhão, Mato Grosso do Sul, Pará, Paraíba, Pernambuco, Rio Grande do Norte and Rio Grande do Sul||Amazonas, Distrito Federal, Espírito Santo, Minas Gerais, Paraná, Piauí, Rio de Janeiro and São Paulo|
|Paid||Acre, Alagoas, Amapá, Bahia, Goiás, Mato Grosso, Rondônia, Roraima, Sergipe, Santa Catarina and Tocantins||-|
Articles of Association Analysis
The articles of association is one of the most important documents of a company and that's why to open one this document must be properly analyzed by an attorney before being registered at the Board of Trade. All types of companies, with exemption of the micro and small ones, should hire this service. The costs involved with the hiring varies from state to state, but the average value is 938.00 BRL. The most expensive state is Rio de Janeiro, that charges almost 2,000.00 BRL for the visa.
Registry with the Board of Trade
With the article of association in hands, it's possible to register this document with the Board of Trade. Before the registration, the Board of Trade will analyze the company name and if the name presented hasn't been already used by another company it will be approved. The fee charged for this service varies in each state of the country.
|Name Feasibility Study||Attendance||Online|
|Free||Alagoas, Pará and Paraná||Amazonas, Bahia, Distrito Federal, Espírito Santo, Goiás, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraíba, Pernambuco, Rio Grande do Sul, Rio de Janeiro, Rondônia, Santa Catarina, São Paulo, Sergipe and Tocantins|
|Paid||Acre, Amapá, Ceará, Maranhão, Piauí, Roraima and Rio Grande do Norte||-|
The company will then receive a NIRE – Company Registry Number – that must be presented to the Board of Trade in order to finalize the registration of the articles of association. Both processes cost on average 256.00 BRL nationally, calculated by Firjan. Although, the costs depend on the state in which they are performed varying from 69.00 to 458.00 BRL.
City Hall Functioning Permit Fee
The city hall functioning permit present higher values for industrial companies (480.00 BRL), medium values for service providers (422.00 BRL) and a small value for companies that develop commercial activities (392.00 BRL).
Fire Brigade Permit Fee
The fire brigade permit fee is the value charged for monitoring and analyzing the company's establishment, if the entire property has protective and fire fighting equipment, fire extinguishers, warning signs with escape routes (exit, hallway, etc.), emergency lighting and other requirements depending on the company's activity. The fee varies from state to state with values from 636.00 to 2,442.00 BRL.
Sanitary Permit Fee
Most of the time the sanitary permit fee is calculated based on the square footage of the establishment in conjunction with the commercial activity performed by it. The permit isn't requested for all companies, just for the ones that must have proper sanitary conditions to perform their activities.
If the business needs a permit, it's important to know that the fee charged by the state Sanitary Surveillance varies according to company size and type of activity (industry, commerce and services). The amounts charged on average for industry, services and trade are, respectively: 589.00, 395.00 and 345.00 BRL.
Treasury Office Expenses
At the treasury office, the entrepreneur will have to deal with costs related to: registry as ICMS taxpayer, registry as a ISS taxpayer, authorization for printing fiscal documentation (AIDF), authorization for the usage of equipment for invoice issuance (EFE) and authentication of accountability books. All of these services and permits can obtained for a cost of 637.00 BRL.