Due Diligence in Brazil
Brazil is one of the leading emerging markets, beaming with opportunities for sophisticated investors and pitfalls for the uninitiated. The potential for profits is high but so are the risks of doing business with the wrong third party agent or target company. Bribery of government officials is common place and an ineffective judiciary renders litigation relief virtually meaningless or at least taking years. Arbitration within Brazil has also proved unpredictable.
The lack of publicly available information only furthers the lack of information necessary to determine if a target company or third party agent may create exposure for the acquiring entity.
Our enhanced due diligence does not entail a review of financial records with an assessment of profitability for acquiring an interest in a particular entity. Rather, we focus on the limited scope of identifying risks associated with FCPA exposure, violations of the UK Anti-Bribery Act of 2010, embezzlement and a lack of internal controls.
Our knowledge of the country’s culture and business practices is invaluable in this regard. Our comprehensive inquiries enable our team to provide a full and transparent view of the risks associated with investing in a particular entity or retaining a particular third party agent.
Our integrity and internal controls ensures that the client is receiving an unbiased assessment, not influenced by external conditions or persons.
How do I perform due diligence?
Before you purchase the business, you (often with the help of professionals) will perform due diligence.
Does the business have healthy cash flow?
By looking at the books, can you tell where the revenue stream is coming from?
If the company has physical assets, are they valued correctly and fairly?
Are there any hidden liabilities?
How reliable are its financial projections and what multiple is it placing on those earnings?
Are the company documents complete? (Articles of incorporation, board meeting minutes, tax registration, etc.)
Is the business up to date on its taxes?
Does it lease property? If so, when does the lease end?
What insurance information is provided and what is covered?
Are there complete employee files including salary and benefits?
Brazil is known for charging a high tax burden from its citizens and companies established.
We will provide an overview of the most common taxes in Brazil:
CIDE (10%), COFINS (3% or 7,6), CSLL (9% to 15%), Import Duty (several), IOF (1% to 25%), IPI (0% to 300%), ITR (0,03% to 20%), PIS/PASE (0,65 to 1,65), IRPF (0% TO 27,5%), IRPJ (15% to 25%), IRRF (15% to 27,5%), IE (30% to 150%), ICMS (7% to 25%), IPVA (2% to 5%), IPTU (variant), ITBI (2%), ISS (5%).
Taxes are an important part of doing business in Brazil.
Although this round-up of the 16 most common taxes in Brazil is giving you a high-level overview of what taxes will apply when doing business in Brazil, we strongly urge you to contact taxation experts that can evaluate your business case.