I have a question regarding employment of somebody based in Brazil.
I'm forming a company with the majority of employees based here in Switzerland. However the programmer I need, whose skills can't be found in locally, is based in Brazil. He would be working from home the entire time on a full-time basis.
Can anybody give me some general advice that I can look into? Any particular challenges and expenses that I should already brace myself for?
Thank-you in advance,
Chris
1) You will need to register as an employer in Brazil, operate Brazil payroll i.e. deduct his income tax, social security, pension or whatever is required in Brazil.
2) You will also need to observe Brazilian employment law e.g. notices, terminations, leave entitlement, health and safety, etc.
3) Your company now has a "fixed place of business" in Brazil (his home office) i.e. need to register for and pay Brazilian corporate tax (34%) on a portion of company profits - essentially as if you set up a branch there.
4) You company might also have a "fixed establishment" and so some VAT/GST obligations in Brazil as well... however this works in Brazil
5) Brazil has all sorts of extra weird taxes and surcharges for companies, there may be other pitfalls to watch for.
6) Any currency controls in Brazil that might make cross-border payments difficult? Certainly there any many withholding taxes. I guess you will be paying him though, from Switzerland. Trying to avoid needing to get any money out of Brazil, ensure all payments flow only into Brazil.
==> Suggest you get a Brazilian tax adviser
It might be smarter to insist he works as an independent contractor. Possibly through a personal services company i.e. Joe Bloggs Ltda. In theory, then, you wouldn't have all the obligations of an employer, nor would your company have established itself in Brazil.
But... so great is this idea, that many countries have anti-avoidance rules i.e. if he looks like an employee in substance, he will be treated as one (and all the employment law and tax implications that come with that). This is where companies like Uber have got in trouble. A more recent example in the UK: https://www.theguardian.com/politics...-bbc-presenter . How developed are these rules in Brazil? Dunno.
These are just the general principles of how international tax / employment rules work...... but you would really need to check how things work in particular in Brazil.
My general impression in Brazil (based on extremely limited experience and hearsay) is that there is a lot of spurious "contractor" arrangements there... rightly or wrongly... If you are working with a local Brazilian adviser, be aware that some will be more reputable than others. (Saying "yeah it looked fishy but my tax adviser told me it was fine" is not usually a valid defence!) But, you probably want to avoid hiring him as an employee if you can help it.
The Brazilian team member is a very important addition to the team, so I don't think we can substitute him for a local alternative. But your overview gives me many important points to investigate.
Thank-you!
Chris
Then they just provide a service to you. I am sure that it not the first time.
Easier dealing with an entity rather than a person.
It takes the local onus off you - you just need the skills.
It turns out that our programmer has a Brazilian company that we can go through. I was aware of it before but didn't think much of it until this question, and suggestions, popped up.
Thanks again,
Chris