International contracts performed in Brazil: points of attention

International contracts that are performed in Brazil raise questions as to their applicability, in particular with regard to (i) the law governing the contract; and (ii) the court having jurisdiction to hear it. The answers start from the premise that an international contract may produce effects and be enforced in Brazil, under the terms of the Law of Introduction to the Rules of Brazilian Law (LINDB).

Article 9 of the LINDB provides that obligations are characterized and governed by the law of the country in which they are constituted. Paragraph 2 adds that the obligation resulting from the contract is deemed constituted in the place where the offeror resides, understood as the place where the offeror is located upon formulating the offer, which may not coincide with the offeror’s domicile. In this context, contracts entered into in the digital environment also warrant specific attention, since this is an innovation subsequent to the statutory text, so that the practical application of the law may give rise to questions.

In electronic contracting, offer and acceptance circulate by e-mail or by platform, and the parties may be located in different countries at the time of the negotiation. This hinders the application of the traditional rules on the place of contracting, since it is not possible to determine with precision the country in which the contract was constituted or the location of the offeror. Under Brazilian law, the electronic signature, governed by Provisional Measure 2,200-2/2001, as updated by Law No. 14,063/2020, addresses the authenticity, the integrity and the legal validity of the document, not the conflict of laws in space. For this reason, it is recommended that the applicable law be expressly stipulated in the contract.

Notwithstanding the principle of freedom of contract, the LINDB contains no provision expressly authorizing the choice of law by the parties. Part of the doctrine, such as Fábio Ulhoa Coelho, maintains that the rule of article 9 does not apply where the contracting parties elect the law they wish to see applied, a reading that favors private autonomy and better fits the practice of international commerce, and in particular the practice of contracts entered into digitally, which are very common nowadays.

In turn, paragraph 1 of article 9 establishes that obligations to be performed in Brazil, where they depend upon an essential form, must observe such form, the peculiarities of the foreign law being admitted only as to the extrinsic requirements of the act. In any event, the scenario is clear in the sense of permitting the enforcement of international contracts in our country. However, two provisions of the LINDB complete the picture. Article 17 denies effectiveness in Brazil to foreign laws, acts and judgments, as well as to any declarations of will, where they offend national sovereignty, public policy and good morals, whereas, on the evidentiary level, article 13 subjects the evidence of facts occurred in a foreign country to the law in force therein, prohibiting Brazilian courts from admitting evidence unknown to Brazilian law.

With regard to the choice of venue, article 25 of the Code of Civil Procedure excludes the jurisdiction of the Brazilian authority where an exclusive foreign venue selection clause exists in an international contract. Its effectiveness depends upon the raising of the clause by the defendant in the answer and upon the absence of any instance of exclusive Brazilian jurisdiction. It is also worth mentioning that the venue may not always be elected; in this regard, article 12, paragraph 1, of the LINDB and article 23 of the Code of Civil Procedure reserve to the Brazilian judge, exclusively, the actions relating to real property located in the country; the main provision of article 12 establishes national jurisdiction where the defendant is domiciled in Brazil or where the obligation is to be performed herein.

In this respect, the recent Law No. 14,879/2024 amended article 63 of the Code of Civil Procedure in order to require that the choice of venue bear a connection to the domicile or the residence of one of the parties or to the place of the obligation, failing which it shall constitute a random venue; although article 63 addresses internal jurisdiction, article 25, paragraph 2, of the same code orders the application, to the foreign venue clause, of the provision of article 63, paragraph 1, so that the repercussion upon international contracts must follow such criterion.

Another important point concerns arbitration. Law No. 9,307/1996, subsequent to the LINDB, authorizes the parties freely to choose the rules of law applicable, subject to good morals and public policy. The arbitration clause is autonomous in relation to the contract in which it is inserted. That is to say, where arbitration is elected, the discussion addressed above with regard to the aforementioned article 9 of the LINDB is overcome.

Accordingly, whenever the enforceable assets are located in Brazil, arbitration seated in the national territory is a structure that must be assessed, because it combines the freedom to choose the applicable law, ensured by specific legislation, and an enforcement instrument exempt from homologation, although it tends to generate initial costs higher than those of an action before the State courts.

It is also important to emphasize that not every contractual type admits the same freedom of structuring. For example, franchise agreements are governed by Law No. 13,966/2019, which requires that contracts producing effects exclusively within the national territory be written in Portuguese and governed by Brazilian law. In international franchising, the original drafting in Portuguese or a certified translation borne by the franchisor is admitted, and the parties are allowed to opt for the venue of one of their countries of domicile, as well as to elect an arbitration tribunal. Where an optional venue exists, a legal representative domiciled in the country of the elected venue is required, with powers to receive service of process, a requirement habitually disregarded in imported drafts.

That said, the enforcement of international contracts in Brazil warrants caution. It is advisable to ascertain whether the contractual type is subject to a special Brazilian regime; whether the dispute settlement route chosen produces an instrument enforceable in the country without a homologation stage; and whether the instrument expressly designates Brazil as the place of performance of the obligation. Subject to these reservations, the rule is that the performance of such contracts within the Brazilian sphere is admitted, work which, as may be seen, must be accompanied by specialized attorneys in order to avoid problems upon any eventual judicial review.

GTLawyers remains available to advise Brazilian and foreign clients in the drafting and performance of international contracts in Brazil.

Across different sectors of the economy, the presence of women in leadership positions has increasingly occupied a place in discussions on governance and management. In law firms, this evolution is also present. At GT Lawyers, however, female leadership is not the result of a recent initiative, but has been part of the firm’s history since its founding.

Founded in 2013 by Tamy Tanzilli, GTLawyers was born from the conviction that a firm is built as much on technical excellence as on the trust placed in the people who contribute to its growth. It is this vision that, over the years, has made it possible to consolidate a management model based on entrepreneurship, talent development and the gradual transfer of responsibilities.

An Entrepreneurial Vision: Tamy Tanzilli, Founding Partner

The history of GTLawyers began in 2013, when Tamy Tanzilli decided to found the firm, bringing to this project more than thirty years of experience in business law and cross-border operations.

Her career, however, goes beyond technical practice. A professor at EM Lyon Business School since 2003, a board member and, since 2025, SME Director on the Executive Board of the France-Brazil Chamber of Commerce (CCIFB), as well as vice-chair of its Legal Committee, Tamy has always maintained close engagement with the business environment and institutions, helping to strengthen relations between Brazil and France.

This recognition has also extended beyond the country’s borders. Recognized by Chambers and Partners France as a foreign expert for Brazil in corporate law and mergers and acquisitions, as well as ranked by Latin Lawyer 250, she continues to be directly involved in the most complex transactions of the Corporate & M&A department

Even at the helm of the firm, Tamy remains close to legal practice. This reflects a vision of leadership in which running a firm means, at the same time, staying close to clients, sharing knowledge and creating opportunities for new professionals to develop. As she herself puts it: “the role of the lawyer goes far beyond simply solving problems; it is about being a strategic partner able to provide trust, security and a long-term vision”.

Anne-Catherine Brunschwig: managing partner no Rio

A firm does not grow solely by opening new offices or expanding its client base, but also through the ability to identify talent, invest in its potential, and assign responsibility.

The opening of the Rio de Janeiro office in 2017 reflects this philosophy well. Its direction was entrusted to Anne-Catherine Brunschwig, today a partner and managing partner of the Rio office.

Specializing in cross-border transactions involving North American and European groups, Anne also heads the firm’s Compliance and Data Protection department. Her institutional path — as vice-president of the Brazil-Canada Chamber of Commerce for three consecutive terms, subsequently statutory legal director and, today, a member of its Board of Directors — reflects a career built on the combination of solid legal expertise and strategic responsibilities.

Her professional development reflects a defining trait of GTLawyers’ culture: the firm’s growth has always gone hand in hand with the strengthening of new leaders, in an environment built on trust, autonomy and complementarity among its partners.

Carolina Moresco: A Successful Career in Brazil

In a law firm, passing on knowledge goes beyond sharing technical aspects. It also means preserving a way of working, of serving clients and of building lasting professional relationships.

This continuity can be seen in the path of Carolina Moresco, partner in the corporate law and mergers and acquisitions practice. Holder of an LL.M. in Contract Law from Insper, she advises Brazilian and foreign companies on investments, commercial contracts and corporate transactions.

Alongside Tamy Tanzilli, Carolina is involved on a daily basis in the most strategic cases handled by the Corporate & M&A department. Her work demonstrates how the firm invests in developing new leaders and in the gradual transfer of the knowledge built up over its history.

Governance Focused on the Future

In little more than a decade, GTLawyers has consolidated its position as one of the leading firms advising foreign companies investing in Brazil.

This position is also reflected in the firm’s international dimension: today, GTLawyers brings together more than sixty lawyers and advises more than three hundred clients, of which around 90% are foreign, with particular emphasis on the French Desk, coordinated by Cécile Verdeaux and dedicated to serving French-speaking clients — one of the distinguishing features underpinning this position of reference.

This growth is the result of its founder’s entrepreneurial vision, but also of the building of a solid team and the progressive strengthening of new leaders. The paths of Tamy Tanzilli, Anne-Catherine Brunschwig and Carolina Moresco illustrate this evolution and show how experience, trust and professional development go hand in hand. As Tamy Tanzilli, founder of the firm, puts it: “female leadership is a sine qua non condition for bringing balance”, without sex, race or origin standing as a barrier to reaching positions of prominence.

More than highlighting individual stories, these three women leaders represent a culture built up over the years, based on trust, people development and continuity. It is this culture that has accompanied GTLawyers since its founding and that continues to guide its evolution.

Choosing between the limited liability company (limitada) and the privately held corporation (sociedade anônima, or S.A.) is one of the first decisions faced by anyone structuring a business or an investment in Brazil, and one of the most lasting: it defines the stability of the ownership base, the degree of formality of the governance and, to some extent, even the cost of running the company. Both types ensure limited liability for their equity holders, but under distinct logics. The first is centered on the relationship between persons; the second, on capital.

As to the governing legislation, the limitada is ruled by a concise chapter of the Brazilian Civil Code (arts. 1.052 to 1.087), with broad contractual freedom and the option of electing the Corporations Law as its supplementary regime. The corporation is governed in full by Law No. 6.404/1976 (the Brazilian Corporations Law, or LSA), a comprehensive and largely mandatory framework.

Recent reforms have brought the two regimes closer together, especially for privately held corporations with annual gross revenues of up to BRL 78 million (Complementary Law No. 182/2021 and Law No. 14.195/2021). The structural differences, however, remain, and they are what should drive the choice.

Stability and transfer of equity interests

The most sensitive difference lies in the exit of an equity holder. In a limitada organized for an indefinite term, any quotaholder may withdraw at any time, without cause, upon 60 days’ prior notice (Civil Code, art. 1.029). The Superior Court of Justice (STJ) has confirmed that this right subsists even where the articles of association elect the LSA as the supplementary regime (REsp 1.839.078/SP, 2021): no contractual arrangement can definitively lock in the ownership base of a limitada. In the corporation, statutory withdrawal rights are limited to an exhaustive list of events (LSA, art. 137), which does not necessarily mean trapping the shareholder: a well-structured shareholders’ agreement can secure a voluntary exit, for instance through call and put options at pre-set price and terms, with the advantage that the exit occurs only when and as the shareholders themselves have agreed, and with specific performance assured (LSA, art. 118, §3). In any scenario, however, disputes tend to concentrate on value. The statutory default criteria are generic (in the limitada, the appraisal of the withdrawing quotaholder’s interest, or apuração de haveres, based on a special-purpose balance sheet; in the S.A., reimbursement at net book value, unless the by-laws provide otherwise) and rarely reflect what the equity holders actually expect, so tailor-made valuation criteria and payment terms, set out in the articles of association, the by-laws or the shareholders’ agreement, remain what prevents litigation

As to the transfer of equity, an assignment of quotas requires an amendment to the articles of association filed with the Board of Trade (Junta Comercial), which makes both the transaction and the identity of the quotaholders a matter of public record; the assignor also remains jointly and severally liable with the assignee, for two years, for the obligations it had as a quotaholder (Civil Code, art. 1.003, sole paragraph). In the S.A., shares are transferred by an entry in the company’s own transfer book, with no public filing, and changes in the shareholder base remain private.

A practical point for foreign groups: the limitada may have a single quotaholder since 2019, while the incorporation of an S.A. requires, as a rule, at least two shareholders (the wholly owned subsidiary, or subsidiária integral, admits a sole shareholder, but only a Brazilian company). For a subsidiary wholly controlled by a foreign investor, the single-member limitada is the natural gateway.

Governance and liability

Until the corporate capital is fully paid in, all quotaholders of a limitada are jointly and severally liable for its payment (Civil Code, art. 1.052), including those who have already paid in their own share. In the S.A., each shareholder is liable only for its own subscription; one shareholder’s default does not contaminate the others.

In day-to-day operation, the limitada runs on a minimal structure, with no mandatory bodies beyond its management, and, since Law No. 14.451/2022, the most relevant matters, including amendments to the articles of association, are resolved by holders of more than half of the capital. The S.A. requires an annual shareholders’ meeting, filed minutes, statutorily codified duties of managers (LSA, arts. 153 to 157) and a specific corporate liability action (art. 159). This formality has been eased in recent years: any corporation may now operate with a single officer (art. 143, as amended by Complementary Law No. 182/2021) and with officers resident abroad, provided a representative is appointed in Brazil (art. 146).

In arrangements among equity holders, the advantage lies with the S.A. The shareholders’ agreement enjoys a solid statutory regime (art. 118), is enforceable against the company and is subject to specific performance. The quotaholders’ agreement, in turn, is accepted in practice, but has no statutory framework of its own, and its enforcement is less certain.

Distribution of profits

In the limitada, the Civil Code imposes no minimum dividend: distributions follow whatever the articles of association provide, and the supplementary application of the LSA’s mandatory dividend is a debated issue, which recommends express contractual treatment. The limitada also allows disproportionate profit distributions, provided they are authorized in the articles (Civil Code, art. 1.007), a useful tool where the partners contribute in different ways.

In the S.A., if the by-laws are silent, half of the adjusted net income must be distributed (art. 202); if the mandatory dividend is later introduced by an amendment to the by-laws, the floor is 25%. Privately held corporations may retain profits if no shareholder present at the meeting objects (art. 202, §3), and those with revenues of up to BRL 78 million and silent by-laws may freely set the distribution at the shareholders’ meeting (art. 294, §4). Equal treatment of shares of the same class remains the rule: differentiated economic rights require distinct classes of shares, and the reach of art. 294, §4 for disproportionate distributions still divides legal scholars, with no ruling from the STJ or from the CVM (the Brazilian securities regulator).

Fundraising and publication requirements

The S.A.’s fundraising toolkit is well established: common and preferred shares in different classes, debentures and subscription warrants. The limitada, historically restricted to quotas, has been expanding its own: preferred quotas are accepted by the DREI (the federal business registration authority) where the articles elect the LSA as supplementary regime; commercial notes (notas comerciais) may be issued since 2021, including with a clause providing for conversion into equity in private offerings; and, since February 2026, the DREI has instructed the Boards of Trade to register debenture issuances by limitadas subject to the LSA’s supplementary regime. This latest development, however, is a recent administrative guideline, not yet endorsed by the CVM or by the courts: for sizeable fundraisings or those involving institutional investors, the S.A. remains the safe vehicle and, in practice, the most widely used.

As to the transparency of results, the limitada is not required to publish financial statements, whatever its size: both private-law panels of the STJ have rejected the requirement, including as a condition for filing corporate acts with the Board of Trade (REsp 1.824.891/RJ, 3rd Panel, 2023; REsp 2.002.734/SP, 4th Panel, 2026). The S.A., by contrast, publishes its corporate acts: electronically, if annual revenues do not exceed BRL 78 million; above that threshold, in a widely circulated newspaper, with a printed summary and the full version available online (art. 289), a regime upheld by the STF, Brazil’s Federal Supreme Court (ADI 7.194, 2024).

Comparative table

How to decide

There is no best type in the abstract; there is the right type for each operation. The limitada favors concentrated control structures, subsidiaries of foreign groups and ventures that prize simplicity, confidentiality of results and flexibility in profit distribution. The privately held S.A. makes sense where equity holders with different profiles coexist, where stability of the ownership base and a fully enforceable shareholders’ agreement are sought, or where the plan includes structured fundraising, the entry of investment funds or an M&A transaction on the horizon.

Nor is the decision final: converting from one type into the other is a common step in the life of companies, often the natural move between set-up and expansion. GT Lawyers assists investors, notably French and European, in structuring their operations in Brazil, from the choice of the corporate form to its implementation, and even its later change and adjustment to each client’s current stage.

This article is for information purposes only and does not constitute legal advice. Published in July 2026, based on the legislation then in force.

By Tamy Tanzilli — GT Lawyers

Since the provisional entry into force of the partnership agreement between the European Union and Mercosur on 1 May 2026, the question of how European companies — particularly SMEs — can establish themselves in South America, and in Brazil specifically, has become one of the most strategic issues of the year. At a time when economic blocs are being reconfigured, the Brazilian market is crystallizing investors’ ambitions as they search for new growth drivers. But is it truly an eldorado for mergers and acquisitions (M&A)? Answering that question requires examining the legal foundations of the treaty, the realities of the market, and the operational constraints that remain.

I. A Confirmed Structural Attractiveness

Before even discussing the legal mechanisms, it is worth recalling a fundamental economic reality. Together, the European Union and the four Mercosur member states (Argentina, Brazil, Paraguay, Uruguay) represent a market of more than 720 million consumers, according to European Commission data. For a company seeking international growth, this critical mass is in itself a decisive argument.

Brazil holds a leading position within this bloc. According to the Pesquisa Fusões e Aquisições published by KPMG Brasil in February 2025, the Brazilian market recorded 1,582 M&A transactions in 2024, a 5% increase over 2023 (1,505 transactions), ending two consecutive years of decline. Domestic deals accounted for 981 transactions, while 601 involved foreign parties, including 394 acquisitions carried out by majority foreign-owned groups. The United States was the leading foreign investor (259 transactions), followed by Canada (35), the United Kingdom (33), Spain (23), and France (18). Furthermore, Brazil maintains its regional leadership: according to the Aon/TTR Data report of February 2025, it accounted for 1,674 announced and closed transactions in 2024, out of a Latin American total of 2,904, confirming its position as the region’s leading market. The leading sectors are technology, renewable energy, financial services, and agribusiness.

On the legal side, the EU–Mercosur agreement establishes a favorable framework for these operations. Article 1.2(f) sets out, among its fundamental objectives, the improvement of conditions for the establishment of businesses, creating a stable, predictable, and non-discriminatory legal framework for economic operators from both blocs. This provision underpins the entire investment chapter of the treaty.

One of the most significant contributions to M&A operations lies in Chapter 10 of the agreement, on services and the establishment of businesses. Article 10.3.1 enshrines the principle of non-discrimination: European companies established in Brazil must be treated comparably to local companies or to investors from other Mercosur countries, provided they meet the applicable establishment criteria. This provision should not, however, be read as full equivalence: Article 10.3.1 does not remove the sectoral reservations listed in the annexes (notably Annexes 10C and 10-E), and several requirements of Brazilian domestic law remain fully applicable, as discussed below.

The treaty also includes a chapter dedicated to SMEs (Article 14.1 et seq.), providing for the creation of an SME coordinator with representation from each party (Article 14.3) and mechanisms for sharing information on marketaccess conditions (Article 14.2). This dimension is all the more relevant given that SMEs represent 98% of Brazilian companies, according to European Commission data.

II. Acquisition: The Ideal Entry Vector to Scale Up Quickly in Brazil?

For a European company seeking to establish itself quickly in Brazil, a merger or acquisition (M&A) is often the most attractive entry vector, since it provides access, in a single operation, to operational assets, an in-place workforce, and an already-established commercial network.

The advantages of acquisition

• Immediate market access: existing customers, teams, contracts, and operations make it possible to skip the often lengthy start-up and visibility-building period.
• Strong acceleration of development: the acquirer immediately benefits from operational, commercial, and human synergies, without waiting for a new structure to organically scale up.
• Immediate strategic positioning: acquiring an established player confers local legitimacy that years of commercial effort would not necessarily have achieved as quickly.
• Business continuity: the target retains its contractual relationships, regulatory authorizations, and customer base, preserving the operation’s operational value.

Risks to anticipate

• Latent liabilities: Brazilian law provides for joint and several liability in tax and social security matters. The acquirer can be exposed to the target’s tax, social security, and environmental debts predating the transaction, even where these were not apparent at the time of negotiation. Thorough due diligence — tax, social security, environmental, and regulatory — is therefore essential to identify the level of risk before committing. Thorough due diligence — tax, social security, environmental, and regulatory — is therefore essential to identify the level of risk before committing.
• Cross-cultural integration: intercultural management is one of the most underestimated success factors. French companies that neglect this aspect — management style, internal communication, relationship to hierarchy — encounter significant difficulties in their post-acquisition operations.
• High transaction costs: audit, negotiation of definitive agreements, take-over, and legal and tax advisory fees — the total cost of the project can be significant.
• Sometimes rigid governance: certain Brazilian corporate structures maintain consent clauses, shareholders’ preemption rights, or blocking mechanisms that complicate the acquirer’s takeover and, where applicable, exit.

These risks are real but manageable. Above all, they illustrate the need for rigorous preparation ahead of any M&A operation in Brazil. Sectors subject to certain restrictions on foreign investment — notably energy, infrastructure, and rural land (Annexes 10-C and 10-E of the agreement) — call for specific upfront analysis. Outside these cases, however, the Brazilian market remains broadly open, and the figures bear this out: 601 crossborder transactions in 2024, including 394 led by majority foreign-owned groups (KPMG Brasil, February 2025).

III. Legal and Tax Points of Vigilance

1. The Requirement of Legal Representation

Under Brazilian law, notably under the Civil Code (Article 1,134) and the rules governing corporations (Corporations Law No. 6,404/76), any foreign entity wishing to register or acquire a company must appoint a legal representative residing in Brazil. This power-of-attorney requirement — the mandato — is more than an administrative formality. It carries significant practical consequences: liability of the representative, the need to identify a trustworthy profile with knowledge of local law and practice, and risks in the event the appointed representative defaults. This constraint effectively conditions the validity of many operations and requires securing local legal counsel from the earliest stages of an establishment project.

2. Prior CADE Review

Any merger transaction likely to produce effects within Brazilian territory is subject, under certain conditions, to prior review by the Conselho Administrativo de Defesa Econômica (CADE), Brazil’s competition authority. Under Article 88 of Law 12,529/2011, notification is mandatory when at least one of the groups involved has recorded annual gross revenue in Brazil equal to or greater than 750 million reais, and another group has recorded at least 75 million reais. These thresholds are cumulative. The review process can take up to 240 days, extendable by a further 90 days. Completing the transaction before CADE’s decision exposes the parties to significant fines (gun-jumping) and to the nullity of acts already carried out. This review period must be anticipated from the earliest stage of structuring the transaction.

3. The Impact of Tax Reform: A Critical New Development for European Investors

The EU–Mercosur agreement does not harmonize direct taxation. Tax rates applicable to companies and to income flows vary across Mercosur countries, and existing bilateral tax treaties between member states and Mercosur countries remain essential to optimizing the structuring of cross-border investments.

Against this backdrop, a far-reaching tax reform entered into force in Brazil on 1 January 2026 and directly affects the expected return calculation of an acquisition. Law No. 15,270/2025, enacted on 26 November 2025, reintroduced a 10% withholding tax (IRRF) on profits and dividends distributed by a legal entity to an individual resident in Brazil, where the monthly amount distributed by a given source exceeds 50,000 reais. For non-residents — including European investors — the 10% withholding applies regardless of the amount distributed, with no exemption threshold. This measure, confirmed by the Receita Federal in its Normative Instruction RFB No. 2299 of 18 December 2025, ends nearly thirty years of full exemption on distributed dividends and materially changes the return-on-investment calculation for any European acquirer.

In addition, the reform of Brazil’s VAT system — the creation of the CBS and IBS taxes, being rolled out through 2033 — is reshaping the tax-burden structure across sectors. In an acquisition, a target’s valuation can shift significantly depending on its sectoral positioning relative to this reform. Comprehensive tax due diligence, covering both the IRRF regime on dividends and the indirect effects of the reform, is essential before any asset valuation.

Conclusion

Brazil, anchored in the momentum of Mercosur and in the historic agreement concluded with the European Union, stands out as one of the most attractive destinations for M&A operations worldwide. Article 1.2(f) of the treaty lays the foundations for a stable and non-discriminatory establishment framework, and Article 10.3.1 opens new prospects for European investors. Hundreds of foreign companies take this step every year. The market is not inaccessible — it is demanding.

Legal challenges remain: the requirement of local legal representation, prior CADE review, latent liabilities to be identified through due diligence, and the new 10% withholding tax on dividends paid abroad since January 2026. These constraints are real — but they are known, documentable, and manageable with the right support. They are an integral part of the acquisition strategy.

The EU–Mercosur agreement has opened a historic strategic window. Companies that know how to anticipate it — by rigorously structuring their operations, securing specialized legal counsel, and factoring in Brazil’s tax and regulatory specifics from the outset — will give themselves the best chance of seizing an opportunity that the numbers, for their part, do not call into question.

Sources and References

– EU–Mercosur Partnership Agreement, full text, OJ L 2026/184 of 27 February 2026 — Articles 1.2(f), 10.3.1, 10-C, 10-E, 14.1, 14.2, 14.3

– European Commission, “The EU–Mercosur trade agreement,” commission.europa.eu, accessed June 2026

– KPMG Brasil, Pesquisa Fusões e Aquisições – Q4 2024, February 2025 (1,582 transactions, +5% vs. 2023)

– Aon / TTR Data / Datasite, Latin America M&A Report 2024, February 2025 (Brazil: 1,674 transactions, regional leadership)

– Brazilian Civil Code (Law No. 10,406/2002), Article 1,134 — legal representation of foreign companies

– Corporations Law (Law No. 6,404/76) — joint-stock companies

– Law No. 12,529/2011, Article 88 — mandatory notification thresholds for CADE (R$750 million / R$75 million)

– Law No. 15,270/2025, enacted 26 November 2025 — 10% withholding tax on dividends

– Receita Federal, Normative Instruction RFB No. 2299 of 18 December 2025 — implementation of Law 15,270

– Receita Federal, Q&A on dividend taxation, published 16 December 2025

Complementary Law No. 224/2025 introduced a linear 10% reduction across various tax benefits and incentives previously in force, including several cases of PIS and COFINS relief. As a result, as of April 1, 2026, transactions that had previously benefited from an exemption or a zero rate for these contributions became subject to taxation equivalent to 10% of the standard rate, depending on the applicable regime (cumulative or non-cumulative).

The measure, which might seem reasonable from an equal-treatment standpoint, introduced an odd break in tax neutrality in Article 4, § 7, which bars the purchaser of goods and services from taking PIS/COFINS credits:

“the application of the provision set out in item I of § 4 [10% of the standard rate for cases of exemption and zero rate] of this article does not allow the purchaser of goods and services to take credits that, under the legislation in force, would be barred as a result of the exemption or the application of the zero (0) rate.”

Despite the ambiguity of this wording, Normative Instruction RFB No. 2,305/25 and the Brazilian Federal Revenue Service’s (“Receita Federal”) “Questions and Answers” reproduced the same language, without any further clarification. 

Since Complementary Law No. 224/2025 itself imposed a minimum tax burden (10% of the standard rates) on transactions that had previously benefited from an exemption or zero rate, those transactions are no longer fully relieved of tax, effectively ending the exemption or zero-rate situations. Analyzing the wording of the provision, we understand that there are at least two possible readings:

• Full denial of credit: the rule would maintain the prohibition on taking credits regardless of the effective taxation (10% of the standard rates), by reference to the prior legislation, which barred the taking of credits in cases of exemption or zero rate;
• Proportional credit: the credit denial would apply only to the untaxed portion (90% of the standard rate, which remains relieved of tax), making it legitimate to take a credit on the 10% portion that is actually subject to PIS/COFINS.

The first interpretation is entirely anomalous, as it violates both the principle of equal treatment and the non-cumulative nature of PIS/COFINS. After all, denying the PIS/COFINS credit in a situation where the prior stage was subject to tax, even partially, ends up compounding the taxation of these contributions and distorting the pricing of goods and services, calling into question the very rationale of the non-cumulative regime. In other words, it undermines the very purpose of non-cumulativity.

The second interpretation, although it is the one that best aligns with non-cumulativity and equal treatment, requires the interpreter to delve further into the constitutional system and, above all, bear a heavier argumentative burden, insofar as it departs from the literal wording of § 7.

Nevertheless, we understand that the second interpretation is the only one consistent with the Federal Constitution, particularly in light of equal treatment, tax fairness, and non-cumulativity.

In this context, some preliminary injunctions (“liminares”) have already recognized that Article 4, § 7 of LC 224/2025 cannot override the non-cumulative nature of PIS/COFINS, granting taxpayers the right to take proportional PIS/COFINS credits (10% of the overall 9.25% rate).

Given this scenario, companies that purchase goods and services affected by the linear reduction of benefits under LC 224/2025 may consider the following strategies:

• Take the proportional credit (0.925%) and assume the risk of a possible challenge by the Federal Revenue Service, with the ability to mount a defense later at the administrative level (supported by a technical legal opinion grounded in the Constitution);
• File a writ of mandamus (“mandado de segurança”) seeking a judicial decision recognizing the right to the proportional PIS/COFINS credit (0.925%), including a request for interim relief (“liminar”) to have that right recognized immediately.

The absence of clear regulations from the Federal Revenue Service, together with the judiciary’s initial signals, suggests that this issue is likely to become a significant area of tax litigation in 2026.

For further information on this topic, our tax team remains available.

We share the guide “Investing in Brazil: An overview of the legal framework,” originally presented by GTLawyers at WebSummit Rio and fully updated with information current as of June 2026. 

Authored by Tamy Tanzilli, Estevão Gross, Carolina Moresco, Cécile Verdeaux, and Anne-Catherine Brunschwig, this document sets out, in summary form, the four key steps for a successful market entry: structuring commercial relationships, incorporating a subsidiary, understanding taxation (including the ongoing tax reform transition), and hiring staff.

Click Here to download the complete guide.