Differences between Branch, Subsidiary, and Representative Office in Brazil

When foreign companies consider establishing a presence in Brazil, one question almost always arises: what is the best legal structure to adopt?It is very common for international investors to have doubts about the differences between a branch (filial in Brazilian Portuguese), a Brazilian subsidiary (subsidiária), and a representative office (escritório de representação).

These choices have a direct impact on costs, taxation, legal liability, and the overall business strategy.

• Branch (filial in Portuguese)

• Subsidiary (subsidiária under Brazilian law)

• Representative Office (escritório de representação)

1. The Branch in Brazil (Filial)

The branch (or permanent establishment) corresponds to what Brazilian law calls a filial.

• Legal nature: not an autonomous entity; it has no separate legal personality and is fully dependent on the foreign parent company.

• Prior authorization: its creation requires a Federal Government decree, following a complex procedure with the Ministry of Industry and Commerce.

• Liability: the parent company bears unlimited liability for all obligations in Brazil.

• Taxation: taxed as a Brazilian company.

• Costs: very high, due to bureaucracy and the need for government authorization.

  
  

👉 Key takeaway: in Brazilian Portuguese, filial = “branch” in English.

Conclusion: despite its apparent simplicity, this model is not recommended, as it combines restrictions on commercial activities with heavy bureaucracy.

2. The Subsidiary (Subsidiária)

The subsidiary is the most frequently chosen structure by foreign companies to establish in Brazil. Unlike the branch (filial in Portuguese), the subsidiary (subsidiária under Brazilian law) is an autonomous entity, incorporated under Brazilian law, but wholly or partially owned by the foreign parent company.

• Legal nature: a local company (usually a Limitada – LLC, or an S.A. – corporation), with its own legal personality.

• Liability: limited to the company’s share capital, protecting the parent company.

• Taxation: subject to the regular Brazilian corporate tax regime.

• Costs: moderate, with no requirement for a government decree.

• Advantage: the most widely used structure by multinationals, offering security, flexibility, and legal protection.

  
  

👉 Key takeaway: in Portuguese, subsidiária = “subsidiary” in English.

Conclusion: for these reasons, the subsidiária is, in practice, the preferred structure for most foreign investors in Brazil.

3. The Representative Office (Escritório de Representação)

The representative office is an administrative structure, without profit-making activities.

• Activity: limited to representation, market research, and prospecting functions.

• Prior authorization: like the branch, it also requires a Federal Government decree.

• Liability: unlimited for the parent company.

• Costs: high compared to its limited usefulness, since it cannot issue invoices for services or sell products.

👉 Conclusion: despite its apparent simplicity, this model is not recommended, as it combines restrictions on commercial activity with heavy bureaucracy.

Final Note for International Investors

Choosing the right legal structure in Brazil is a strategic decision that impacts taxation, liability, and operational flexibility. While the branch and representative office may seem attractive at first glance, in practice the subsidiary is the structure that best balances compliance, cost, and legal security.

📩 If you are considering investing in Brazil, I would be glad to assist you through each step of the process — from choosing the right corporate structure to ensuring tax and legal compliance. Our email: iurevieira@pontesvieira.com.br