2 7 th March 2014

1. UK Trade & Investment Export Support to Companies in the Global Sports Market Case Study - Brazil 27th March 2014

2. So…What´s going on in Brazil? 2 2

3. Entering the Brazilian market • Before entering the Brazilian market - be aware of various import duties and indirect taxes. This can significantly increases the cost of exports to Brazil and can erode your profit margins if you don’t take care. • Beware of local business partners telling you that costs and corners can be cut, for example through the use of customs brokers (despachantes) – they cannot be • If expanding organically into the market note that it is impractical to operate through a branch; always register a limited company. No lower limit – it is compulsory to register in order to trade. • Setting up a company in Brazil is a bureaucratic process; however it is not difficult if you know the ropes. • If acquiring a Brazilian target, it’s important to understand Brazilian business culture in negotiating with vendors, and perform Due Diligence. • Multiple taxes levied at Federal, State and Municipal level. A variety of indirect taxes and importation duties apply. Rates vary between states and municipalities. • Effective up-front supply chain planning can be critical, from both a tax and labour perspective. For example, imports can be routed in a tax and cost-efficient way through different Brazilian cities/states that are not obvious to the uninitiated. Doing things in Brazil is almost always cheaper for tax than importing. • Brazil was one of the first countries to adopt online filing, not just tax returns but all invoices. Companies must therefore review tax returns to ensure that all entries can reconciles to other electronically filed data. • Accurate compliance is important; tax inspectors can be aggressive and informal negotiations unusual. Litigation is rife. • Penalties for under declared/late taxes relatively severe – between 20% and 75% of tax due and are rarely waived, although there are occasional amnesties. • Small companies (turnover less than R$72M) can adopt the simple “Deemed Profit” regime – tax is based on percentage of turnover regardless of profitability and complexities such as transfer pricing can be avoided. • Brazilian States offer significant tax incentives, such as regional grants, R&D credits and tax exemptions. There are often under-used through lack of awareness by foreign multinationals generally because the State authorities do no widely publicise their existence.

4. Brazilian tax: Perception & Reality • I heard that… • Brazil has a very complicated tax system. • The truth is…. • Brazil has a very complicated tax system. 4

5. Brazilian Tax :Overview of Tax Rates Key taxes in Brazil Federal taxes State taxes Municipal taxes Source: Deloitte research & analysis; The Economist; The Wall Street Journal; International Tax Review

6. 2014 FIFA World Cup Tax Benefits • The Tax benefits atFederal Level are available to: • FIFA; • FIFA Subsidiary in Brazil; • FIFA Confederations; • FIFA members foreign Associations; and • FIFA Service Providers and FIFA Commercial Affiliates domiciled abroad, which are broken down in the executive Branch, or through individual or company they hired to represent them, subject to the requirements established by the Federal Revenue Service of Brazil. • The entities mentioned above will be able to import food, medical supplies, including pharmaceuticals, fuel and office supplies, trophies, medals, plaques, figurines, badges, pennants, flags, commemorative objects, promotional material, printed brochures and other assets with similar purpose, to be freely distributed or used in events, goods of types and in quantities normally consumed in sports the same magnitude, and other non-durable goods, considered as those whose life is up to one (1) year with exemption of taxes levied on import of goods. • Additional Benefits are available in some States and Municipalities

7. Some Useful Tips – it’s not all bad news • Always take advice. Do not underestimate the complexity or profit and risk implications if you get your cost base wrong: • Compliance matters: the tax authorities are litigious. You may not avoid tax assessments and penalties completely, but you will significantly reduce your risk. • Brazilian States have grants and incentives: They are willing to negotiate with nwbusiness ventures. • Specific incentives are available for: 2016 Rio Olympic Games and the World Cup • Dividends can be paid without withholding tax, although withholding tax applies to most methods of cash repatriation, • Deloitte has 11 offices in Brazil to Support You: Can handle all areas of tax compliance and a specialized group in Brazil in London. 7

8. Deloitte Martin Jaycock Partner Brazil Services Group & International Tax Deloitte LLP +44 20 7007 0682 +44 7831 158959 mjaycock@deloitte.co.uk Alberto Bertocco Senior Manager Brazil Services Group & Indirect Taxes Deloitte LLP +44 20 7303 6139 +44 7867 156539 albertocco@deloitte.co.uk 8

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