China and Brazil: Corporate, Tax, and Regulatory Frameworks Comparison

1. Introduction

China and Brazil are among the world’s largest economies, ranking second and eleventh, respectively, in terms of GDP, and hold strategic positions in international trade. Although both countries offer significant market potential, their corporate, tax, and regulatory frameworks differ substantially, reflecting distinct institutional histories, economic models, and political priorities.

China has a legal system that has evolved over successive historical periods. During the Imperial Era, the model of governance was based on Confucian moral philosophy and Legalist administrative control. At the end of the Qing Dynasty and the beginning of the Republic, established in 1912, the country underwent legal reforms aimed at modernization, notably drawing inspiration from German civil law. Later, with the Proclamation of the People’s Republic of China in 1949, the Soviet legal system exerted an influence. Finally, in the wake of the Reform and Opening-up in 1978, China developed an extensive legal codification to underpin the new era of economic development. In particular, Chinese corporate law went through significant changes during this transition to a socialist market economy in which commercial enterprises and foreign investment were developing. The Company Law of the People’s Republic of China, which came into force in 1994 and has since undergone amendments, forms the basis of current Chinese corporate law and was notably inspired by German law, particularly regarding the incorporation of concepts of corporate governance, joint-stock companies, and limited liability companies.

Brazil, for its part, saw the introduction of the Roman-Germanic tradition (civil law) into its legal system during the Portuguese colonial period. Later, following independence in 1822, the system was modernized based on continental European models, notably German, French, and Portuguese law, thereby consolidating the tradition of a focus on written law. Since then, the legal system has undergone reform processes through the incorporation of major codes of law, such as the Civil Code, the Penal Code, and the Code of Civil Procedure, and, finally, through the Federal Constitution of 1988, which constitutes the central pillar of the Brazilian legal system. Regarding corporate law, the Brazilian Corporate Law (Law No. 6,404/1976), influenced by German and U.S. law, and the Civil Code (Law No. 10,406/2002) are central pillars. In particular, the former addresses topics such as corporate governance and shareholder protection, while the latter governs limited liability companies and other corporate forms.

In this regard, the purpose of this article is to present a basic comparison between China and Brazil from the perspective of the legal framework for business operations by foreign companies, covering company formation, taxation, the regulatory environment, and general business aspects.

2. Business Formation and Corporate Structures

2.1. China

In China, the legal basis for establishing a business is the Company Law. Most sectors are fully open to foreign investment, without the need for prior approval from the Chinese government. However, sectors included in the Negative List for Foreign Investment (“Negative List”) are subject to restrictions ranging from a minimum percentage of Chinese ownership to a total ban on foreign investment in the sector. This list includes activities such as news agencies, agriculture and livestock, tobacco trade, education, nuclear energy, mining (particularly the extraction of rare earth minerals, radioactive materials, and tungsten), genetic research, film production, television and radio production, seed selection and production, telecommunications, water and air transport, and domestic transport, among others.

The most common business structures for foreign investors are the Wholly Foreign-Owned Enterprise (WFOE), Representative Office (RO), Joint Venture (JV), and Foreign-Invested Commercial Enterprise (FICE). The WFOE is the most common corporate structure for foreign companies, operating similarly to a Brazilian limited liability company and allowing 100% of its capital stock to be held by foreigners. Its incorporation can take two to nine months, depending on the size of the company and the complexity of its operations. There is no minimum share capital requirement, nor a minimum investment requirement for forming a WFOE (with the exception of activities involving regulated sectors such as securities, insurance, and banking). However, the subscribed share capital must be fully paid up within five years of the company’s incorporation.

The RO is the easiest type of foreign investment entity to establish. Since it takes about two months to incorporate and does not require registered capital, it is commonly seen as a gateway for those who wish to familiarize themselves with the Chinese market. However, its scope of operations is limited: lacking legal personality, it functions solely as an extension of the foreign company’s activities in China. An RO cannot engage in profit-making activities and is restricted to market research, corporate promotion, and establishing relationships related to the sale of products, services, or local procurement. However, even without generating revenue, it is still subject to Chinese taxes. Finally, the RO’s parent company must have been in existence for at least two years for the RO to be established.

The JV is an alternative that allows foreign investors to operate in sectors listed in the Negative List that require a Chinese entity to be part of the company’s ownership structure, such as the medical industry and aviation solutions in agriculture, fisheries, and forestry. Structured as a limited liability company with a local entity as a partner, it can present complexities for foreign companies accustomed to holding full corporate control of their international subsidiaries, and the degree of decision-making independence is lower compared to a WFOE. The average time to establish a JV is five to six months, and no minimum share capital is required. However, like WFOEs, JV partners must fully pay in their capital within five years of the company’s incorporation.

Finally, a FICE can be established either as a WFOE or a JV, and is intended for commercial activities in China, including retail, franchising, and distribution. It is the ideal structure for foreign companies that purchase Chinese products for redistribution in the local market, given the relatively low incorporation costs; the ability to centralize purchasing and logistics activities (such as sourcing, exporting, quality control, etc.) with greater operational control and efficiency compared to management from abroad, and the elimination of additional logistics costs, customs duties, and VAT that would result from intermediation by companies outside the country. The average time to become fully operational ranges from four to six months, and there is no minimum capital requirement—although, in the case of companies located in industrial parks or specific sectors, a capital contribution may be required within specified timeframes.

2.2. Brazil

In Brazil, the formation of companies is governed primarily by the Civil Code, the Brazilian Corporate Law (Law No. 6,404/1976), and supplementary regulations issued by commercial registries, the Federal Revenue Service, and other regulatory agencies. The most common corporate structures are the limited liability company (LTDA) and the corporation (S.A.), with the LTDA being widely used by small and medium-sized businesses due to its simplicity and contractual flexibility.

In a limited liability company (LTDA), liability is limited to the shareholder’s equity interest, and dividends are distributed in proportion to each partner’s share—or disproportionately, if so provided in the company’s articles of incorporation. In a corporation (S.A.), however, shareholders’ liability is limited to the value of the shares they have purchased, and it is also possible to issue preferred shares, which entitles shareholders to receive minimum or fixed dividends.

In recent years, the country has made progress in streamlining and reducing the bureaucracy involved in the business registration process, with the implementation of the so-called “Redesim” system and the integration of tax and commercial registries. Even so, starting a business can involve multiple steps, especially when state or municipal licenses are required, such as operating permits and environmental authorizations.

Foreign equity participation is generally permitted, with specific exceptions in sectors considered strategic (such as media, nuclear energy, and agricultural activities in certain regions). It should be noted that foreign investments of US$ 100,000 or more (or the equivalent in other currencies) must be reported to the Central Bank of Brazil.

2.3. Conclusion

3. Tax Structure

3.1. China

The Chinese tax system is more centralized and is generally considered simpler from an operational standpoint.

In China, Tax Resident Enterprises (TREs) are subject to Corporate Income Tax (CIT) on their worldwide revenue. A company that is not a TRE and does not have a registered address in China is subject to taxation only on revenue generated within the country. Otherwise, the non-TRE company must pay CIT on both income earned within Chinese territory and abroad. The standard CIT rate is 25%, with a reduction to 10% or 15% for companies under preferential regimes, such as research and development, software, high technology, low-profit companies, or those located in special economic zones (e.g., Hainan, Shenzhen, etc.). Unlike in Brazil, there is no state or provincial income tax, as CIT is a national tax.

In addition, the supply of goods and services in China is subject to Value-Added Tax (VAT), with a standard rate of 9% or 13%, depending on the type of good or service. Goods such as basic foodstuffs or books may be subject to lower rates or even be tax-exempt.

Finally, China’s tax burden is significantly lower than Brazil’s, at around 13% to 15%, and, when social security contributions are included, it reaches approximately 21%.

3.2. Brazil

The Brazilian tax system is widely recognized for its complexity. Taxes are levied at three levels of government (federal, state, and municipal), including taxes, fees, and contributions. At the federal level, the main taxes include the Corporate Income Tax (IRPJ), the Social Contribution on Net Income (CSLL), the Social Integration Program (PIS), and the Contribution for Social Security Financing (COFINS). At the state level, the Tax on the Circulation of Goods and Services (ICMS) is levied on the circulation of goods and certain services, while municipalities collect the Tax on Services of Any Nature (ISS) on services. A 10% tax rate also applies to profits and dividends distributed to partners residing abroad.[1]

The cumulative nature of the tax system, the multitude of special tax regimes, the high level of tax litigation, and the lack of predictability due to the ongoing tax reform are factors that significantly impact the business environment. Furthermore, the country has a medium-to-high tax burden compared to the global average, reaching 32.2% of GDP. On the other hand, Brazil offers significant tax incentives, both sector-specific and regional, especially for industrial, infrastructure, and innovation projects.

However, the Tax Reform, which took effect in 2026 and will implement changes during a transitional period extending through 2033, aims to simplify and reorganize in particular consumption taxes in Brazil. In this regard, the five taxes — PIS, COFINS, IPI (Tax on Industrialized Products) (partially), ICMS, and ISS — will be replaced by two new taxes: the CBS (Contribution on Goods and Services) at the federal level, and the IBS (Tax on Goods and Services) at the municipal and state levels, bringing the current tax system closer to the VAT (Value Added Tax) model. Additionally, taxation will now be based on the destination rather than the origin; that is, taxes will be collected at the point of final consumption rather than at the point of production. Furthermore, companies will now be able to deduct from the tax the taxes paid in previous stages of the production chain. Furthermore, a specific Selective Tax (IS) was created to be levied on products harmful to the environment or health, such as alcoholic beverages, cigarettes, and fossil fuels, with the aim of discouraging consumption. Previously, this tax burden for this purpose was spread across various taxes.

3.3. Conclusion

4. Regulatory Environment

4.1. China

In China, the regulatory environment is characterized by strong state centralization, primarily through regulatory bodies such as the State Administration for Market Regulation (SAMR) — which is responsible for ensuring free competition, product quality standards, and business registration — and the Ministry of Commerce (MOFCOM), which oversees foreign investment, including the approval of foreign companies entering the market.

Although the country has made significant progress in codifying laws and standardizing regulations, guidelines, regulations and public policies can be changed relatively quickly — often with immediate effect — reflecting economic, industrial, and strategic priorities set by the government. Predictability stems less from long-term regulatory stability and more from companies’ alignment with current public policies, as well as from ongoing interaction with local authorities. Furthermore, the practical application of rules may vary by region, sector, and level of government involved, requiring foreign companies to adopt a dynamic regulatory approach that is sensitive to the institutional context and prevailing policy guidelines.

4.1.1. Compliance in China

For the purposes of this article, the main laws governing compliance in China are: (i) the Personal Information Protection Law, which regulates the collection, processing, and transfer of personal data in China; (ii) the Data Security Law, which establishes a data classification system (core, important, and general), with data classified as “core” and “important” subject to rigorous government review before leaving the country; and (iii) the Protection of State Secrets, which restricts the sharing of data regarding areas such as science and technology.

4.2. Brazil

The Brazilian regulatory environment is characterized by an extensive, detailed, and highly formalized regulatory framework, based on the Federal Constitution, sector-specific laws, and a large volume of subordinate legislation. Economic regulation is primarily carried out by independent regulatory agencies, such as ANEEL (energy), ANATEL (telecommunications), ANVISA (health and sanitary surveillance), and the CVM (capital markets), which possess regulatory, supervisory, and enforcement powers. This model provides a high degree of formal legal certainty, with written rules, defined procedures, and broad scope for administrative and judicial oversight. On the other hand, the multiplicity of regulations, the overlap of jurisdictions among federal entities, and the frequent judicialization of disputes result in high compliance costs, longer regulatory adaptation times, and a constant need for specialized legal counsel, especially for companies operating in regulated sectors.

4.2.1. Compliance in Brazil

Brazilian legislation on this matter is based on the following three pillars: (i) the Anti-Corruption Law (Law No. 12,846/2013), which establishes strict liability (without the need to prove intent) for legal entities for acts harmful to the national or foreign public administration; (ii) Federal Decree No. 11,129/2022, which regulated the Anti-Corruption Law and defined the official parameters for Integrity Programs, according to which a company must prove that its compliance program meets specific government criteria (e.g., due diligence); and, finally, the LGPD (Data Protection Law – Law No. 13,709/2018), which regulates the processing of personal data with a focus on individual privacy, punishing, through administrative sanctions, the leakage and misuse of data.

4.3. Conclusion

5. General Aspects of the Business Environment

From both a cultural and practical standpoint, doing business in China requires an understanding that long-term relationships, trust, and strategic alignment are key elements. While contracts are important, the relational context and ongoing interaction with partners and local authorities play a decisive role in the success of business ventures.

The business environment in Brazil, in turn, places a high value on personal relationships, flexible negotiation, and the ability to adapt to a complex institutional landscape. Contracts tend to be detailed and lengthy, due to concerns about regulatory and legal risks.

6. Conclusion

China and Brazil offer significant opportunities but require distinct legal and strategic approaches. China combines greater administrative predictability with strong state intervention and sector-specific restrictions on foreign investment, while Brazil features a sophisticated yet complex and highly litigious legal environment. For companies and investors, understanding these differences is essential for efficiently structuring operations, mitigating risks, and capitalizing on opportunities in each market.

[1] A measure recently enacted by Law No. 15,270/2025, which may be subject to changes or amendments resulting from potential legal disputes.