Académique Documents
Professionnel Documents
Culture Documents
Photo by looking4poetry
A recently published document on payment processing in these countries recited impressive economic data and outlined the basics of payment
North America: +1 604 689 0399 | Europe: +353 (0)61 714360 | www.pacnetservices.com
Inflated prices would be a positive thing, if it werent for the bureaucracy and practical barriers to sales in the Brazilian market. Being able to accept payments in the ways Brazilians like to pay - which are unique - is the key to success. Unfortunately, accepting local payments means paying local taxes.
Tax is Everywhere
Although Brazilian commerce restrictions have loosened slightly in the last decade, the countrys social and political landscape still bears many of the marks of totalitarianism. One of the most prevalent of these is the national ID system. Every person and every company has a tax number, which is publicly available information. For individuals the code is known as a CPF, and for companies it is a CPNJ. It is virtually impossible to do anything financially in Brazil without one. Without a tax number, neither an individual nor a company can open a bank account. Money cannot be received into a bank account unless the sender has the tax number of the payee. An individual cannot open a company or serve as a director of one without a tax number, and a company cant import goods or services without one. The tax number is not secret and enjoys no privacy protection whatsoever; for example, if you key in an individuals bank account number to make a transfer at an ATM, the CPF number will often be displayed on the confirmation screen. With some difficulty and a suitable degree of explanation and justification, it is possible for a foreigner to obtain a Brazilian tax number. This quest is not for the faint of heart; nevertheless, trying to establish a meaningful local presence in Brazil without one is a fools errand.
No Local Presence?
If, and these are big ifs, you are only going to sell product valued at $50 USD or less, accept only cheques for payment (for Rs. 100 or less, never more) and ship it to consumers from outside the country, you dont need a local presence. For any other payment types, and if you intend to import your product in bulk and distribute it in country, then you need a local presence for various reasons. Each of these conditions can be prohibitive, for reasons that will become plain.
North America: +1 604 689 0399 | Europe : +353 (0)61 714360 | www.pacnetservices.com
by cheque; your payment processor will not be involved in importation, and the reliability of the mail system for items shipped from outside the country is much lower than internal shipment. So not only will you have a price restriction but you will need to figure in a percentage for lost goods which have to be replaced. A successful sales programme in Brazil is going to require local handling, thats just the way it is. Digital delivery of products is more exciting in this context, in that there are no postal losses.
postal channel is a possibility. And finally, just to confuse the picture further: many types of goods shipped into Brazil require import permits in addition to payment of taxes. It can, and usually does, require many months after application by a local agent (with CNPJ, of course) to obtain the import permit along with a classification and valuation of the product. An obvious example is cosmetic products - highly desirable in Brazil and commanding strong retail prices, but fraught with bureaucracy, rules and taxes.
Establishment costs are not high; if you have your people lined up then it can cost less than 1500. However, you need to consider your ongoing costs, before accounting, for taxes on any sales or profits of 200 to 300 per month. If you make it more complicated, costs will spiral upwards dramatically.
North America: +1 604 689 0399 | Europe : +353 (0)61 714360 | www.pacnetservices.com
2. Credit/Debit Cards
Most Brazilians who have a bank account, also have a credit or debit card. Cards are issued largely under the Visa and MasterCard brand logos, though there are other bank debit cards that are not card scheme-branded. This sounds good for international sales until you contemplate several limiting factors. First, most Brazilian cards are enabled for intra-national use only; they only work if processed by a Brazilian company through its acquirer. Second, the banks in Brazil do not provide acquiring services for their merchants; instead, independent acquirers (of which the largest and best-known is Cielo) provide merchant services and only settle the net funds to bank accounts. If, therefore, you accept credit cards through an international acquirer, or try to run them through the machine/software provided by your bank outside Brazil, most of the transactions will be declined.
1. Cheques
Most Brazilians to whom you could sell something by mail (meaning literate Brazilians with some money) have a bank account and a cheque book. Cheques are typically printed on demand at the ATM and customers are normally restricted to having 8 or 12 at a time. Bank computer systems keep long term records of blank cheques issued. Cheques are, despite the restrictions, widely used in Brazil and it is not unusual to see residents using cheques to pay for retail purchases at the supermarket or pharmacy. There is a high degree of trust in cheques, as a person who bounces two or more is likely to be noted on the national black list (referenced via CPF) and experience both commercial and personal difficulties until the matter is cleared up. In short, accepting cheques in payment for goods is a worthwhile practice, particularly if orders are to be made by mail. However, if you intend or need to accept cheques for more than 100 BRL, then you need your own company. Cheques for 100 Rs or less can be consigned to a payment processor with a Brazilian unit (like PacNet do Brasil) and deposited on your behalf. Cheques for 100 BRL or more, however, need to be either deposited in your own bank account (thus you need a company with a CNPJ) or endorsed by the company
Parcelled pricing. Note that the product is actually 2 cents cheaper on installment than if paid for immediately.
It gets worse. While most of the world is used to taking single payments on credit cards, the entire Brazilian retail economy runs on a practice of parcelization of transactions. That is to say, if
5
North America: +1 604 689 0399 | Europe : +353 (0)61 714360 | www.pacnetservices.com
you go to a store to buy a pair of shoes, the price will be displayed as something like Rs.100 / 10 x 10. Meaning, you can buy the goods with 10 payments of 10 Rs. The credit card regime accommodates this, and at the time of sale the machine/software asks the sales person how many parcels the payment is to be split into. This is something people outside Brazil are not used to, and it requires a fundmental shift in marketing thinking to realize it is something Brazilians think of as normal, and expect. Settlement times are slow. It is not uncommon for new merchants to wait 30 days for their funds from the card processor. And MDRs (Merchant Discount Rates, or the commission charged by the card schemes) are high - quotes of 8 to 10 percent are not unusual. Basically, if you want to accept Brazilian credit cards, you will need a bank account to receive your proceeds, a company (with CNPJ) to contract with the acquiring company, and the cash flow to fund your sales for a protracted period while the acquirer settles. And dont forget the tax. You will be required to include the appropriate rate of sales tax (typically about 18%) in your price, and remit it to the government on a monthly basis. If you use a domestic payment processor for your credit cards, some of these hurdles can be overcome. The taxes and costs will remain, however, and of course be slightly marked up to give a margin to the payment processor - if you sell something for BRL 100, you are likely to see only 70 BRL of that money in your own hands at the end of the process. Your international processor can connect you to the domestic acquiring system, but cannot avoid the taxes or timelines that are intrinsic to Brazilian acquiring.
North America: +1 604 689 0399 | Europe : +353 (0)61 714360 | www.pacnetservices.com
or by the bank, or delivered digitally by email or internet. And once received, it can be paid at any one of literally millions of outlets: grocery stores, in banks, at ATMs, at the post office, at lottery booths, and hundreds of other types of processors. Almost magically, funds paid in at the payment point, sent by electronic banking, or transferred at the ATM, are credited within 5 days to the bank account of the issuer. All of this is made possible because the tax number system is tied into bank accounts; no matter where funds are paid in, if a valid boleto number is either typed or scanned in, the funds will arrive in the issuers bank account. Thats the broad brush description. It will be immediately obvious that to issue boletos you need a bank account; and that to have a bank account you need a CFP or CNPJ; and therefore you need a Brazilian identity or company (or both). Inevitably, the tax authorities have their hands on the whole system and there is no way to avoid liability for reporting or taxes if you collect boletos in Brazil, no matter if your payment processor issues the boletos for you. In order to issue a boleto you must have the CPF or CPNJ of the customer. Therefore, obtaining this is a fundamental and regular part of the order taking process. There are several refinements to this general description. At the legal level, when issuing a boleto you can choose whether to have it registered or unregistered. If it is registered, then the bank will maintain a record of it, and issue reminders to the payer automatically if it is not paid. More significantly, if it is unpaid the bank will report the consumer to the Central Bank, and a register exists (not surprisingly, accessed via CPF number) of unpaid boletos; you can therefore assess the creditworthiness of a potential customer by checking their record for
leaving boletos unpaid. Access to this database is via a paid subscription to a private third party service, and is surprisingly cheap - a matter of a few dollars a month. This serves as a powerful incentive for consumers to pay boletos. If the boleto is registered, the bank takes an active role in encouraging its payment. If it is unregistered, then the banks role is confined to passive acceptance of payment and advising the merchant when the funds arrive. A boleto can be cancelled after issue. Another refinement is that a boleto can contain a discount for early payment, or a premium for late payment. These terms are at the discretion of the merchant and can be quite generous or severe. Where boletos issued via a bank by the account holder (which may be the merchant or the PSP) fall down, is that most banks do not have particularly sophisticated software for their creation, especially for providing quick boleto production via the web. A number of third party providers have sprung up to master this process and provide back office support for the related accounting. The best known is probably the giant Braspag organization, but there are smaller (and more nimble) operators providing similar niche products. What happens when they are employed is that a multi-party contract is created allowing the local specialist to link to the bank account and the banks software; it then works with the merchants site to create a pay by boleto pop-up, captures the boleto data, receives reporting of paid boletos from the bank and provides reconciliation data to the merchant. A payment processor can be inserted into this process between the merchant and the bank, in which case the merchants bank account is the one employed. Utilization of such a specialist is a must for online sales organizations and a significant plus for anyone with a high volume of boleto payments to administer.
7
North America: +1 604 689 0399 | Europe : +353 (0)61 714360 | www.pacnetservices.com
Compared to the other payment methods in Brazil, boleto is significantly more successful and less expensive than most. Expect to pay less than 3 Rs (1 or $2) for issued and paid boletos, a few cents per transaction to a web creation service, and perhaps 2 or 3% to the PSP. All in, for goods sold at 60 Rs or more, your costs should come in below 5% - but dont forget the taxes.
6. Direct Debit
Brazil has a well developed direct debit system, and it is on the English model - the main constituency of users is regular issuers of irregular amounts (utilities being the obvious candidate). Direct debit is however largely unsuitable for remote selling as there is a paper burden surrounding the set-up and origination of direct debits. Naturally in order to commence doing business in this manner you need a Brazilian entity, CNPJ and bank account.
North America: +1 604 689 0399 | Europe : +353 (0)61 714360 | www.pacnetservices.com
If you have worked through a PSP, paid your taxes, but have no Brazilian entity of your own, then you have a problem and you will need help from one of several specialized participants. Your PSP will advise you on these and the associated risks. In short, however, and vendors who have worked with India or China will be familiar with similar routines, you need to be married up in a relationship with a business which has funds going in the opposite direction, such as a remittance agency or introductions bureau. What happens then is that domestic transactions are conducted in parallel, with the party outside Brazil receiving foreign currency proceeds of one deal, and compensating the partner by making a required payment in Brazil. It works and there is a massive industry around it. You can expect, however, to pay between 6 and 8 percent for the service, so there is a further burden on the already thin profits to be made in Brazil after payment of all the taxes.
payment before funds are released. However, local payments go through seamlessly. The options for payments to Brazilian consumers and companies mirror the payment methods listed above for incoming funds; through your bank or your PSP you will be able to issue cheques, send direct bank transfers, or issue refunds to credit cards. The notion of the OFT (Original Funds Transfer) to Brazilian credit cards is still nascent, and prepaid cards have not really hit the market with any force (though an internationally enabled foreign gift card would be an interesting variant). Direct bank transfers, exactly as described for DOC and TED above, are viable options if you have the CPF or CNPJ and bank details for the consumer.
Money In
If you want to sell from outside, products
9
North America: +1 604 689 0399 | Europe : +353 (0)61 714360 | www.pacnetservices.com
valued at USD $50 or less, and ship them from outside, you can take payment by cheque, boleto, international credit card (this will be a small percentage of cardholders), and direct bank transfer. PacNet can accept and negotiate your cheques up to Rs 100 (any payee), issue and report your boletos, process the international credit cards and accept direct bank transfers. PacNet will have to collect your taxes on national payments, and all operations will be conducted through its own bank accounts. If you have an appetite for larger business and wish to establish your own company in Brazil, PacNet can provide step-by-step information, and introductions to service providers, to ensure you do it the right way. Once you have your Brazilian company with CNPJ, PacNet can then negotiate your cheques up to any value, assist you with credit card processing in the local ringfenced system, and set up high volume boleto issuing, receipt and reporting. It can also accept local bank transfers, and even, in appropriate circumstances, originate direct debits. However, its not a turnkey solution, and it will take the better part of a year to set up.
achieve the effect of currency export, without breaking any laws and without risk. It is expensive - expect to pay fees of between 6 and 8 percent for export of proceeds of sales from Brazil.
Taxes
PacNet will not perform operations in any country which are in breach of tax regulations. Therefore, an essential precondition to working with PacNet is that we comply with local tax regulations, and collect and remit taxes where required. Often we serve as the merchant of record for our clients, and as such we are liable to taxes should the collector come calling.
Further Information
If you are motivated to work in the Brazilian market and would like PacNets assistance with the monetary aspects, please contact any of our worldwide offices, info@pacnetservices.com, or write directly to PacNets country specialist, paul@pacnetservices.com. Information is entirely free. Brazil is not for the faint of heart but there are rewards for getting it right and doing it properly.
10
North America: +1 604 689 0399 | Europe : +353 (0)61 714360 | www.pacnetservices.com