Difference between revisions of "Brazil NGO Sector"
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| − | == | + | ==Classification of non-profits in Brazil== |
In Brazil, there are diverging criterias on the classification of non-profit organizations. In an attempt to unify these criterias, the Brazilian Institute of Geography and Statistics (“Instituto Brasileiro de Geografia e Estatística – IBGE”) carried out an extensive study on the non-profit sector in Brazil . This study was performed in accordance to the methodology described in the Handbook on Non-profit Institutions in the System of National Accounts , elaborated by the United Nations Statistical divisionDivision, which proposes a set of five prerequisites for non-profit institutions, as follows: | In Brazil, there are diverging criterias on the classification of non-profit organizations. In an attempt to unify these criterias, the Brazilian Institute of Geography and Statistics (“Instituto Brasileiro de Geografia e Estatística – IBGE”) carried out an extensive study on the non-profit sector in Brazil . This study was performed in accordance to the methodology described in the Handbook on Non-profit Institutions in the System of National Accounts , elaborated by the United Nations Statistical divisionDivision, which proposes a set of five prerequisites for non-profit institutions, as follows: | ||
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#Voluntary: they are freely established by citizens around a common objective. | #Voluntary: they are freely established by citizens around a common objective. | ||
| − | The Brazilian Civil Code (Law 10,406 of December 10, 2002) recognizes only two categories of private legal entities that can be considered non-profit organizations under the UN Statistical Division parameters: Associations and Foundations. | + | The Brazilian Civil Code (Law 10,406 of December 10, 2002) recognizes only two categories of private legal entities that can be considered non-profit organizations under the UN Statistical Division parameters: Associations and Foundations. <membersonly> |
| − | === | + | ===Associations=== |
| − | + | An association (sometimes referred to as a non-profit civil society) is a self-governed, voluntary organization formed for one or more non-profitable purposes set forth in its by-laws . | |
The Constitution of Brazil guarantees the freedom of association. The exception to this general rule is that citizens may not form a military group or associate for unlawful purposes (Article 5, XVII of Brazilian Federal Constitution). Therefore, under normal circumstances, an association must may merely register its charter in at a notary public office to obtain legal status4. Associations need not seek any other public authority permit to register as a non-profit private legal entity. | The Constitution of Brazil guarantees the freedom of association. The exception to this general rule is that citizens may not form a military group or associate for unlawful purposes (Article 5, XVII of Brazilian Federal Constitution). Therefore, under normal circumstances, an association must may merely register its charter in at a notary public office to obtain legal status4. Associations need not seek any other public authority permit to register as a non-profit private legal entity. | ||
| − | === | + | ===Foundations=== |
A private foundation, often referred to simply as foundation, is a non-profit private legal entity created with an endowment. According to articles 62 to 69 of the Civil Code, a foundation is defined as a collection of assets granted legal personality by operative law. The foundation’s’ goals, which must be devoted to public interest, are recorded in a written declaration, which must be registered with a notary public. | A private foundation, often referred to simply as foundation, is a non-profit private legal entity created with an endowment. According to articles 62 to 69 of the Civil Code, a foundation is defined as a collection of assets granted legal personality by operative law. The foundation’s’ goals, which must be devoted to public interest, are recorded in a written declaration, which must be registered with a notary public. | ||
The previous Civil Code (antecedent to Law 10,406) allowed foundations to pursue any purpose, as long as it was not against the law. Currently, however, foundations are limited to religious, moral, cultural, or assistance purposes . There is debate over the exclusion of organizations with other public interest purposes, such as education, environmental preservation, and research and development from operating as a foundation. | The previous Civil Code (antecedent to Law 10,406) allowed foundations to pursue any purpose, as long as it was not against the law. Currently, however, foundations are limited to religious, moral, cultural, or assistance purposes . There is debate over the exclusion of organizations with other public interest purposes, such as education, environmental preservation, and research and development from operating as a foundation. | ||
| − | The Civil Code requires that a foundation have and disclose sufficient assets to achieve its purposes. A foundation must be controlled and managed as established in its charter, by the person or persons appointed by the founder in the letter or establishment . | + | The Civil Code requires that a foundation have and disclose sufficient assets to achieve its purposes. A foundation must be controlled and managed as established in its charter, by the person or persons appointed by the founder in the letter or establishment . |
| − | === | + | ===Registration Procedures== |
#Formulation of the organization’s by-laws ; | #Formulation of the organization’s by-laws ; | ||
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#Registration at the “Instituto Nacional de Securidade Social” (National Institute of Social Security) for special treatment regarding contributions to Social Security purposes. | #Registration at the “Instituto Nacional de Securidade Social” (National Institute of Social Security) for special treatment regarding contributions to Social Security purposes. | ||
| − | == | + | ==Tax treatment for non-profits in Brazil – deviation from the norm== |
In Brazil, tax benefits depend on the nature of the non-profit organization’s activities, rather than on the nature of the organization itself. Therefore, the legal form of the organization is irrelevant for tax benefits purposes. | In Brazil, tax benefits depend on the nature of the non-profit organization’s activities, rather than on the nature of the organization itself. Therefore, the legal form of the organization is irrelevant for tax benefits purposes. | ||
Article 150 (VI) (c) of the Brazilian Constitution stipulates that the federal government, states, federal districts, and municipalities are not allowed to tax educational and social assistance entities. This tax exemption applies only to those assets, income and services strictly related to the educational and social assistance activities. In addition, the same article provides that the organization’s by-laws must specify its educational and/or social assistance objectives in order to obtain tax benefits. | Article 150 (VI) (c) of the Brazilian Constitution stipulates that the federal government, states, federal districts, and municipalities are not allowed to tax educational and social assistance entities. This tax exemption applies only to those assets, income and services strictly related to the educational and social assistance activities. In addition, the same article provides that the organization’s by-laws must specify its educational and/or social assistance objectives in order to obtain tax benefits. | ||
The National Tax Code specifies the tax benefit criteria stated in the Constitution, providing provided that they areto be eligible for tax exemptions, that an educational or social assistance entity: | The National Tax Code specifies the tax benefit criteria stated in the Constitution, providing provided that they areto be eligible for tax exemptions, that an educational or social assistance entity: | ||
| − | + | *Shall not distribute any surplus revenue, dividends and bonuses among its members or participants, advisors, directors, employees or donors; | |
| − | + | *Limits the application of its resources in the Brazilian territory, observing the maintenance of the organization’s objectives; | |
| − | + | *Keeps accounting books in order to provide transparency of its accounts and activities ; | |
Other laws impose additional conditions for tax benefits, such as: | Other laws impose additional conditions for tax benefits, such as: | ||
| − | + | *Restriction to remunerate the organization’s board of directors in any way (managers and staff can be remunerated); | |
| − | + | *Obligation to keep accounting records for at least five years, demonstrating the origin of revenues, and nature of expenses; and | |
| − | + | *Obligation to submit income tax statements to the Federal Revenue Office annually. | |
| − | == | + | ==Special Designations for non-profits in Brazil== |
After completing the mandatory registration procedures mentioned in title “2” section 2 above, non-profits may apply for special designations. Although special designations are not mandatory for non-profits to operate, in light of practical administrative issues, and the legal and fiscal benefits they confer, these designations bring organizations closer to being equivalent to an IRC §501 (c) (3) organization. Therefore, they are useful to both grant makers and organizations to identify the condition non-profit organization. Moreover, designations give credibility to the organizations towards the public, as they demonstrate a governmental recognition of their non-profit status. | After completing the mandatory registration procedures mentioned in title “2” section 2 above, non-profits may apply for special designations. Although special designations are not mandatory for non-profits to operate, in light of practical administrative issues, and the legal and fiscal benefits they confer, these designations bring organizations closer to being equivalent to an IRC §501 (c) (3) organization. Therefore, they are useful to both grant makers and organizations to identify the condition non-profit organization. Moreover, designations give credibility to the organizations towards the public, as they demonstrate a governmental recognition of their non-profit status. | ||
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This qualification is granted by the Ministry of Justice to organizations that perform their activities in the areas determined by article 3 of Law 9,790/99: | This qualification is granted by the Ministry of Justice to organizations that perform their activities in the areas determined by article 3 of Law 9,790/99: | ||
| − | + | *Social assistance; | |
| − | + | *Culture; | |
| − | + | *Historical preservation and cultural heritage; | |
| − | + | *Education; | |
| − | + | *Health care; | |
| − | + | *Nutrition and food security; | |
| − | + | *Environmental protection and sustainable development; | |
| − | + | *Voluntary work; | |
| − | + | *Economic and social development and poverty reduction; | |
| − | + | *Non-profit experimentation of socially productive models and alternative systems of production, commerce, employment and credit; | |
| − | + | *Promotion of rights and free legal assistance; | |
| − | + | *Ethics, peace, democracy and other universal rights; and | |
| − | + | *Research and development. | |
Public foundations created by the public administration are unable to receive OSCIP designation (Article 2 of Law 9,790/99). | Public foundations created by the public administration are unable to receive OSCIP designation (Article 2 of Law 9,790/99). | ||
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The public utility status is granted by the Ministry of Justice to non-profit organizations that have as its objectives to the promotepromotion of education, scientific research, culture, or philanthropy. To be eligible for public utility status, an organization must also : | The public utility status is granted by the Ministry of Justice to non-profit organizations that have as its objectives to the promotepromotion of education, scientific research, culture, or philanthropy. To be eligible for public utility status, an organization must also : | ||
| − | + | *Be properly registered as a legal entity; | |
| − | + | *Be formed in the Brazilian territory; | |
| − | + | *Have carried on a public interest activity for three years or more; | |
| − | + | *Not remunerate its directors under any circumstance, or distribute any surplus revenue among its members or participants, advisors, directors, employees or donors and; | |
| − | + | *Publish a balance sheet and income statements every year. | |
Non-profit organizations with public utility status are able to receive subventions, donations and assistance from the federal government . Another benefit of the public utility status is that contributions to these organizations made by corporations are deductible of this corporation’s tax base for income tax purposes . Also, public utility organizations have full exemption of social welfare contribution to Social Security. | Non-profit organizations with public utility status are able to receive subventions, donations and assistance from the federal government . Another benefit of the public utility status is that contributions to these organizations made by corporations are deductible of this corporation’s tax base for income tax purposes . Also, public utility organizations have full exemption of social welfare contribution to Social Security. | ||
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In order to receive CEAS certification, the social assistance organization must carry out and/or contribute to programs related to the : | In order to receive CEAS certification, the social assistance organization must carry out and/or contribute to programs related to the : | ||
| − | + | *Protection of family, children, motherhood, youth, and aid to the elderly; | |
| − | + | *Education and rehabilitation of disabled individuals; | |
| − | + | *Assistance to children and youth from troubled homes; | |
| − | + | *Promotion of free education and health assistance; or | |
| − | + | *Promotion of employment. | |
In order to be entitled to CEAS certification, an the organization must meet the following conditions : | In order to be entitled to CEAS certification, an the organization must meet the following conditions : | ||
| − | + | *Be properly registered as a legal entity in Brazil, and have been engaged in public interest activities for more than three years by the time of the application; | |
| − | + | *Be registered in the National Council of Social Assistance (CNAS); | |
| − | + | *Provide evidence that its resources, income, and profits are applied in programs within the national territory; | |
| − | + | *Provide evidence that at least 20% of its revenues originating from payments for service, sale of goods and operational contributions are used to provide free services; | |
| − | + | *Provide evidence that subventions granted by the government are used to accomplish the entity’s aims; | |
| − | + | *Do not remunerate, under any circumstance, its directors, or distribute any surplus revenues to its members or participants, advisors, directors, employees or donors; | |
| − | + | *Provide in its charter that, in case of dissolution, the entity’s assets should be transferred to another organization with CEAS certification or a social assistance organization with similar aims; | |
| − | + | The CEAS certification must be renewed every three years. | |
==Tax Benefits for Grant Makers== | ==Tax Benefits for Grant Makers== | ||
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Individual donations: full deduction of the donation up to a limit of 6% of the due income tax. | Individual donations: full deduction of the donation up to a limit of 6% of the due income tax. | ||
| − | == | + | ==Difficulties to register non-Profitsin Brazil== |
In Brazil, registering a private legal entity, whether for-profit or non-for-profit, national or foreign, is a very time-consuming and bureaucratic process. | In Brazil, registering a private legal entity, whether for-profit or non-for-profit, national or foreign, is a very time-consuming and bureaucratic process. | ||
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“Doing Business”, the World Bank database that collects objective measures of business regulation throughout 175 countries, indicates that starting a business in Brazil requires up to 17 different procedures and can take approximately 152 days . The same database shows that in the United States, registering a new firm requires 5 procedures and it takes approximately 5 days. These measurements place Brazil in the 6th most burdensome country to start a new business. Some of the reasons for this condition are: complex legislation, multiple levels of tax obligations , bureaucratic paper work, dilatory law enforcement , and corruption. Consequently, it is advisable to contact a lawyer and an accountant as the first step in registering a non-profit in Brazil. | “Doing Business”, the World Bank database that collects objective measures of business regulation throughout 175 countries, indicates that starting a business in Brazil requires up to 17 different procedures and can take approximately 152 days . The same database shows that in the United States, registering a new firm requires 5 procedures and it takes approximately 5 days. These measurements place Brazil in the 6th most burdensome country to start a new business. Some of the reasons for this condition are: complex legislation, multiple levels of tax obligations , bureaucratic paper work, dilatory law enforcement , and corruption. Consequently, it is advisable to contact a lawyer and an accountant as the first step in registering a non-profit in Brazil. | ||
| − | == | + | ==Applicable Laws== |
| − | + | *Brazilian Federal Constitution; | |
| − | + | *National Tax Code (Law 5,172/66); | |
| − | + | *New Civil Code (Law 10,406/2002); | |
| − | + | *Law on Social Assistance (Law 8,742/93); | |
| − | + | *Law on OSCIPs (Law 9,790/99); | |
| − | + | *Law on Social Organizations (Law 9,637/98); | |
| − | + | *Legislation on Public Utility Organizations (Law 91/35, Decree 50,517/51 and Decree 3,415/2000); | |
| − | + | *Legislation on Social Assistance Beneficent Entity Certification (Law 8,212/91, Decree 2,536/98, Decree 3,504/2000, Decree 4,327/2002 and Decree 4,381/2002); | |
| − | + | *Law on Public Foundations (Law 7,596/87); | |
| − | + | *Law on Voluntarism (Law 9,068/98) | |
| − | + | *Legislation on corporate taxation (Law 9,532/97, Law 3,470/58); and | |
| − | + | *Legislation on individual taxation (Law 8,313/91, Law 9,532/97, Law 9,250/95 and its alterations) | |
| − | == | + | ==References== |
| − | + | *BARBOSA, Maria Nazaré Lins and OLIVEIRA, Carolina Felippe de. Manual de ONGS: Guia prático de orientação jurídica. Rio de Janeiro, Brazil: Editora FGV, 2003. | |
| − | + | *Brazilink.org. Brazil Society. (September, 2006). http://www.brazilink.org/society.asp (accessed September 16, 2006). | |
| − | + | *World Bank. Doing Business database. http://www.doingbusiness.org (accessed November 28, 2006) | |
| − | + | *FIGUEREDO LOPES, Lais Vanessa Carvalho and COSTA, Daniela Paes. Country Information: Brazil in United States International Grantmaking (May, 2006). http://www.usig.org/countryinfo/brazil.asp (accessed September 15, 2006). | |
| − | + | *IBGE. Private Foundations and Non-profitable Associations in Brazil – “FASFIL”. IBGE, ABONG, GIFE and IPEA. Brazil: IBGE Publications, 2004. http://www.ibge.gov.br/home/estatistica/economia/fasfil/default.shtml (accessed September 10, 2006). | |
| − | + | *ORDEM DOS ADVOGADOS DO BRASIL (Brazilian BAR Association). Cartilha do Terceiro Setor. São Paulo, Brazil: Nova Bandeira Produções Editoriais, 2005. http://www.mapa.org.br/download.aspx (accessed September 10, 2006). | |
| − | + | *PAES, José Eduardo Sabo. Fundações e Entidades de Interesse Social: aspectos jurídicos, administrativos, contábeis e tributários. Brasília, Brazil: Brasília Jurídica, 2004. | |
| − | + | *SZAZI, Eduardo. Terceiro Setor: regulação no Brasil. São Paulo, Brazil: Editora Fundação Peirópolis, 2003. | |
Latest revision as of 07:19, 17 July 2008
Contents
Classification of non-profits in Brazil
In Brazil, there are diverging criterias on the classification of non-profit organizations. In an attempt to unify these criterias, the Brazilian Institute of Geography and Statistics (“Instituto Brasileiro de Geografia e Estatística – IBGE”) carried out an extensive study on the non-profit sector in Brazil . This study was performed in accordance to the methodology described in the Handbook on Non-profit Institutions in the System of National Accounts , elaborated by the United Nations Statistical divisionDivision, which proposes a set of five prerequisites for non-profit institutions, as follows:
- Private: they do not belong to the State;
- Institutionalized: they are legally constituted and are legal entities;
- Non-profit: they do not share profits;
- Autonomous: they are capable of raising and managing their own funds;
- Voluntary: they are freely established by citizens around a common objective.
The Brazilian Civil Code (Law 10,406 of December 10, 2002) recognizes only two categories of private legal entities that can be considered non-profit organizations under the UN Statistical Division parameters: Associations and Foundations.
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