BRAZIL Law and Practice Contributed by: Fernanda Levy, Aline Bauermeister, Rodrigo Menezes and Fabiana Fagundes, FM/Derraik
Many state governments also support or fund start-up accelerators and incubators, which pro - vide equity financing, mentoring and resources in exchange for a small equity stake. 4.2 Tax Treatment No specific tax treatment applies for growth, start-up or VC fund portfolio companies in Bra - zil. They are treated just like any other company, and the tax rules applicable to such company will vary according to the type of tax regime cho - sen: real profit, deemed profit or “SIMPLES” . Companies opting for real profit can deduct necessary and usual expenses of their operat - ing activity from the tax basis of their corporate income tax and social contribution on net profit. In addition, companies that invest in techno - logical innovation can fill out their tax deduction basis by investing in technology development and technological innovation projects. This was established by Law No 11,196 of 2005, known
of the founders with those of the key employees, and with the growth and goals of the company – thus creating a sense of ownership for such individuals. Equity incentives Usually, a primary tool for ensuring the long-term commitment of founders and key employees is through long-term incentives and equity-based compensation, which focus on the appreciation of the value of the company’s shares over time. Cultural and non-financial incentives Developing a strong company culture and pro - viding a positive work environment are also vital. Measures aligned with those objectives include: • development of growth opportunities for professionals, and training and educational programmes that help individuals advance their careers within the company; • regular acknowledgement of employees’ hard work and achievements; and • work-life balance, through initiatives that offer flexible working conditions, wellness pro - grammes and family-friendly policies. Exit opportunities Clearly defined exit strategies for founders and key employees can also play a role in their com - mitment. These might include lucrative buyout options or favourable terms upon the sale of the company. By combining these strategies, ventures can effectively motivate founders and key employees towards dedicating themselves to the compa - ny’s mission and objectives over the long term, minimising turnover and maintaining continuity in leadership and expertise.
as the “Good Law” ( Lei do Bem ). 4.3 Government Endorsement
No major initiatives specifically designed to increase the level of equity financing activity in the VC industry are conducted by the Bra - zilian government, though there are many pro - grammes of lower relevance.
5. Employment Incentives 5.1 General Employment Incentives
Securing the long-term commitment of found - ers and key employees is crucial for the stabil - ity and success of a start-up. This commitment is typically achieved through a combination of contractual agreements, equity incentives and cultural strategies designed to align the interests
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