A LAW IN FAVOUR

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GENERAL LAW OF MICRO AND SMALL ENTERPRISE
A LAW IN FAVOUR OF BRAZIL
Brasília-DF August/2006
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Representativeness of Small Businesses in Brazil

• 5 million (99) of the countrys formal
  enterprises and 10 million of its informal
  enterprises
• Moreover, SMEs employ 56 of the labour force
  working in the formal urban sector (excluding
  government employment)
• In the rural sphere, SMEs represent 4.1 million
  of all proprieties
• 42 of total salaries
• 20 of GDP
• 13 of supplies to government
• 2 of exports

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• High Level of Informality
• Low level of technical and economical development

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Unfavourable environment for businesses Hostile
to SMEs

• High Tax Burden
• Inefficient Bureaucracy
• Fragmentation of Policies
• Predatory Rivalry Formal x Informal
• Low Competitivity
• High Early Failure Rate 60 in two years

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Public policy proposals in support of SMEs
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Source Research into Business Failure - SEBRAE
Brazil's support service for small business
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Legal Foundation

• Federal Constitution
• Art. 170 1988 Favoured Treatment
• Art. 179 1988 Differential Treatment
• Art. 146 2003 Simplified Tributary Treatment
• (Amendment 42)

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General Law of Micro and Small Enterprise
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OVERALL THEME OF THE GENERAL LAW

• For SMEs
• To make micro and small enterprises competitive,
  as formal businesses, both with large enterprises
  and with the informal economy, by means of
• Deregulation
• Simplification
• Stimuli.

• For Society
• To generate jobs and income by means of creating
  opportunities through stimulating
  entrepreneurialism.

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Initial Provisions-Arts. 1 and 2
Establish general norms relative to the
differential and favoured treatment to be
accorded to micro and small enterprises by the
Federal, State, and Municipal authorities,
especially so far as concerns I assessment
and levying of Federal, State and Municipal taxes
and contributions, including accessory
obligations, through a single collection
system II complying with labour and welfare
obligations, including accessory obligations
III access to credit and to the market,
including preference in the acquisition of goods
and services by Public Authorities, to
technology, to associativism and to rules of
inclusion.
The Management Committee, composed of
representatives of the revenue authorities of the
three spheres, and the Permanent SME Forum,
presided over by the Minister of Development and
composed of representatives of the SMEs of the
whole of Brazil, will supervize compliance with
the norms.
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Chapter II Defiinition of Micro and Small
Enterprises

• Federal
• Micro annual gross revenue of up to R 240,000
• Small annual gross revenue between R 240,000
  and R 2.4 million

Differential Ceilings for States and
Municipalities

• Participation in GDP of up to 1 - R 1.2
  million (11 States RO, AC, RR, AP, TO, MA, PI,
  RN, PB, AL, SE)
• Participation in GDP from 1 to 5 - R 1.8
  million (11 States AM, PA, CE, PE, BA, ES, SC,
  MT, MS, GO and DF)
• Participation in GDP above 5 - R 2.4 million
  (5 States MG, RJ, SP, PR e RS)

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Chapter III Registration and Closure - Arts 4
to 11
In formulating rules, the organs involved at
the three levels of government in starting and
closing enterprises, should consider a single
registration process. Integrated and
consolidated system of information and guidance,
permitting research prior to actual registration,
modification or closure of businesses, in order
to give certainty to the user about the
documentation to be required and about the
viability of registration. The organs involved
in the opening and closing of businesses and
responsible for issuing licences and
authorizations for operation will only carry out
inspections after the beginning of the operation
of the establishment when the activity, by its
character, bears a degree of risk comptible with
this procedure.
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Chapter IV Small Business Taxation Regime Arts
12 to 36
Unified Collection of Taxes single tax
effect for the contributor IRPJ, IPI, CSLL,
Cofins, PIS, INSS employer, ICMS and ISS various
types of business taxes and contributions levied
in Brazil Access for those already opted
into Simples Nacional existing small business
taxation regime And for a series of new
categories such as accountancy, informatics,
civil construction, etc.
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Chapter IV Simples Nacional Arts 12 to 36
Up to 60,000.00 4 From 60,000.01 to
90,000.00 4 From 90,000.01 to 120,000.00
4 From 120,000.01 to 240,000.00 5.47 From
240,000.01 to 360,000.00 6.84 From 360,000.01
to 480,000.00 7.54 From 480,000.01 to
600,000.00 7.60 From 600,000.01 to
720,000.00 8.28 From 720,000.01 to
840,000.00 8.36 From 840,000.01 to
960,000.00 8.45 From 960,000.01 to
1,080,000.00 9.03 From 1,080,000.01 to
1,200,000.00 9.12 From 1,200,000.01 to
1,320,000.00 9.95 From 1,320,000.01 to
1,440,000.00 10.04 From 1,440,000.01 to
1,560,000.00 10.13 From 1,560,000.01 to
1,680,000.00 10.23 From 1,680,000.01 to
1,800,000.00 10.32 From 1,800,000.01 to
1,920,000.00 11.23 From 1,920,000.01 to
2,040,000.00 11.32 From 2,040,000.01 to
2,160,000.00 11.42 From 2,160,000.01 to
2,280,000.00 11.51 From 2,280,000.01 to
2,400,000.00 11.61
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Fixes a preferential limit for purchases from
SMEs Stimulates sub-contracting to SMEs in big
contracts Divisible goods and services
partial supply by SMEs Pledge of purchase as
credit entitlement subject to the official base
interest-rate
Chapter V Government Purchases Arts 37 to 44
Permission for consortia in labour insurance
and medicine Stipulates advisory supervision,
with fines only in repeated cases Reduction of
prior deposit for recourse to Labour Court
Exemptions from some accessory obligations
Chapter VI Simplification of Labour
Relations Arts 45 to 50
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Regulation of SMEs in the fields of labour,
metrology, health, environment and safety should
give priority to guidance or advice, to the
extent that the activity or situation, by its
nature, carries a degree of risk compatible with
such a procedure.
Chapter VII Regulation through Guidance Art 51
Permission for the creation of consortia of SMEs
of indefinite duration, under regulation of
Federal Executive Power
Chapter VIII Associativism Art 52
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Chapter IX Stimulus for Credit and
Capitalization Arts 53 to 59
Stimulates special lines of credit for
SMEs Creates a national system of
guarantees Strengthening of mircrofinance
cooperative credit, microcredit and access to
public funds
Chapter X Stimulus to Innovation Arts 60 to 63
Utilization of Technological Funds
Minimum of 20 of RD and technological training
funds to be directed to SMEs Stimuli for
technological incubators
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Chapter XI Civil and Business Rules Arts 64 to 69
Dispenses with excess meetings, assemblies,
publications and paperwork. Creates the
concept of the individual entrepreneur with
limited liability.
Chapter XII Access to the Courts Arts 70 e 71
Encourages prior conciliation, mediation and
arbitration Special Civil and Federal
Judgeships for MEs and SEs
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Chapter XV Final and Transitional Provisions Arts
73 to 84
6 months for dissemination of the rules
Provision for favoured treatment for SMEs in all
laws from this time, under penalty of
non-application Closure of businesses without
activity for more than 3 years, with assumption
of debts by the partners
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Renato Caporali Manager of International
Relation caporali_at_sebrae.com.br 55-61-33487399 S
EBRAE
General Law of SMEs