Report Topics:
1:- General Information
2:- Cooling-off Period
3:- Pyramid Schemes
4:- Multi-Level Marketing
5:- Prohibition on Products
6:- Credit Restrictions Country
7:- Money Collections
8:- Licenses
9:- Status of Direct Sellers
10:- Earnings Claims
11:- Taxes and Fees
12:- Social Security
13:- Others
General Information
Cooling-off Period
The most important legislation for consumer protection is the Consumer Protection Code – CDC (Law No. 8.078/1990), which establishes all the main general rules, such as defining who is considered a consumer and a supplier, as well as consumers’ rights and suppliers’ obligations.
Any entity that supplies a product or a service in the consumer market must comply with consumer protection law, independent if it is a public or private, Brazilian or foreign, individual or legal entity. The supply of products or services, according to the CDC, encompass every activity of production, assembly, creation, construction, transformation, import, export, distribution or commercialization of products or services. Therefore, everyone involved in the supply chain (for example, the manufacturer, producer, assembler and importer) must comply with consumer protection law and can be jointly liable for any damages caused to a consumer, including those considered ‘apparent suppliers’ by the customer. Thus, direct selling companies are liable before Consumer Protection Code.
For non face-to-face sales, such as direct selling, marketplaces or any other online transactions, Section 49 of the Consumer Protection Code establishes that consumer/end user can exercise his ‘right to regret’ and withdraw from his order within seven days from the date of receiving the goods or from the execution thereof. In this case, any amount that has already been paid shall be refunded by the supplier.
Pyramid Schemes
The Brazilian Federal Constitution ensures free exercise of any economic activity, but still there are rules that establish limits in relation to pyramid schemes.
The Penal Code (Decree number 2.848 of 12/07/40) imposes limits of commercialization by punishing frauds or illicit advantages, including, among them, the pyramidal schemes. Also Law N. 1.521/51 establishes penalties with fines and imprisonment.
Multi-Level Marketing
There is no specific legislation for direct sales or multilevel marketing in Brazil. They must observe the general rules applicable to companies.
Commissions earned by the direct selling Consultants are subject to withholding income tax whose rates range from 7.5% to 27.5% on their income.
For social security purposes, direct selling companies must withhold 11% on commissions paid to Consultants up to the value of the maximum retirement ceiling, in addition to the employer’s social security payment calculated at the rate of 20% over the commission paid.
There is a special social security regimen known as MEI – Individual Microentepreneur that instead of withholding social security, Consultants pays a fixed amount to the Government.
Prohibition on Products
Exception made to medicine and similar products there are no prohibition on direct selling products offer.
Credit Restrictions Country
There are no specific laws regulating concession of credit to acquiring consumer of products through direct selling companies.
Money Collections
No information.
Licenses
Considering direct selling transactions are usually taken out of fixed establishment there is no previous license required to Consultants to start their activities.
Status of Direct Sellers
Independent direct selling consultants earn commissions on sales but work for themselves, that is self-employed person who participates in the distribution system of a direct sales company, without employment relationships.
Knowing the products, the independent consultant provides the sales experience through relationships: Sells, explains, indicates and demonstrates goods or services directly to consumers out of a fixed establishment.
Legal provisions on Section 442-B of Brazilian Labor Code and Law N. 6.586/78 for social security purposes.
Earnings Claims
No legislation.
Taxes and Fees
Welfare / Social Security Duties
Direct Selling Consultants are obliged to enroll in Social Welfare as autonomous according to Law N. 8.212/91 and rate may range up to 20% depending on the Social Security plan chosen by the Consultant.
Since 2008 Brazil has a special regimen called MEI – Microentrepreneuer being eligible individuals that has annual gross revenues up to BRL 81.000,00.
As for commissions earned, direct selling companies must withhold 11% on commissions paid to Consultants up to the value of the maximum retirement ceiling, in addition to the employer’s social security payment calculated at the rate of 20% over the commission paid
Withholding Income Tax
Commissions earned by the direct selling Consultants are subject to withholding income tax whose rates range from 7.5% to 27.5% on their income.
ICMS – Value Added Tax on Sales
This is one of the most important tax for direct selling activities. It is a kind of VAT, but it does not consider the full cost or value added in each step of the commercial cycle of the product, but rather the sum of the tax paid in previous steps, which payments are turned into credits to be offset against outstanding ICMS debts in the following operations. Some restrictions are applied.
It levies on the sales to the Consultants and also on the sales from the Consultants to the end user, under a special scheme known as tax substitution regimen.
In the tax substitution regimen, direct selling companies, based on an estimated value of the sale to the final consumer, calculate and collect VAT on behalf of the Consultant. Such tax calculation basis is called MVA – Vallue Added Margin and is determined by the State IRS together with ABEVD – Brazilian Direct Selling Association, as set forth by ICMS Rule N. 45/99
The WFDSA International Guide to Direct Selling Legislation is a guide and is not exhaustive either in terms of subjects presented or for all areas of concern to direct selling companies. It is intended to cover general areas of concern. The Guide is not a substitute for legal counsel but only intended to alert you to the general nature of laws and regulations affecting the direct selling industry in a particular country. Consequently, before beginning an operation in any foreign country, it is strongly recommended that competent legal counsel be consulted. While every effort has been made to insure that the information contained in this Guide is accurate, the variety of sources used makes absolute verification difficult. Further, laws and regulations also can change from time to time without notice. Therefore, the WFDSA cannot be held liable for the information included in this publication.