If your company is already established in Brazil, it is important to understand the main taxes that companies are required to pay and the different tax regimes available. In this letter, we will briefly explain the main taxes paid by companies in Brazil and the available tax regimes. This knowledge can help you optimize your tax strategy and reduce the risk of noncompliance.
Firstly, there are several taxes that a company may be required to pay in Brazil, such as:
- Corporate Income Tax (IRPJ) – This is a tax on the company’s profits and it is charged at a rate of 15% or 25%, depending on the company’s size and revenue.
- Social Contribution on Net Profit (CSLL) – This is a mandatory social contribution on the net profit of companies and it is charged at a rate of 9%.
- Tax on Circulation of Goods and Services (ICMS) – This is a state tax that applies to the circulation of goods and services and the rate varies depending on the type of the products and the state where the company is located.
- Tax on Industrialized Products (IPI) – This is a federal tax levied on the production and import of industrialized products. The tax rate varies according to the type of the products. The more essential the product, the lower the rate, so as the opposite. For example the cigarettes has one of the highest rate.
- Social Integration Program (PIS) and Contribution for the Financing of Social Security (COFINS) – These are federal taxes that apply to the company’s gross revenue and they are charged at a rate of 0.65% or 1.65% and of 3% or 7.6%, respectively.
- Service Tax (ISS) – This is a municipal tax that applies to the provision of services and the rate varies depending on the municipality where the company is located.
Secondly, there are three main tax regimes available in Brazil:
- Simples Nacional – This regime is designed for small businesses with an annual revenue of up to R$4.8 million. It allows companies to pay all taxes in a single monthly payment, based on a fixed percentage of their revenue.
- Lucro Presumido – This regime is designed for medium-sized businesses with an annual revenue of up to R$78 million. It allows companies to pay taxes based on a presumed profit margin, which is determined by the type of activity the company performs.
- Lucro Real – This regime is designed for large businesses with an annual revenue of more than R$78 million. It requires companies to calculate their taxes based on their actual profits.
Disclaimer: In this material we are sharing a more simplistic and generalized view on taxes and tax regimes. Due to the tax complexity, it is necessary to make a study, case by case, to check which is more suitable for the company.
In the next letters, we will be discussing more about each tax regimes, the pros and cons and which one is more suitable for each company.