Choose Your Own Tax Regime

Brazil’s tax legislation is about as complex as carrying an elephant. Nonetheless, you can get started by learning about the three main tax regimes for companies. Understanding the calculations for each regime will help you choose the best option. But choose wisely - you only get to decide once per year.

Lucro Real

This regime is mandatory for companies with revenue of over R$78 million per year. Under the “real profit” regime, taxes are calculated based on the company’s actual profits. You must also calculate each type of tax separately.

Lucro Presumido

Under this regime, profits are presumed based on a percentage of revenue. The percentage varies depending on the company’s business activity. For example, the rate for a service company is 32%. So a service company that has revenue of R$1 million would pay tax on R$320,000 - the amount deemed as profit. The “presumed profit” regime can be chosen by companies with annual revenue up to R$78 million.

Simples Nacional

Unlike the other two regimes, the “simples” regime calculates taxes based on revenue. Profit doesn’t matter. You simply take your revenue and pay taxes at the rate set for your business activity. Companies with revenue up to R$4.8 million per year are eligible and normally adopt this regime because it’s relatively simple. Unfortunately, companies with owners domiciled outside Brazil cannot take advantage of this regime.

Having a local accountant or attorney to help you through the analysis is essential. The calculations are complex and can vary greatly depending on a company’s business activities with exceptions and pitfalls along the way. Make sure you get guidance for your specific situation.