COMPANY TAX RATE

Dont start a business in Brazil without a Tax Study!

Brief Summary – Company Tax Rate

When determining company tax rate or sales tax or VAT in Brazil we must first determine the following aspects:

  1. Are we selling a product or service? Each of these has different state and federal taxes to pay.
  2. What legal entity or company type is being operated. There are 4 main types of tax companies, each with their own corporate tax regime.
  3. Brazil is a federal state. That means there are municipal, state and federal taxes to pay. These tax rates vary from state to state.
Tax Rate
Tax Rate

5

Types of tax Companies

Tax Rate

8

Types of Tax rates

Tax Rate

34%

Tax rate on profit

Tax Rate

18%

Average ICMS - VAT

How Company Tax Rate Works?

You always need to do a full tax planning excercise to determine the best tax rate option here. There are a lot of variations.

Tax Rate

Select Tax Regime

The following company tax regimes are available for most segments or services:

MEI – sole proprietor

Nacional Simples – increasing tax rate based on turnover but no tax credits allowed. Limited to US$880 000 per year.

Lucro Presumido – predetermined tax rates and annual profit tax rate based on turnover irrespective of profit.

Lucro Real – Tax rates allow credit of value-added operations and annual profit based on real profit with tax rate up to 34%.

Tax Rate

Analise the Taxes

Product Sales will have the below taxes depending on their HS code (NCM in Brazil):

ICMS – a type of VAT that varies from 7% to 21% depending on state and segment (alcohol and energy segments have higher tax rates for instance)

PIS and CONFINS – social taxes that go up to 9,25%

IPI – variable tax for Imported and Industrialized products

ST – Substituicao Tributaria – special regime tax for retail or products that have high tax evasion

When providing Services these tax rates will depend on the local municipality ISS rates for that type of service. Which vary from 2% to 5% plus that company regime tax.

Tax Rate

Income Tax

Using the corporate tax regime chosen and then considering relevant taxes for that product or service, profit projections can now be made. Each of those tax rates has special rules with regards to credits and payment due.