The economy in Brazil is booming despite what many consider poor infrastructure, a certain degree of bureaucracy and high corporate taxes. Home to the 2014 World Cup and the 2016 Summer Olympics, improvements are quickly being made. The Olympic Park is being constructed on the home of the former Grand Prix track and will cover 300 acres, all with waterfront views. This development, along with the boom in Brazil’s economy, has the country listed as the world’s 6th largest economy. However, according to the World Bank’s ease of doing business index, Brazil ranks 130th for the year 2013.
Corporate taxes in Brazil are extremely high and the tax laws are extremely complex. Corporations, as well as small and medium size businesses, are wise to enlist the aid of knowledgeable tax lawyers and accountants before submitting their taxes. Failure to properly prepare and submit taxes in a timely manner can lead to heavy fines and penalties, not to mention the difficulty in remedying the situation between several different government offices.
Corporate taxes are imposed on all businesses located in Brazil.
These corporate taxes include:
Imposto de Renda sobre Pessoa Jurídica or IRPJ (corporate income tax) is a federal income tax levied against all business. It is assessed at the rate of 15% plus an additional 10% for income over R$240,000. Companies that earn less than R$48 million can adopt a deemed profit tax calculation method, which usually lowers taxes in comparison to the actual profit tax method. Businesses with income greater than R$48 million must use the actual profit method in computing their taxes. No matter which method is used, the calculation and deductions follow very strict guidelines and professional assistance is necessary when calculating the amounts owed.
Imposto sobre Serviços or ISS (service tax) is a tax imposed on companies that provide services, based on their location and the type of services provided. Municipalities impose this tax, which is assessed at 2% to 5% of a company’s gross income. There are no deductions or credits available for this tax.
These are just two of the taxes that affect businesses in Brazil, whether they are international businesses or local businesses. Having a knowledgeable tax advisor will help you maximize your profits and minimize fees and penalties that would be assessed for improper payment of taxes.