BRAZIL Law and Practice Contributed by: Júlio de Oliveira, Stephanie Makin, Gabriel Lacerda and Carlos Augusto Cruz, Machado Associados
Consortiums Commonly used to explore public concessions, a consortium is an association set up by two or more companies for a predetermined amount of time to car - ry out a specific project or undertaking. The member companies of a consortium are liable for their obli - gations as established in the consortium agreement, which must be registered in the Commercial Registry. As a rule, there is no joint responsibility between the member companies of a consortium, unless required in specific legislation. Revenues, costs and expenses registered by the con - sortium shall be shared according to the provisions of the consortium agreement, and the member compa - nies must include such revenues, costs and expenses in their own results according to their percentage of ownership in the consortium. Investment Funds As transparent entities, the income generated by investment funds is taxed at the level of the inves - tors, and the fund manager is liable for withholding the income tax due. The taxation of the investors in investment funds will vary according to the type of fund, the tax residency of the investor, and the area of investment and the length of the investment (ie, long-term or short-term). 1.3 Tests for Determining Tax Residence To determine the residence of a legal entity for tax purposes, Brazilian tax legislation takes into consid - eration only the place of incorporation of the legal entity, meaning that any kind of legal entity that is incorporated in Brazil will be considered as a Brazilian resident and taxed as such, regardless of its place of effective management. 1.4 Applicable Corporate and Individual Tax Rates Businesses in Brazil, even if they are owned directly by individuals, are subject to corporate income tax ( imposto sobre a renda das pessoas jurídicas – IRPJ) at a rate of 15%. A surcharge of 10% is applicable for taxable income exceeding BRL240,000 per year (approximately USD45,000).
In addition to the IRPJ, a social contribution on net profit ( Contribuição Social sobre o Lucro Líquido – CSLL) is also due by Brazilian companies at a rate of 9%, except for financial entities, which are currently subject to 15% or 20% rates depending on the finan - cial activity performed. In the context of the implementation of Pillar 2 rules in Brazil, an additional contribution to the CSLL has been created, in force as of 2025, to meet the require - ments of a qualified domestic top-up tax (QDMTT). Although still referred to as CSLL, the characteristics of the additional CSLL are quite different from those of the ordinary CSLL. In line with Pillar 2 rules, the additional CSLL may be due by companies that are part of a multina - tional group and have generated annual revenues of EUR750,000,000 or more, reflected in the consolidat - ed financial statements of the ultimate parent entity (UPE) in at least two of the four fiscal years immedi - ately preceding the year under analysis.
2. Corporate Tax Regime 2.1 Taxable Profits
Brazil legal entities may be subject to the calculation of IRPJ and CSLL based on two main regimes: actual
profit or deemed profit. Actual Profit System
Under the actual profit system, the taxable income corresponds to the accounting profit accrued by the company, adjusted in accordance with the additions and exclusions set forth by tax legislation, minus the offsetting of accumulated tax losses from previous years (limited to 30% of the adjusted profit). The main tax adjustments are: • permanent additions – eg, non-deductible expens - es, profits earned abroad and losses resulting from the equity pick-up method of accounting; • permanent deductions – eg, profits resulting from the equity pick-up method of accounting, interest on net equity and tax benefits; • temporary additions – eg, provisions; and
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