BRAZIL Law and Practice Contributed by: Júlio de Oliveira, Stephanie Makin, Gabriel Lacerda and Carlos Augusto Cruz, Machado Associados
• temporary deductions – eg, differences in depre - ciation between tax and accounting criteria. Deemed Profit System The deemed profit system may apply to companies with yearly revenues of up to BRL78 million (approxi - mately USD15 million) or companies that are not man - datorily subject to the actual profit system. Under the deemed profit regime, the taxable basis corresponds to deemed percentages of the gross revenues of the company (such percentages vary from 1.6% to 32% depending on the activities of the company) plus other taxable revenues, without any deductions for costs and expenses or tax losses carried forward. Accrual or cash basis may apply. Starting from 2026, the deemed percentages appli - cable to gross revenues up to BRL5 million (approxi - mately USD 930 thousand) per year will increase by 10% (thereby varying from 1.76% to 35.2%). 2.2 Technology Investments Lei do Bem A special incentive for technological innovation ( lei do bem ) is applicable to legal entities that carry out research on new products and manufacturing pro - cesses, and make improvements in the quality, pro - ductivity and competitiveness of existing products and manufacturing processes. This technological innovation incentive provides the following benefits. • IRPJ and CSLL benefits include: (a) deduction of expenses related to technological innovation R&D; (b) additional exclusion from the IRPJ and CSLL taxable basis equal to percentages varying from 60% to 100% of expenses related to technological innovation R&D (conditions must be met); (c) full depreciation in the year of acquisition of new assets used in technological innovation R&D; and (d) accelerated amortisation of costs with the ac - quisition of intangibles linked to technological innovation R&D. • Other benefits include: (a) 0% withholding tax (WHT) on payments or credits to non-residents for the registration
and maintenance of trade marks, patents and cultivars abroad; (b) 45% reduction in the excise tax ( Imposto sobre Produtos Industrializados – IPI) levied on the purchase of assets destined for technological R&D – this incentive was reduced by Supple - mentary Law 224/2025; and (c) government subvention of up to 60% of the value of the remuneration of researchers hold - ing master’s or PhD degrees. Companies in the automotive sector that invest in R&D or in the production of technology in the country may benefit from financial credits corresponding to 50% of the amounts disbursed with these R&D investments, limited to 5% of the total gross revenue from the sale of goods and services in the second calendar month prior to the month in which the credit is calculated. Such financial credits will be granted in the form of CSLL credits (90% as of January 2026 due to Sup - plementary Law 224/25) that may be offset against federal taxes due by the companies or be refunded in cash. 2.3 Special Incentives Brazilian tax legislation provides for IRPJ incentives in order to promote the development of certain regions’ economic sectors. Incentives for Regional Development Companies in the North and North East of Brazil may benefit from a 75% IRPJ reduction if their activities are considered as a priority (such activities are defined by Presidential Decrees). In general terms, taxpay - ers may benefit from this reduction for a ten-year period provided they apply and have their projects approved before 31 December 2028. The benefit shall be approved by the Brazilian Federal Revenue Ser - vice based on a prior technical analysis of the regional superintendencies – Superintendência do Desenvolvi- mento da Amazônia (SUDAM) and Superintendência do Desenvolvimento do Nordeste (SUDENE). The IRPJ reduction only applies to profits directly related to certain encouraged economic activities (eg, infrastructure related to energy, telecommunica - tions, transportation, pipeline installation, gas produc - tion, water supply and sanitation services projects;
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