BRAZIL Law and Practice Contributed by: Domicio dos Santos Neto, Frederico Favacho, Henrique Erbolato and Fernando Ferreira, Santos Neto Advogados
(b) the Actual Profit Regime is required for larger companies (gross revenue exceeding BRL78 million) and uses actual accounting profits, allowing for the full deduction of operating expenses and rural tax losses, which can be carried forward indefinitely and without limita- tion on the amount to be offset against profits on the current year (other activities have an annual limitation of 30%); or (c) Simples Nacional is available to micro and small enterprises (up to BRL4.8 million in rev- enue), consolidating multiple taxes into a single monthly payment. • Individual rural producers may pay Individual Income Tax (IRPF) on net income from rural activi- ties (up to 27.5%) or opt for a simplified regime (applying a 20% presumed profit margin on rev- enues). Accumulated rural losses can be carried forward indefinitely to offset future agricultural income. • Social Security Contribution (FUNRURAL): rural employers and individual producers contribute to social security through FUNRURAL, calculated either as a percentage of gross revenue from pro- duction or over the total payroll. Indirect Taxation Brazil is transitioning away from its legacy indirect tax system to a Dual Value-Added Tax (Dual VAT) model enacted by Constitutional Amendment No 132/2023 and regulated by Supplementary Law No 214/2025. The following taxes apply under the legacy system. • ICMS: state-level VAT applying to the circulation of goods and services. Under the legacy system, basic food items and agricultural inputs frequently benefit from exemptions, reduced calculation bases or deferred collection. • IPI: federal excise tax on industrialised products, generally zero-rated for unprocessed agricultural commodities (in natura). • PIS and COFINS: rates for agribusiness sales are 3.65% (cumulative) or 9.25% (non-cumulative), depending on the corporate tax regime. However, essential raw commodities, basic food items and agricultural inputs frequently benefit from a 0% rate. To prevent tax cascading, sales by individual farmers to processors often operate under tax sus-
pension, shifting the tax burden to the final stage. Agro-industries purchasing from exempt produc- ers can also claim presumed credits to offset their liabilities on processed goods. As of 2026, the Dual VAT framework (LC 214/2025 Implementation) replaces PIS, COFINS, IPI, ICMS and ISS with a unified Dual VAT regime comprising: • Contribution on Goods and Services (CBS): a fed- eral VAT replacing PIS, COFINS and IPI; and • Tax on Goods and Services (IBS): a subnational VAT shared between states and municipalities, replacing ICMS and ISS. The combined rate of CBS and IBS has not been yet decided as of August 2026, but it is expected to be between 26% and 28%. Agribusiness-Specific Regime LC 214/2025 establishes a differentiated regime for agribusiness, granting a 60% reduction in IBS and CBS rates for agricultural inputs and primary food products, alongside a complete exemption (zero rate) for items included in the National Basic Food Basket. Individual rural producers with annual revenues below specific legal thresholds may opt out of the IBS/CBS taxpayer status while allowing their corporate buyers to generate presumed tax credits. Other Property and Transactional Taxes Rural Land Tax (ITR) is an annual federal tax charged on rural landowners based on total area and land utili - sation degree. Highly productive properties and areas designated for environmental preservation (eg, Legal Reserves and Permanent Preservation Areas – APPs) qualify for significant rate reductions or exemptions. 7.2 Tax Benefits and Incentives To foster agribusiness competitiveness, lower produc- tion costs and attract domestic and foreign capital, Brazil provides a comprehensive system of tax incen- tives and fiscal mechanisms. The most relevant are as follows. • Export Tax relief: under both the current regime and the Dual VAT framework, exports of raw and processed agricultural commodities are constitu-
21 AGRICULTURAL LAW 2026
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