BRAZIL Law and Practice Contributed by: Ricardo Barretto Ferreira da Silva and Camila Sabino Del Sasso, Azevedo Sette Advogados
• PIS and COFINS will be integrated in the CBS, whereas PASEP should remain for gov - ernment entities. 5.2 Taxes Applicable to Businesses A company is considered taxable if it is incorpo - rated in Brazil or has a permanent establishment in the country. Although Brazilian legislation does not define the term “permanent establishment” for tax purposes, a permanent establishment is likely to be recognised in practice when certain conditions are met. These include: • productive entity, with a fixed presence in Brazil, maintaining facilities and generating profit; and • the ability to enter into contracts through agents or representatives in Brazil, conduct sales activities, and submit invoices directly to a Brazilian buyer. Brazilian companies are subject to corporate income tax ( Imposto de Renda Pessoa Jurídica , or IRPJ)and social contribution on net profits ( Contribuição Social sobre o Lucro Líquido , or CSLL) on their worldwide income at a maximum combined tax rate of up to 34% (15% of IRPJ + an additional 10% on profits above BRL240,000 per year + 9% of CSLL). The legislation allows Brazilian companies to deduct the income tax paid abroad from their corporate income tax in Brazil, up to the limit of the Brazilian corporate income tax levied on earnings, profits, or capital gains. The tax bases can be calculated using the tax - able profit (based on net accounting profit) or presumptive profit (fixed percentages applied to gross revenue) regimes. The tax rates are fixed as defined by the law, but the way they are cal - culated varies according to the regime chosen.
Brazilian legal entities (business/companies) are subject to a tax system that includes federal, state and municipal taxes. However, as men - tioned in 5.1 Taxes Applicable to Employees/ Employers , it is important to note that Brazil approved a tax reform and the transition to the new tax system will begin in 2026, being imple - mented gradually. Under the new rules, there will be elimination of several existing indirect taxes – namely, PIS/ COFINS, ICMS, ISS, and the tax on industrial products ( Imposto sobre Produtos Industriali- zados , or IPI) – and the introduction of a new tax structure more aligned with the OECD’s VAT model. The reform establishes the following new taxes: • CBS – replacing PIS/COFINS, this federal tax will be applied to goods and services; • IBS – replacing ICMS (state‒level) and ISS (municipal), this tax will unify indirect taxation at the subnational level; and • IS ( Imposto Seletivo ) – an excise tax targeting products and operations that pose risks to human health or the environment. IBS and CBS will be calculated based on the transaction value. Contrary to the current regime, taxes will not be computed on their own calculation basis. Taxpayers will have more transparency with regard to the tax burden, with the elimination of the “gross-up methodology”. These changes aim to simplify Brazil’s complex tax system and improve efficiency by adopting a structure closer to international best practices. Finally, it is also important to note that at the end of 2024 Brazil enacted Law No 15,079, intro - ducing the CSLL, which establishes a minimum
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