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Corporate - Income determination
Last reviewed - 29 October 2024Brazilian taxpayers are subject to Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) under the so‑called “actual profits” method (APM — Lucro Real), which is based on taxable income (i.e., earnings before taxes or EBT), adjusted by specific additions and exclusions established in tax legislation. The actual profit may be determined annually or quarterly, and in the case of annual calculation, the tax authorities require monthly advance payments based on estimated taxable income.
Subject to certain restrictions — including a cap on gross revenue of BRL 78 million and limitations linked to the taxpayer’s activities — Brazilian taxpayers may alternatively elect the “presumed profits” method (PPM — Lucro Presumido) for purposes of calculating IRPJ and CSLL. Under the PPM, taxable income is calculated quarterly by applying statutory presumption percentages to gross revenues and then making adjustments required by the legislation.
Recent legislative changes (LC 224/2025, effective from 2026) introduced a significant modification to the PPM: Beginning in 2026, taxpayers with annual gross revenue above BRL 5 million are subject to a 10% increase in the presumption percentages used to calculate IRPJ and CSLL. This increase applies only to the portion of revenue exceeding BRL 5 million, with the first BRL 5 million continuing to follow traditional presumed rates.
Additionally, the legislation requires quarterly proportional monitoring of this annual threshold — meaning the BRL 5 million cap is fractioned into BRL 1.25 million per quarter for purposes of determining whether the increased presumption must be applied.
Below we exemplify the main presumed profit rates that must be applied to determine the calculation basis (considering the standard rates and noting that for taxpayers whose revenue exceeds BRL 5 million, the applicable presumption for the excess amount is increased by 10%):
|
Activities |
Presumed profit rate (%) |
| Retail sale of fuel and natural gas | 1.6 |
| Sale of goods or products | 8.0 |
| Cargo transportation | |
| Real estate activities (purchase, sale, subdivision, development, and construction of real estate) | |
| Hospital services | |
| Rural activity | |
| Industrialisation with materials supplied by the client | |
| Other unspecified activities (except services) | |
| Transportation services (except freight) | 16.0 |
| General services with gross revenues up to BRL 120,000/year (*) | |
| Professional services (Simple Societies [SS], doctors, dentists, lawyers, accountants, auditors, engineers, consultants, economists, etc.) | 32.0 |
| Business intermediation | |
| Administration, lease, or assignment of movable/immovable property or rights | |
| Construction services, when the provider does not use materials owned by it or is not responsible for the execution of the work. | |
| Services in general, for which no specific percentage is established | |
| In the case of exploration of diversified activities, the respective percentage will be applied to the gross revenue of each activity. | 1.6 to 32.0 |
* Not applied to legal entities engaged in the performance of hospital activities or transportation services, as well as the professional services societies.
Inventory valuation
Brazilian income tax regulations require that inventory may be valued at the actual average cost or by the cost of the most recently acquired or produced goods. Rulings to the effect that last in first out (LIFO) is not acceptable have been given. With the introduction of the public digital bookkeeping system (i.e. SPED), the Brazilian tax authorities (i.e. RFB) should have access to the productive process and inventory movement of companies (see the Tax administration section for more information).
Capital gains
Capital gains derived from the sale of assets and rights, including shares/quotas, are generally taxed as ordinary income.
Carried forward capital losses may be offset only against capital gains. Unused capital losses are treated similarly to income tax losses with regard to limits on use and carryforward period. Capital losses may be used to offset other operating income in the year that they are incurred.
Capital gains derived by non-residents (including transactions carried out abroad between two non-resident investors, involving assets or rights located in Brazil) may be taxed in Brazil.
Such gains should be subject to progressive income tax rates, which range from 15% (for capital gain that does not exceed BRL 5 million) to 22.5% (for the portion of the gain that exceeds BRL 30 million), as per the table below:
| Capital gain (BRL) | Income tax rate (%) | |
| Over | Not over | |
| 0 | 5 million | 15.0 |
| 5 million | 10 million | 17.5 |
| 10 million | 30 million | 20.0 |
| 30 million | 22.5 | |
For beneficiaries residing in tax haven jurisdictions, the rate applicable remains at 25%, irrespective of the amount of the gain, due to an explicit provision in the law for these situations.
Exemptions from capital gains taxation may be available for specific transactions (e.g. certain regulated investments on the Brazilian stock market).
Dividend income
In general terms, no IRRF is due on cash dividends or profits paid or credited to either corporate or individual shareholders. Brazilian resident beneficiaries are not subject to further income tax on receipt of dividends.
Financial income
Fixed-rate interest income from short, medium, or long-term financial market transactions, including swap transactions, is subject to IRRF at rates ranging from 15% to 22.5%. Non-fixed financial gains related to stock/commodities exchange and/or futures market transactions are taxed at rates of 20% (day-trade) and 15% (all other cases). For legal entities, the total income or gain is considered taxable income, and the tax withheld may be offset against the total tax due by the corporate taxpayer.
Additionally, PIS/COFINS may be levied at a rate of up to 4.65%, depending on the type of transactions and taxation regime (i.e. non-cumulative method).
Royalty income
Under Brazilian tax legislation, royalties are defined as the remuneration agreed between contracting parties for the use or exploration of:
- industrial property rights (i.e. patents, trademarks, brand names, and other rights of the same nature)
- know-how (sharing of technical information, necessary for the industrial manufacturing of a product or process, deriving from experience previously acquired), and
- copyrights.
Royalty income should be subject to regular corporate income taxation in Brazil.
Foreign currency exchange gain/loss
With respect to foreign currency exchange gain/loss, which may arise from receivables or liabilities denominated in foreign currency, Brazilian tax legislation allows the local company to elect to consider the related effect, for tax computation purposes, either upon an accrual or cash basis (i.e. actual receipt/payment of funds).
Foreign income
Brazilian resident companies are taxed on worldwide income. See Controlled foreign companies (CFCs) in the Group taxation section for more information.
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