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What are the tax incentives for starting a business in Brazil?

What are the tax incentives for starting a business in Brazil? Europartner Open Company in Brazil / Eurpartner abertura de empresa no Brasil

Starting a company in Brazil is a measure that favors economic growth, generates jobs and improves the population’s consumption levels. Due to so many benefits, the federal government encourages the formation of companies in the country through so-called tax incentives. 

Tax incentives are part of policies aimed at the economic development of the nation, moving the market. In addition, it promotes healthier and fairer competitiveness between organizations, offering advantages to entrepreneurs from small to large businesses. 

Why are tax incentive laws important for starting a business in Brazil?

Brazil is known for being a country with a high tax burden. And this aspect, in fact, can drive away new investors from the South American country. But a way to get around this challenge was the creation of tax incentive laws, whose objective is precisely to reduce the tax burden paid by companies. 

As provided by law, incentives are available at the municipal, state and federal levels, contributing so that companies may maximize their profits. 

Consequently, when cash is left over, these same companies can plan future investments, both for internal operations and for certain sectors of the economy.

Types of tax incentives for a Company in Brazil

Over more than 20 years, companies from different segments – information technology, aerospace, port companies, etc – have benefited from tax incentives such as: 

RECAP – Federal Incentive

Provided for in Law No. 11,196/2005, the Special Regime for the Acquisition of Capital Goods for Exporting Companies (RECAP) suspends the obligation to pay PIS/COFINS on purchases or imports of new machinery and equipment, referring to the decree. 

Prodepe – State Incentive

The Pernambuco State Economic Development Program is a stimulus to attract investments in industrial activity and in wholesale trade.

The benefit that companies enjoy is related to the ICMS debt balance for a given tax period. 

Technological Innovation Law – Sectorial Tax Incentive

The creation of the Legal Framework for Science, Technology and Innovation was based on the idea of ​​strengthening the relationship between the private sector, universities and the public sector.

The premise is to promote actions to encourage startups and entrepreneurs, so that they can execute projects and launch products with a lower tax burden.

How do tax incentives work for a Company in Brazil?

In short, incentives work like this: a company in Brazil can allocate part of its taxes paid to the government to invest in social welfare projects. Or, even, allocate these resources to any other project model with which the company intends to contribute.

Federal incentives are usually granted to companies opting for real profit. But if these companies opt for Simples Nacional or collect taxes for presumed or arbitrated profit, they will not be able to enjoy the benefit. 

On the other hand, the type of taxation is irrelevant at the state and municipal levels. 

Which companies can benefit from tax incentives?

Certainly, tax incentives contribute to the opening of new companies in Brazil and to the growth of already established enterprises. 

After all, incentives provide the essential conditions for organizations to thrive, investing in new resources, hiring and equipment.

At the federal level, the granting of tax incentives and exemptions considers the tax regime chosen by the company in Brazil. In this case, therefore, only legal entities that opt ​​for the Real Profit benefit from tax incentives.

On the other hand, the use of state and municipal incentives is not linked to the corporate taxation model. With this, the range of benefited companies is expanded.

How to apply for these tax incentives?

In summary, any type of enterprise is open to request the benefit. However, the government will evaluate each application, taking into account certain criteria, for example: 

  • Compliance with legislation 
  • Technical capacity of the entrepreneur or company manager
  • Cost compatibility
  • Public interest

In addition, it is worth emphasizing that the company cannot have debts with the Federal Revenue, and must present all the required documentation to guarantee approval. 

Do you have plans to open a company in Brazil? Talk to Europartner

The Europartner has a team specialized in business accounting and in starting a business in Brazil, focused on optimizing processes, reducing bureaucracy and offering broad accounting support to our customers.  This also includes support for companies that want to get tax breaks faster.

Talk to us and clear your doubts with our team of experts!

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