IRPJ, short for Imposto sobre a Renda das Pessoas Jurídicas in Portuguese, and CSLL, short for Contribuição Social sobre o Lucro Líquido in Portuguese, are both imposed by the federal government on corporate income. These combined are the Brazilian income taxes for business, different from other countries which have one tax on income. States and cities in Brazil do not levy income taxes. An income tax return must be filed every year by businesses and individuals.

The Brazilian income tax system, like the US Income tax system, is a pay-as-you go tax which means that as we earn the income, we pay taxes on it.

Imposed on

IRPJ and CSLL are imposed on any type of income such as earned income, capital gains and passive income from whatever source.

There are several methods to calculate the income tax in Brazil:

• Itemizing deductions (actual profit method) for big entities;
• Standard deduction (presumed profit method) for medium-sized Entities; and
• Simple tax system for Small-Sized Entities, Micro-Sized Entities and Individual Micro-Entrepreneur.

Basis and Rate

For IRPJ, companies which have less than BRL 20,000.00 in taxable monthly income are subjected to a 15% income tax rate. Companies that earn more than this amount, these incomes are taxed at 25%. For CSLL, the standard rate is 9%, but the rates are different for financial institutions.

Usually the total income tax rate in Brazil for companies is 34% (25% IRPJ plus 9% CSLL).

Exemptions

Some non-profit organizations such as religious organizations, political parties, labor unions, and education institutions are exempt from IRPJ and CSLL. Dividends in Brazil are exempted incomes.

Taxpayer and Governmental Agency

IRPJ and CSLL are owed by the majority of businesses. These are federal taxes, therefore they are paid to the Department of Federal Revenue of Brazil. The official document to pay them is the DARF (Federal Taxation Form).

Tax Principles 

Brazilian constitution and the main federal tax law have several tax principles. The following principles are the main ones that are applied to the IRPJ:

• Progressive tax: The tax rate in progressive tax increases as the taxable amount increases. Therefore, individuals and companies which make more money pay a higher percentage of taxes.

Main Laws

• Decree (Regulation) 9580, November 22, 2018 (IRPJ – Income Tax)
• Law 7689, December 15, 1988 (CSLL – Income Tax)

Tax Returns and Forms

The taxpayer is required to report the IRPJ and CSLL on the following tax returns and forms:

• ECF – Digital Income Tax Return

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Written by Thiago M. Silveira

Thiago M. Silveira is a Brazilian Chartered Certified Accountant (CRC) with more than 10 years of success in the accounting field, with insightful understanding in all aspects of accounting, financial reports preparation, local taxes and compliance in Brazil.

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