Simple Tax System in Brazil

Brazilian companies struggle to be in compliance with taxation and bureaucracy. To make this less painful, the government created the Simple Tax System, Simples Nacional in Portuguese, for micro and small businesses. The goal of this system is to consolidate different taxes and reduce the number of tax reports.

The Simple Tax System is not applicable for large organizations, the idea is to reduce bureaucracy for small businesses which cannot afford it. The following is a list of companies that can benefit from the Simple Tax System in 2018:

• Individual Micro-Entrepreneur, MEI or Microempreendedor Individual in Portuguese, are companies whose gross annual revenue does not exceed BRL 81,000.00.
• Micro-Sized Entities, ME or Microempresa in Portuguese, are companies whose gross annual revenue does not exceed BRL 360,000.00.
• Small-Sized Entities, EPP or Empresa de Pequeno Porte in Portuguese, are companies whose gross annual revenue does not exceed BRL 4,800,000.00.

These types of entities can opt for the Simple Tax System. Once this system is chosen, it must be followed for the entire calendar year. It is not required to adopt this system, but the advantages for adopting it are attractive. Usually, companies pay their taxes one by one, but companies in the Simple Tax System can pay all taxes electronically on a single tax form named DAS. The tax form includes the following taxes:

• IRPJ – Corporate Income Tax
• CSLL – Corporate Income Tax (Social Contribution)
• PIS/PASEP – Tax on Gross Revenue
• COFINS – Tax on Gross Revenue
• IPI – Tax on Manufactured Products
• ICMS – Value-Added Tax
• ISS – Sales Tax on Services
• CPP – Employer’s Social Security Contributions

Some taxes such as IOF, II, IE and ITR are not included in the system. Public companies cannot opt for this system. The taxpayer must annually file the DASN, short for Declaração Anual de Faturamento do Simples Nacional in Portuguese.

The tax is paid based on  revenue. There are several tables, and each type of industry must follow its specific table. Each table has its own tax brackets, which results in a progressive tax system. The rates for this system are lower than for standard taxation system.

Certain types of industries cannot apply to this regime. However, the business that can apply under the law to this type of tax system will benefit from it in several ways.

This system can help entrepreneurs to start small businesses with less bureaucracy imposed by the government. Several entrepreneurs start businesses because of this tax system and many of these business would not survive without it.

Written by Thiago M. Silveira