Tax regime: what are they and how do they work?

A tax regime is nothing more than a set of rules that determine how a company will be taxed.

Simple national

Created to reduce bureaucracy, Simples Nacional gathers federal, state and municipal taxes in a single guide . The company cannot have annual gross revenue above R $ 4.8 million, the partners must not have restrictions that prevent them from participating in this regime and it is necessary to check if the type of activity of the company is allowed for this modality.

Real profit

In the Real Profit modality, the company’s monthly or quarterly billing is what determines how much tax will be charged on the actual profit . For some types of companies, this regime is mandatory due to the activity performed. The method of paying taxes is more difficult, as there are individual tax guides and, in addition, accessory obligations to be fulfilled throughout the year.

Presumed profit

Here, the tax calculation is made based on a presumed value , according to the type of activity performed. Companies with annual revenues between R $ 4 million and R $ 78 million may opt for this regime . The payment of tax forms is also made individually.

What are small business taxes?

It is worth remembering that not all companies pay all types of taxes. Each modality has its specific characteristics, but we can summarize that list in eight taxes. Are they:

1. Corporate Income Tax (IRPJ)

It is the tax that is levied on the gross income of companies , regardless of the size and tax regime adopted. There are two alternative tax rates: 6%, when collected on the accumulated inflationary profit, and 15%, when collected on the real profit. The IRPJ declaration can be made every three months (March, June, September and December) or once a year.

2. Social Contribution on Net Income (CSLL)

This is another tax that affects corporate net income . The social contribution ranges from 9% to 20%. The percentage to be charged depends on the final amount of net income for the base period verified before the provision for IRPJ.

3. Social Integration Program and Training Program for the Civil Servants’ Heritage (PIS / PASEP)

These social contributions are intended to pay allowances and unemployment insurance to workers of government entities and bodies. It is as if it were a guarantee to the FGTS . It was implemented in 1988 and its objective is to improve income distribution throughout Brazil.

4. Contribution to Social Security Financing (COFINS)

All Brazilian companies, with the exception of those registered under the Simples Nacional regime, must collect COFINS . The tax is intended to help the government finance social security programs , such as social security and public health, for example. The rates vary between 3% and 7.6%, according to the profit regime.

5. Tax on Circulation of Goods and Services (ICMS)

First of state taxes, ICMS is levied on all goods and services sold in Brazil . Companies that collect this value are companies (which often pass them on to the consumer). Each state is free to assign the rate it wishes on the circulation of goods.

6. Service Tax (ISS)

This is a municipal tax to be collected by companies, regardless of the segment in which they operate. The minimum charge rate is 2%, which may reach 5%. The tax is intended not only for companies , but also for self-employed professionals .

7. Tax on Industrialized Products (IPI)

Tax of the Union’s competence, the Tax on Industrialized Products must be paid by importers or traders and owners of industries. The fees are levied on imported goods as well as on nationally manufactured products. If it went through an industrialization process, the rate is generated .

8. Social Security Employer Contribution (CPP)

It is a collection linked to the INSS that aims to contribute to the General Social Security Regime . The rates vary according to the tax regime adopted by the company, and can reach up to 20% of the salary or pro-labore.

Get organized and keep your taxes up to date

Although the tax burden in Brazil is high and, at first glance, it seems difficult to account for all these taxes, in practice things are not that complicated . For companies of the MEI type or those opting for Simples Nacional, the process is fast and smooth.

For the others, the help of a good accountant is ideal to keep everything up to date and avoid having to pay fines or extra amounts for tax delays. Organization is essential to keep your company’s documentation always in order.

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