Approved at the end of 2025, the law reduces tax incentives and affects Corporate Income Tax (IRPJ), the Social Contribution on Net Profit (CSLL), the Presumed Profit Regime, Interest on Equity (JCP), the Social Integration Program (PIS), the Contribution for the Financing of Social Security (COFINS), Import Tax, and Social Security Contributions. The changes take effect in 2026.
By Rafael Maniero e Mauricio Nucci
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Legale Overseas, no. 964.
At the close of 2025, the Brazilian Government enacted Complementary Law No. 224/2025, which reduces federal tax incentives and modifies the framework of certain tax regimes, such as the Presumed Profit Regime. The new rules increase the tax burden on taxpayers and require a review of tax strategies for 2026.
The law, regulated by Normative Instruction No. 2,305 of 2025, issued by the Brazilian Federal Revenue Service (RFB), reduces federal tax incentives by 10%, impacting Corporate Income Tax (IRPJ), the Social Contribution on Net Profit (CSLL), the Presumed Profit Regime, Interest on Equity (JCP), the Social Integration Program (PIS), the Contribution for the Financing of Social Security (COFINS), Import Tax, and the Employer’s Social Security Contribution.
Among the reductions in tax incentives and the resulting increase in the tax burden, special attention should be given to the following points:
Presumed Profit Regime — Increase in Presumed Margins
Within the scope of the Presumed Profit Regime, classified by the law as a tax incentive, there is a 10% increase in the presumed profit margins applicable to the portion of gross revenue exceeding BRL 5 million in the calendar year, with proportional application of this threshold in each assessment period.
With respect to the proportional application of the thresholds, the new rule may result in advance tax payments. This is because companies opting for the Presumed Profit Regime must calculate and pay IRPJ and CSLL on a quarterly basis, and the new rule requires the threshold to be observed proportionally in each tax period of the year.
When applying the proportional threshold per quarter, a company with revenue exceeding BRL 1.25 million in a given quarter must already apply the increased presumed margin to the amount exceeding this limit.
As a result, taxpayers may be subject to undesired advance tax payments. Beyond potential cash flow impacts, this may also increase the complexity of calculating IRPJ and CSLL, raising the risk of tax non-compliance and exposure to penalties.
Therefore, what emerges is not only an increase in the tax burden, but also a heightened level of tax compliance risk, which should be carefully considered by taxpayers.
PIS and COFINS — Exemption, Zero Rate, Reduced Rate, and Other Incentives
With regard to PIS and COFINS incentives—such as reduced tax rates, presumed credits, reductions in the tax base, and reductions of tax payable—the increase in taxation results from the reduction of such incentives, limiting them to 90% of their originally granted value.
In the case of exemptions and zero-rate taxation, the increase occurs through the collection of an amount corresponding to 10% of the standard applicable tax rate.
The law also prohibits the use of tax credits by purchasers of goods and services subject to exemption or zero rates. Thus, even where PIS and COFINS are effectively collected, the purchaser is not entitled to claim credits, not even on a proportional basis.
Exceptions
The reduction of tax incentives does not apply to constitutional tax immunities, incentives granted to companies operating in the Manaus Free Trade Zone, the zero rate applicable to basic food basket products, incentives granted for a fixed term and subject to burdensome conditions already fulfilled, benefits under the Minha Casa Minha Vida housing program and the University for All Program (ProUni), the Simples Nacional tax regime, the Social Security Contribution on Gross Revenue (CPRB), among other exceptions provided for in the law and in the related normative instruction.
JCP — Withholding Taxation
The withholding income tax rate applicable to payments of Interest on Equity (JCP) to shareholders has been increased from 15% to 17.5%, and such withholding tax must be treated as a final tax.
Increase in CSLL Taxation for Fintechs
For payment institutions, administrators of organized over-the-counter markets, stock exchanges, clearing and settlement entities, and other entities as may be designated by the National Monetary Council (CMN), the CSLL rate will be 12% until 2027 and 15% as of 2028. For credit, financing, and investment companies, the rate will be 17.5% until 2027 and 20% as of 2028.
Potential Judicial Challenges
Finally, two issues may be subject to judicial review:
- the prohibition on claiming PIS and COFINS credits on the acquisition of goods and services subject to exemption or zero rates conflicts with the non-cumulative system applicable to these contributions, since there will be an effective tax payment by the seller due to the partial suppression of the respective tax incentives. As such, the restriction introduced by law may violate constitutional principles and give rise to new court disputes; and
- the legislation has introduced the classification of the Presumed Profit Regime as a tax incentive, which represents a departure from the prior consensus that it constituted merely a method for calculating IRPJ and CSLL. It will be up to the Judiciary to determine whether this new classification is valid.
The Vaz de Almeida Advogados team has extensive expertise in tax incentives and is fully prepared to assist companies in understanding the impacts of the new rules on their operations, as well as in making informed strategic decisions.
Translation Disclaimer
This document was originally drafted in Portuguese and subsequently translated into English using artificial intelligence (AI).
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