This topic addresses some examples of tax regimes involving corporate income tax that are specific to certain entities or industries.

Tax Exempt Entities

Certain entities are exempt from corporate tax (IRPJ and CSLL) due to their non-profit legal nature or activities performed, including:

Institutions of a philanthropic, recreational, cultural and scientific nature and civil associations that provide the services for which they were established and make them available to the group of people for which they are intended, on a non-profit basis;
Universities engaged in the PROUNI (“University for All Program”), which are obliged to grant a certain number of full or partial scholarships to students, following requisites set forth by the Ministry of Education; and
Closed supplementary pension entities.

Certain entities are exempt from IRPJ but are subject to CSLL, including:

Open non-profit supplementary pension entities (subject to CSLL at 9%);
Foreign maritime and air navigation companies if, in the country of their nationality, Brazilian companies with the same objective enjoy the same prerogative (subject to CSLL at 9%); and
Savings and loan associations whose objective is to provide or facilitate the acquisition of a first home for members, as well as to capture, encourage and disseminate savings, and which meet the standards established by the National Monetary Council (subject to CSLL at 15%).

Incentives for Technological Innovation

Brazilian tax law provides tax incentives to foster technological innovation.

The concept of technological innovation is the conception of a new product or manufacturing process, as well as the aggregation of new functionalities or characteristics to the product or process which causes incremental improvements and effective quality and productivity gain resulting in increased competitiveness in the market.

Consequently, companies engaged in this type of activity are allowed to deduct from the taxable bases of the IRPJ and CSLL:

All R&D expenses, including expenditures in Brazil with a university, research institution or independent inventor, inasmuch as the company which supported the payment bears the business risk, the management and the control of the results of the research; and
An extra deduction, between 60% and 100% of the R&D expenses depending on the number of researchers hired by the company and if the research and development results in a patent.

The other incentives applicable to the IRPJ are the following:

Expensing (full depreciation in the same year) of the acquisition cost of new machines and equipment used in the research activities;
Accelerated depreciation through deduction as cost or necessary expense of the expenditures related to the acquisition of intangibles used in the research activities; and
Depreciation or amortization of all expenses related to fixed structures, registration and authorization fees related to the research.

Besides these incentives related to the IRPJ and the CSL, Law 11,196/2005 also provides other tax reductions, such as a reduction of 50% of the excise tax (IPI) due on the acquisition of equipment, machines and instruments, as well as spare accessories and tools which accompany these goods, related to the research.

Incentives for Information Technology and Automated Products

Companies engaged in the development or production activities of information and communication technology goods may deduct between 160% and 180% of their R&D expenditures depending on the number of employed researchers.

In addition, such companies are also entitled to an additional financial credit, deductible from the IRPJ and CSLL bases. The credit ranges from 1.73 to 3.41 times the amount of R&D expenditure, depending on the relevant period, activities performed and place of location of the company.

Incentives for the Semiconductors Industry

Companies engaged in the development or production of semiconductors and their components may apply for an exemption of IRPJ on the sales of such products, as well as to several other Brazilian VAT exemptions.

In addition, such companies are also entitled to an additional financial credit that may be used to offset federal taxes in general. The credit is currently set at 2.62 times the amount of R&D expenditure, subject to a maximum of 13.10% of the minimum investment required in R&D and innovation as per the law, and subject to meeting other specific requirements.

On 11 September 2024, Brazil extended the applicability of tax incentives provided for the semiconductor and information and communication technology sectors until 31 December 2029.

Special Tax Regime for Real Estate Development (RET)

Real estate developments may benefit from a special tax regime in which the applicable federal taxes (IRPJ, CSLL, PIS and COFINS) are levied jointly based on a single rate of 4% charged on the monthly revenues. Cash basis is the mandatory recognition method under the RET.

The formal requisites to elect the RET include the compliance with a “segregation” mechanism that isolates and protects the assets of each real estate development allowing it to communicate only with its corresponding liabilities. This segregation of assets of real estate projects must be formally registered before the Real Estate Registry Office. The real estate development will then be given an independent Tax Enrollment registry (CNPJ) and, in order to duly formalize the option for RET, the taxpayer must also file the asset segregation and the statement for the option for RET before the Federal Revenue Office.

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