The taxable base under this regime is based on the accounting profits adjusted by some inclusions or exclusions, specifically addressed in the Brazilian tax law. (see Sec. 6 for a view on the main types of inclusions/exclusions).

Certain companies must apply the real profit regime and, therefore, may not elect the presumed profit regime. The companies that must mandatorily apply the real profit regime are:

Large companies, i.e., those whose total revenue accrued in the previous calendar year exceeds the limit of BRL 78 million, or proportionally to the number of months in the period in cases of companies formed within the preceding year;
Those engaged in activities of commercial banks, investment banks, development banks, promotion agencies, savings banks, credit companies, financing and investment companies, real estate credit companies, securities brokerage firms, securities and foreign exchange dealers, micro-entrepreneur and small business credit companies, securities and financial instrument distributors, leasing companies, credit cooperatives, private insurance and capitalization companies, and open private pension entities;
Those that have profits, income, or capital gains from abroad (income from abroad is interpreted restrictively and comprises only income derived from activities physically performed abroad);
Those that enjoy fiscal benefits related to the exemption or reduction of IRPJ;
Those engaged in factoring activities (i.e. cumulative and continuous service activities of credit advisory, marketing, credit management, risk selection, management of accounts payable and receivable, purchase of credit rights resulting from merchandise sales on credit or provision of services);
Those engaged in the activities of securitizing real estate, financial, and agribusiness credits;
Those that have been constituted as special purpose entities formed by microenterprises and small businesses; and
Those that issue shares in the Brazilian stock market under the small caps incentivized program (established in Article 16 of Law 13,043 of 2014).

Taxpayers under the real profit regime may choose at the beginning of each tax year to calculate their IRPJ/CSLL liabilities quarterly or yearly. If taxpayers decide to calculate their corporate income tax liabilities yearly, they must make monthly prepayments on an estimated basis or payments based on interim balance sheets.

Such monthly payments are anticipations of the IRPJ/CSLL due for the entire year and can be based on estimates of profitability which are fixed percentages on gross revenue (these estimated monthly prepayments can be based on the very same percentages of profitability that apply under the presumed profit regime). These monthly prepayments can be reduced or suspended during the year if the company notices that the monthly anticipations paid up to that moment exceed the actual IRPJ/CSLL due on accumulated profits year-to-date. To do so, the company must prepare an interim balance sheet and calculate the ongoing real profit to demonstrate the sufficiency of IRPJ/CSLL paid up to that moment.

The recognition of revenue and expenses follows the accrual method, and all kinds of income are included in the taxable bases of IRPJ/CSLL: regular active income, passive income, capital gains, etc. The main exceptions to this rule are equity pick up income or dividends received from Brazilian invested entities, which are exempt from taxation, and income derived from activities carried out in the SUDAM (Superintendency for the Development of the Amazon) region or the SUDENE (Superintendency for the Development of the Northeast region) region (see Sec. 6.6. for other cases of excluded and segregated income).

Different computation regimes may apply upon election to long term construction contracts and long term arrangements for the supply of goods and services with predetermined prices, the taxable profit of which may be calculated under the percentage-of-completion method. A cash basis may apply on the calculation of foreign exchange gains/losses related to receivables/liabilities established in foreign currency, as well as on the gains derived from long-term sales of non-current assets.

Another important exclusion is that related to losses of prior years. Companies under the real profit regime may reduce their taxable profit in up to 30% by offsetting tax loss carry forwards. (see Sec. 7. for more details).

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