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Tax incentives in Brazil

Last verified: 2026-10-25

Brazil's main federal incentives are the 75% IRPJ reduction for projects in the SUDENE and SUDAM regions, the Lei do Bem R&D deductions, and the Manaus Free Trade Zone. From 2026, Complementary Law 224/2025 cut a broad set of federal tax benefits by 10%, with exceptions including the Manaus Free Trade Zone and benefits tied to investments already approved by 31 December 2025.

The rule

1. Companies with projects approved by 31 December 2028 for installation, expansion, modernization or diversification in priority sectors in the SUDENE and SUDAM areas get a 75% reduction of IRPJ and surcharge computed on exploration profit.Provisional Measure 2,199-14/2001, as amended by Law 14,753/2023, art. 1, 2023 official text

2. Lei do Bem: companies may deduct R&D spending, get a 50% IPI reduction on R&D equipment, full depreciation of new R&D equipment in the year of acquisition, and zero withholding on remittances for registering and maintaining trademarks, patents and plant varieties abroad.Law 11,196/2005, art. 17, 2005-11-21 official text

3. Lei do Bem: an additional exclusion of up to 60% of R&D spending from IRPJ and CSLL bases, up to 80% depending on researchers hired, plus up to 20% for patents granted, limited to the taxable base of the period.Law 11,196/2005, art. 19, 2005-11-21 official text

4. LC 224/2025 reduces federal benefits for PIS, COFINS, IRPJ, CSLL, II, IPI and employer social security: exemptions become 10% of the standard rate, reduced rates move 10% toward the standard rate, credits and tax reductions are limited to 90%, and presumed bases rise by 10%.Complementary Law 224/2025, art. 4, paras. 1 and 4, 2025-12-26 official text

5. The LC 224 cut does not apply to constitutional immunities, Manaus Free Trade Zone and free trade area benefits, zero rates on the national basic food basket, time limited benefits where the taxpayer already met an investment condition in a project approved by 31 December 2025, and certain non profit entities.Complementary Law 224/2025, art. 4, para. 8, 2025-12-26 official text

6. From 2029 to 2032 ICMS incentives are reduced in proportion to ICMS rate cuts and disappear with ICMS in 2033.Constitutional Amendment 132/2023, arts. 128 and 129 ADCT, 2023-12-20 official text

Worked example

A manufacturing project in the SUDENE area earns exploration profit generating BRL 2,000,000 of IRPJ and surcharge (about USD 397,006). The 75% reduction saves BRL 1,500,000 (about USD 297,755), subject to whether the LC 224 10% cut applies to the specific project. USD at the BCB PTAX selling rate of 23 October 2026, BRL 5.0377 per USD.

Step by step

Identify the incentive and confirm whether it falls under the LC 224 cut or one of its exceptions.
For SUDENE and SUDAM, file the project and obtain the approval report before 31 December 2028.
For Lei do Bem, keep project level R&D records and file the annual report to the Ministry of Science.
Model the phase down of state ICMS incentives under the reform.

Common traps

Modeling pre 2026 incentive values without the LC 224 haircut.
Losing Lei do Bem benefits by being on presumed profit.
Assuming state ICMS incentives survive the reform.

Sources

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