Simples Nacional or Presumed Profit: How to Pay Less Tax

Opening a CNPJ in Brazil is just the first step. The most critical decision that will dictate your company's survival and profit margin comes right after: choosing the tax regime.

Most new entrepreneurs choose Simples Nacional out of intuition, believing that the name "Simples" guarantees the lowest tax rate. However, depending on revenue, the annex of your activity and payroll costs (R Factor), Presumed Profit can be much more financially advantageous.

The Myth of Simples Nacional

Simples Nacional unifies the payment of 8 taxes (IRPJ, CSLL, PIS, COFINS, IPI, ICMS, ISS, CPP) in a single guide (the DAS). This facilitates accounting bureaucracy.

However, Simples Nacional has progressive rates. This means that, as your revenue increases in the last 12 months, the percentage of tax charged also increases dramatically. Furthermore, certain regulated professions (doctors, engineers, programmers) generally start in Annex V, taxing a very high 15.5% on the first real invoiced, unless they use the R Factor rule.

When is Presumed Profit Worthwhile?

In Presumed Profit, the Federal Revenue Service "assumes" what your profit margin is based on your activity (ex: 32% for the provision of services). Federal taxes (IRPJ and CSLL) only apply to this percentage, while PIS, COFINS and ISS apply to total revenue.

In practice, for a company providing services, the tax burden on Presumed Profit tends to be around 13.33% to 16.33% (varying depending on the ISS rate in your municipality).

The Turning Point

Presumed Profit usually becomes more advantageous than Simples Nacional when:

1. The company's revenue grows a lot: In Simples, revenues above $ 100 thousand/month push the effective tax rate into very high ranges. In Presumed Profit, the rate remains stable regardless of whether you earn 100 thousand or 1 million.
2. Low payroll (R Factor): Service companies without many CLT employees (below 28% of revenue) are stuck in Annex V of Simples (15.5%). Switching to Presumptive Profit can reduce this burden.

Simulating the Exchange

This decision cannot be based on hunches. You need to cross-reference your annual revenue projection with your exact salary slip.

To help you and your accountant draw the best scenario, we offer the free Assumed Profit Calculator vs Simples Nacional. Enter your revenue, expenses and discover mathematically under which regime your business will leave the most money in your pocket.