Brasilian Taxes – Differences between Real Profit and Estimated Profit

To clarify the main differences between Real Profit and Estimated Profit will make a brief summary.

Estimated Profit

The estimated profit, as its name implies, uses the concept of presumption of profit. Based on this presumption applies to the percentage of IRPJ and CSL.

This percentage is determined in accordance with the activity exerted by the company as exemplified in the table:

   It is worth remembering that when a company operating more than one activity, for example, sales and service, will apply the percentage for each individual billing.

  The table below shows the percentage has to be applied on a practical recipe for the various types of business activities.

   Additionally if the company establish "deemed income" of more than R$ 60,000.00, in the quarter, you will pay additional income tax with a rate of 10% on the excess.

  In addition to income tax and social contribution the company will pay 3% and 0.65% of COFINS and PIS respectively calculated on gross sales.

Real Profit

  Unlike the estimated profit in real profit and the income tax CSL is calculated based on taxable income determined by the company, considering all revenue, less all costs and expenses of it, according to the rules described in the regulation of income tax. The rules are very careful about what may or may not be deductible.

  The tax rates on income will be cleared 15% of income tax for monthly income to R$ 20.000,00 per month and 25% for income exceeding R$ 20.000,00 per month, and 9% social contribution.

  The calculation of profit can be made through a system of monthly estimates, called the Annual Taxable Income or quarterly, called Real Profit Quarterly following the rules applicable to the chosen modality. Although the name is the real annual earnings, the trial balance can be calculated monthly as they allow the company pays taxes based on profits earned when it is less than the monthly estimates (the same percentage applied to the presumed income) or even suspend the payment in the case of zero profit or loss.

Other additional rules must be observed such as those applicable to accumulated losses.

  For calculation of PIS and COFINS companies taxed on actual profits has tax rates, with the non-cumulative incidence, respectively, 1.65% and 7.6%. That means the company will take credit for their purchases and part their expenses and have tax rates above applied to their recipes.

  The information described here is only a brief account of the differences between estimated profit in real profit, and many other additional instructions apply to each scheme.

  The complexity of schemes is so great that without a tax planning customized to each company can not determine which of them will be more advantageous. As the tax options are given at the beginning of each year, we recommend that the tax planning to start as soon as started the last quarter of each year, allowing the company to make a choice based on detailed information.

The Tactus have an expert advice on tax planning to meet their clients.

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The World Cup 2014 will generate over $ 140 billion for at least ten sectors of the economy. It is estimated that the segments with high concentration of micro, small and medium companies, such as textiles, services and information that will directly and indirectly affected by the event move almost $ 15 billion. The figures are part of the study-Brazil Sustainable Socioeconomic Impacts of the World Cup in 2014, drafted by Ernst & Young in partnership with Fundação Getulio Vargas (FGV).

"Companies are moving to offer products and services to an estimated 7.4 million contingent of foreign tourists who will move the country in 2014," said Jose Carlos Pinto, a partner at Ernst & Young.

Small and medium companies from different sectors, such as Portal for Education, training area, serving the textile sector, investments are already looking to the World Cup. The prediction of the companies is growing by 20% between 2013 and 2014. Consultant for Ernst & Young, all companies interested in capturing opportunities in the world should immediately initiate a planning process.

"Small and medium-sized companies, which have lower cash flow and limited availability of credit, must prepare, from now to meet the demands that will arise," he says.

According to the survey, the sectors most benefited by the World Cup will be the construction, food, beverages and services. Altogether, these areas should have increased production from $ 50.1 billion. Rodrigo Teles, CEO of Endeavor Institute, an organization that supports entrepreneurship in ten countries, comments that, according to the Ministry of Sports, U.S. $ 5 billion to $ 10 billion is expected to enter the economy, "which means more contracts tuned for entrepreneurs, "he says.

According to Teles, if small and medium enterprises capture a small piece of the contributions provided for, can double or even triple in size. The director of Endeavor believes that major opportunities will emerge in niches such as infrastructure, telecommunications, security, energy and mobility.

In Campo Grande (MS), the Education Portal, which offers online courses for professional updating and post-graduate students must create ten more English courses and eight new training for the tourism and hospitality. The site offers over 500 courses in 25 areas such as business, law, sports, management and leadership.

"Preparations began even before the country was announced as host of the event," says company president, Ricardo Nantes. By the end of 2011, the portal launches a battery of courses to meet the public involved with the World Cup. The idea is to qualify for tourism professionals and offer more classes in English and Spanish.

The goal of Nantes is to increase market share in 20% of the site, with courses for professionals and businesses. According to the study by Ernst & Young, the projected investments in the hotel, about $ 3 billion, will add 19,400 new housing units to the hotel pool of the host cities of the tournament. "It will be necessary to invest in professional training."

In Blumenau (SC), the expectation is high business in the textile sector, an area with estimated impact of $ 580 million on behalf of the World Cup. The company's 192 employees develop labels, metal and buttons for brands like Colcci, Forum and Animale.

"We have defined a group of professionals who will work part time only in the design of the 2014 Cup," says the director of innovation and marketing Cristiano Buerger. "We have potential to grow about 20% between 2013 and 2014." To ensure the return of business, Tecnoblu's plan, which should earn R $ 30.5 million in 2010, is investing U.S. $ 300 000 by the end of 2011, into new product lines and market research.

How should companies plan to cash in on the Cup? For consultants and industry experts, all the pre-World Cup preparation starts with good planning. "Entrepreneurs must identify the products and services that will be demanded more and know who are potential customers," teaches Jose Carlos Pinto, a partner at Ernst & Young. "Possible alliances and partnerships with foreign companies that already have experience in other hearts may be a key differentiator."

According to Rodrigo Teles, director of the Institute Endeavor, based on the history of the championships held in other countries, entrepreneurs are able to map the investments needed to completely enjoy the event. "We already know what will be the 12 host cities will be and where most of opportunities," he recalls. "Developing a network of relationships in these cities will be critical to generate good business."

According to the study-Brazil Sustainable Socioeconomic Impacts of the World Cup 2014 host cities will be targeted with initiatives in infrastructure, with investments of $ 14.5 billion. Only in the redevelopment of sites with greater movement of tourists and the area around the stadium, expenditures are estimated at U.S. $ 2.8 billion.

Within the company, the organizational point of view, the tip of the experts is to be with "the house in order." "Keep a good management system, performance metrics and transparency of financial statements," says Teles. "This will give confidence to a partner or customer's time to close business or to seek external funding for new investments."

Consultant to the Lucas Copelli, in the stage of preparation for the World Cup, which runs through 2013, opportunities for small and medium enterprises will be related to the planning of works undertaken by government, FIFA and the private sector in local games. "It happens when the major works of infrastructure, urbanization and urban mobility, stadium construction and expansion of the hotel chain, which have positive impact on business of civil construction, information technology, security, cleaning, food and transportation with." "The business of advertising, public relations, web design and consultancy services will also benefit in the preparation of campaigns for the year of the tournament."

In Group PR machine, the public relations and press relations, the estimate is to increase business by 40%, due to the world. The company earned $ 35 million per year. "The forecast is to invest $ 1.2 to $ 2 million in four years, growth of infrastructure, marketing, expansion of staff and capital," says Maristela Mafei, a founding member company of 238 employees, with 15 years in the market. (J.S.)

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After evaluating indicators on standards for foreign investments in 87 countries worldwide, a World Bank report concluded that the opening of a company by a foreigner in Brazil takes on average 166 days.

Among the countries evaluated, only Angola (263 days), Haiti (212) and Venezuela (179) have more time-consuming procedures for opening businesses by foreigners. At the other end of the table, are Rwanda and Georgia (four days), Canada (6 days), Afghanistan, Albania and Belarus (7 days). Among the other countries surveyed, the process takes on average 11 days in the United States, 14 in Britain and 99 days in China.

Facility Index Despite the lengthy process to open businesses targeted by the report, the World Bank study puts Brazil in a middle position in an index of ease of establishment of companies, which also takes into account legislation on the topic in each country. In an index ranging from 0 (most difficult) to 100 (easiest), Brazil received a rating of 62.5 little below average in Latin America and the Caribbean (62.8) and a little below average overall (64.5).

According to the study, the place that offers the greatest facility for the opening of businesses by foreigners is Slovakia, which received an index of 92.1. Then come to Romania, with 89.5, and Britain and Poland, both with 85. The country considered more difficult to open by foreign companies is Ethiopia, with an index of 21.1. Ghana had 34.2 rating, and Saudi Arabia (where the average time of starting a business is only 21 days) received 35. Restrictions The study also assesses the constraints on the presence of foreigners in various economic sectors in Brazil and concluded that these restrictions are greater than the average for Latin America and the Caribbean. T

he report cites, for example, the restriction on the maximum 30% of foreign media companies and 20% in the airline, or a total ban on the participation of foreign companies in the health sector. Nevertheless, the study says that compared with other BRIC countries (which also includes Russia, India and China), only Russia has fewer restrictions on foreign participation than Brazil. The report also notes that, despite the restrictions off, "in general terms, the Brazilian legislation gives equal treatment to foreign companies or local authorities."

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