New law institutes reduction of federal tax benefits in Brazil

Published on December 26, 2025, Supplementary Law No. 224/2025 has established new rules in Brazil concerning a 10% reduction in tax benefits related to PIS/Cofins, corporate income tax (IRPJ), contribution tax on net profit (CSLL), federal import duties (II), excise tax (IPI), and social security contributions made by employers.

This 10% reduction is linked to certain federal tax incentives and benefits outlined in the Brazilian government’s 2026 Budget Tax Expenditures Statement, such as Reporto (Tax Regime for Port Structure Modernization and Expansion Incentives), Reidi (Special Infrastructure Development Incentive Regime) and IRPJ exemptions for companies located in the SUDAM and SUDENE development regions.

Moreover, Supplementary Law No. 224/2025 provides that the reduction applies to benefits instituted via the following tax regimes:

• Presumed Profits;
• REIQ (Special Regime for the Chemical Industry);
• Presumed IPI Credit;
• Presumed PIS and Cofins Credit (including on imports) granted to various Mercosur Common Nomenclature (NCM) codes, such as medicines, beef and coffee;
• Reduction to zero of PIS/Cofins (including on imports) for certain agricultural and food products, such as fertilizers and wheat flour;
• Reduction of PIS/Cofins rates on petrochemical naphtha intended for producing or formulating gasoline or diesel fuels.

The supplementary law also stipulates that the reduction is not applicable to certain other benefits, such as those granted to companies operating in the Manaus Free Trade Zone, and ad rem rates and benefits granted to taxpayers who have already met an onerous condition for their enjoyment for a fixed period. In this case, ‘onerous condition’ refers specifically to investment in projects approved by the Brazilian government up to December 31, 2025.

RFB Instruction No. 2,305/2025 also contains an annex listing certain other tax expenditures that are not covered by the reduction, such as the Simples Nacional tax regime.

The changes regarding presumed profits have been the target of criticism, as the regime essentially serves as a simplified method for measuring income tax, rather than as a tax benefit.

Additionally, certain changes provided for in Supplementary Law No. 224/2025 rely on concepts that are not specified either in the law itself or in RFB Instruction No. 2,305/2025. These include the concept of enjoying an onerous condition so that the original effects of certain benefits established in projects approved by the Brazilian government by December 31, 2025, are upheld.

There is also uncertainty regarding whether the list of benefits subject to the reduction is exhaustive. A systematic interpretation of the text indicates that the reduction applies only to incentives expressly contemplated in the Tax Expenditures Statement and the list provided for in supplementary law itself. As such, in principle, the reduction would not extend to special regimes that have not been included in these texts, such as Repetro (Special Customs Regime for the Import and Export of Goods Destined for Oil and Natural Gas Exploration and Production Activities) and the regime for Brazil’s Export Processing Zones.

The reduction in benefits is to be implemented as follows:

Exemptions and zero rates

Application of a rate corresponding to 10% of the rate of the standard taxation system on the calculation base for the tax.

Reduced rate

Application of a rate corresponding to the sum of 90% of the reduced rate and 10% of the rate of the standard taxation system.

Reduction of the calculation basis

Application of 90% of the reduction of the calculation base provided for in the specific legislation covering the benefit.

Granted credits

Reduction in credit and consequent use limited to 90% of its original value, with the unused amount cancelled.

Special or optional favored regimes where taxes are levied as a percentage of gross revenue

A 10% increase in the percentage applied to gross revenue.

Taxation regimes with a presumed calculation base

A 10% increase in the presumed percentages.

Legal entities taxed on the basis of presumed profit

A 10% increase in the percentages provided for in the IRPJ and CSLL legislation, levied on total gross revenue exceeding BRL 5 million in a given calendar year, applying (i) the limit proportionally to each calculation period in the year, permitting the adjustment in the following periods within the same calendar year; and (ii) the increase proportionally to the revenues of each activity.

As well as the reductions in tax benefits, Supplementary Law No. 224/2025 has implemented other important changes to the following tax regimes:

• The IRRF rate on interest on equity (juros sobre capital próprio) has increased from 15% to 17.5%;
• The CSLL rate for companies in some sectors has increased, as follows:
  • Payment institutions, organized over-the-counter market managers, credit unions, savings and loan associations, stock, commodity and futures exchanges, settlement and clearing entities, as well as other companies that the National Monetary Council may consider eligible due to the nature of their operations: the rate will be 12% until December 31, 2027, and will rise to 15% as of January 1, 2028;
  • Credit, financing, and investment companies, and capitalization companies: the rate will be 17.5% until December 31, 2027, and will rise to 20% as of January 1, 2028.
• For fixed-odds betting operators, there will be gradual increases in the taxation of Gross Gaming Revenue (GGR). The existing 12% rate will increase to 13% for 2026, 14% for 2027, and 15% as of 2028.

The law also provides for joint and several tax liability for companies that run unauthorized betting operations or permit transactions with unauthorized companies, as outlined in this recently published article.

For more information on this topic, please contact Mattos Filho’s Tax practice area.