Originally published in the August 19 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazilian service companies under the presumed income tax calculation regime soon may enjoy a reduction of their mandatory social contribution on net income (CSL). The proposed reduction is included in a law project that was approved by the Chamber of Deputies’ Commission of Economic Development, Industry and Trade on August 13.
Currently, taxpayers under the presumed method calculate and pay the CSL at 9 percent of a tax basis equal to 32 percent of their monthly gross income, for a total of 2.88 percent of the gross income.
Law Project 1255/2007, originally presented on June 14, 2007, by lawmaker Fernando de Fabinho, would reduce the CSL tax base applicable to service companies from 32 percent to 12 percent of a taxpayer’s monthly gross income (or 1.08 percent of a service company’s gross income). This would restore the CSL regime that had been in place for service companies until the enactment of Law 10,684 of 2003.
Lawmaker Guilherme Campos, acting on behalf of the Commission of Economic Development, issued an opinion in favor of the law project. Campos said Brazil’s service sector is one of the country’s main generators of jobs and economic growth. However, existing tax policy toward small service companies (almost all of which are under the presumed method to calculate income tax and CSL) has been particularly burdensome in comparison to the presumed tax burden applicable to other sectors, for which the tax basis is always less than 32 percent of gross income.
The law project now will be reviewed by the Chamber of Deputies’ Commission of Finance and Taxation and Commission of Constitution and Justice. The commissions have conclusive powers, meaning that if all three approve the law project, it will be forwarded directly to the Senate with no need for a vote by the full Chamber of Deputies.
David Roberto R. Soares da Silva