What is Presumed Profit and how does it work?

Have you ever thought about the possibility of having a resource that makes it easier for companies to pay taxes? If so, you need to know about Presumed Profit.

This is an easy way to pay taxes for companies in Brazil, which uses a profit estimate based on a percentage of sales. 

In today’s content, we’ll understand how this works and what the advantages of this option are. Keep reading to find out!

Key ideas:

• Presumed Profit is a simplified taxation regime in Brazil.
• It is based on an assumption of profit from a percentage of the company's revenue.
• It is a more practical and accessible alternative to Real Profit, especially for small and medium-sized companies.

Introduction to Presumed Profit

The presumed profit regime is an easy way for companies to pay taxes in Brazil.

This is because, in this regime, the tax is calculated with a presumption of profit, so there is no need to calculate the company's real profit.

What is the Presumed Profit regime?

The presumed profit regime is recommended for companies with up to R$78 million in gross revenue per year. 

Thus, in this regime, Income Tax and Social Contribution are calculated with fixed percentages on revenue. This eliminates the need to calculate actual profit.

When is the Presumed Profit applicable?

The regime is applicable to companies that:

• Have annual gross revenue of up to R$1,400,000;
• They are not required to calculate real profit;
• That are not financial institutions or similar;
• Do not provide cargo transportation services.

Therefore, the regime is great for small and medium-sized companies, which are looking for a simpler and less bureaucratic way to pay taxes.

Advantages of Presumed Profit

The Presumed Profit regime brings many advantages to companies. Let's look at some of these advantages:

1. Simplification of tax calculations: Presumed Profit uses a fixed calculation base. This makes calculating taxes easier and less complicated than Real Profit.
2. More efficient tax planning: With Presumed Profit, companies can better plan their taxes. This helps to make better decisions about investments and business strategies.
3. Lower cost of compliance: Using Presumed Profit reduces accounting and documentation costs. This is different from Real Profit, which requires more documents.
4. More predictable cash flow: Quarterly collections of Presumed Profit help with financial planning. This makes managing the company's money easier.

Therefore, this regime brings advantages such as simplifying tax processes, better tax planning and reducing costs. This helps companies to have a more predictable cash flow.

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Disadvantages of Presumed Profit

As we have seen, this regime brings advantages to small and medium-sized companies. 

However, there are also important disadvantages and limitations, and it is important for entrepreneurs to consider these issues before choosing this modality.

Limitations of Presumed Profit

A major limitation of this feature is that it does not allow you to deduct all of your company's expenses. 

This is because the tax is calculated as a percentage of revenue, without taking real costs into account.

• Companies with high costs may pay more taxes than under the real profit regime.
• Activities such as professional and intermediary services have a high profit percentage. This can increase the tax burden.
• Presumed profit does not allow for offsetting losses from previous years. This can be a problem for companies that are growing or experiencing financial difficulties.

Therefore, it is essential that business owners carefully assess their needs and compare this method with real profit to choose the best tax option.

How to calculate the Presumed Profit

Let's see how to calculate and what the rates are, as this helps to better understand taxes.

Calculation formula

The formula is simple. It uses gross revenue and a presumption percentage, and this percentage changes according to the company's activity.

Presumed Profit = Gross Revenue x Presumed Percentage

Therefore, the presumption percentage ranges from 1.6% to 32%. This depends on the company's activity, and it is the legislation that defines this percentage.

Presumed Profit Rates

After calculating the Presumed Profit, you apply the Income Tax (IR) and Social Contribution on Net Profit (CSLL) rates. This shows the total taxes to be paid. The rates are:

• Income Tax (IR): 15%
• Social Contribution on Net Income (CSLL): 9%

Therefore, the total effective rate is 24%, considering IR and CSLL.

Presumed Profit vs. Real Profit

Choosing a tax regime for your business requires understanding the differences between presumed profit and real profit.

This is because each option has its advantages and disadvantages, so the choice must consider the characteristics of your company.

THE presumed profit It is a simple regime, in which the tax is calculated based on a percentage of gross revenue. 

Already the real profit It is more complex, as here the tax is based on the company's net profit.

Finally, the presumed profit It is good for small and medium-sized companies, as it is simple and reduces the tax burden. 

Already the real profit It is best for large companies or those with complex costs.

Practical example

Let's see how this regime works through an example:

A consulting company has a turnover of R$1.2 million per year.

So, the calculation of Presumed Profit is simple:

1. Annual revenue: R$1.2 million
2. Presumed Profit Percentage for services: 32%
3. Presumed Profit = Revenue x Presumed Profit Percentage
4. Presumed Profit = R$ 1.2 million x 32% = R$ 384 thousand

So, after calculating, the company pays taxes, and uses the IRPJ and CSLL rates. In this case, suppose the rates are 15% for IRPJ and 9% for CSLL.

So this example shows how to calculate and taxes. Understanding this helps businesses better plan their taxes.

Books and records required for Presumed Profit

Companies that choose the Presumed Profit regime need certain accounting books and records, which are essential for calculating and declaring taxes.

Additional obligations

The main obligations include:

1. Cash book: recording of cash inflows and outflows.
2. Inventory Record Book: list of goods and merchandise in stock.
3. Entry Log: record of acquisitions of goods and services.
4. Exit Registration Book: sales and service notes.
5. Ledger: details of accounting movements.

So, in this case, it is important to keep the books and records up to date. 

This includes the Presumed Profit Assessment Book (LALP) and the Social Contribution Assessment Statement (DACON).

Finally, maintaining these ancillary obligations is crucial, as it helps companies keep their accounting up to date and comply with tax laws.

Presumed profit for companies in specific sectors

This regime brings advantages to several companies, including those in specific sectors. 

This is because it has general rules, but may have particularities in certain sectors of the Brazilian economy.

For example, service companies have rates of 16% to 32% on presumed profit. In the commercial sector, the rate is 8%. Industries pay 8% on gross revenue.

Furthermore, some sectors may choose special taxation regimes, such as Simples Nacional, and this may affect the advantage. 

Therefore, it is important that entrepreneurs carefully assess their needs before choosing a tax regime.

• Service companies: rates from 16% to 32%
• Commercial: rate of 8%
• Industrial companies: rate of 8%

Therefore, this calculation for companies in specific sectors requires attention, as the rules and rates change according to the company's activity. 

Therefore, careful analysis helps to reap the benefits of this regime.

Transition between tax regimes

Switching from one tax regime to another, such as Presumed Profit or Simples Nacional, is a delicate process. 

This is because each regime has its own rules and obligations, and changes can affect the tax burden and financial management of the company.

So when a company decides transition between tax regimes, it is important to evaluate several factors. These include:

• Legal and regulatory requirements of each regime;
• Impacts on tax calculation and collection;
• Need to adapt internal systems and controls;
• Deadlines and procedures for implementing the change.

Therefore, it is important to seek help from professionals, such as accountants and tax consultants. They can help you make the transition between tax regimes correctly, and this avoids future problems.

“Changing tax regimes requires careful planning to maximize benefits and minimize risks.”

Some key points in transition between tax regimes they are:

1. Feasibility analysis: Assess the financial and operational impacts of the regime change.
2. Compliance with deadlines and obligations: Comply with deadlines and procedures to make the transition effective.
3. Adjustments to systems and controls: Adapt management systems and internal controls to the new regime.
4. Stakeholder Communication: Inform customers, suppliers and government agencies about the change.

Therefore, the transition between tax regimes It is an important strategic decision, as it can affect the company's financial health and competitiveness. 

Therefore, it is essential to plan and execute carefully, with the support of experts.

Conclusion

This article showed how Presumed Profit works, and as we saw, it is good for small and medium-sized companies looking for less complexity.

This is because it is easier to use than Real Profit.

So, a strong point is the ease of calculating profit, which also reduces bureaucracy and helps with tax planning. 

However, there are disadvantages, such as limitations on deductions and a higher tax burden in some cases.

Therefore, when choosing, it is important to know the rules well. 

Therefore, companies need to keep an eye on changes in laws.

But, with good planning and help from experts, this regime can be a good choice.

Read also: Letter of new job acquisition: what it is and when to use it – The Administrator.

Content Team Theadmin

I am a member of the O Administrador team and I produce content about career, personal finance, financial education, productivity, and professional development. My goal is to share clear and practical information to help readers with their day-to-day decisions.

August 16, 2024