Business expenses in Brazil 2026: what really lowers your tax

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You run, or plan to run, a business in Brazil and want to know which costs actually lower your tax. After reading, you will know which regime lets you deduct, what the Receita Federal accepts and rejects, and how freelancers and companies differ.

Brazil business expenses in 2026: the key figures

What changed for 2026

• Presumed profit costs more above R$5 million. Complementary Law 224/2025 raises the IRPJ and CSLL presumption percentages by 10% on the slice of revenue above R$5 million a year (R$1.25 million a quarter), from 2026 (PwC, secondary). Below that, nothing changes.
• Profit extraction changed. When one company pays a resident individual more than R$50,000 of dividends in a month, it withholds 10% on the whole amount; dividends to non-residents bear 10% (Law 15.270/2025). That makes the split between expenses, salary and dividends matter more.
• The deductibility rules themselves are unchanged. Art. 47 of Law 4.506/1964 and art. 13 of Law 9.249/1995 apply as in 2025.

Is this guide for you?

Read on if you…

• own a Brazilian Ltda or single-member company and want to know what it can deduct;
• are choosing between Lucro Real, Lucro Presumido and Simples Nacional;
• invoice as a self-employed professional and want to lower your monthly carnê-leão.

Probably not your case if you…

• are a salaried employee: your deductions are personal, see personal tax deductions and benefits of Brazil;
• are not resident in Brazil and have no business presence there.

Do business expenses lower your tax in Brazil?

Only under one regime. Brazil has three ways to tax a company's profit, and just one looks at your actual costs. The Receita's IRPJ page says profit "can be real, presumed or arbitrated".

• Lucro Real (actual profit). Tax falls on accounting profit, adjusted for tax rules. Every deductible cost counts. Losses carry forward.
• Lucro Presumido (presumed profit). The law presumes your profit is a fixed share of revenue, under art. 15 of Law 9.249/1995. For most services, that share is 32%. Spend 10% or 70% of revenue on costs: the tax is the same.
• Simples Nacional. One monthly payment calculated on revenue, for companies up to R$4.8 million a year. Costs play no direct role.

Here's the catch. Most small service companies pick Presumido or Simples because they are cheaper to run. Founders then keep collecting receipts that will never reduce IRPJ. Good bookkeeping still matters: it documents how much profit you can pay out.

Rates for each regime are in corporate income taxes in Brazil.

What can a company deduct under Lucro Real?

The legal test

Art. 47 of Law 4.506/1964 defines operating expenses. In plain words:

1. Necessary: paid or incurred to carry out the transactions your activity requires.
2. Usual or normal: common in your type of business, not a one-off personal benefit.
3. Linked to the income source: they keep the business producing revenue.

In practice, add a fourth condition: a proper electronic invoice (nota fiscal) in the company's name and CNPJ, its tax number.

Usually deductible

• salaries, employer social charges and the directors' fixed pay (pró-labore);
• office rent, utilities, software subscriptions and cloud services;
• accountants, lawyers and other professional fees;
• marketing and advertising;
• depreciation of equipment, for example 10% a year for machinery and furniture;
• taxes, generally on an accrual basis, and interest on business loans;
• donations to registered charities, within limits.

Not deductible

Art. 13 of Law 9.249/1995 bans these deductions for both IRPJ and CSLL:

• rent or leasing of assets, unless intrinsically linked to producing or selling your goods or services;
• depreciation, upkeep, insurance and other costs of assets with no such link, such as a family car or flat;
• meals of partners, shareholders and directors;
• non-mandatory contributions, except those funding health and insurance plans;
• donations, except qualifying ones;
• gifts and promotional freebies (brindes).

Punitive tax fines are also not deductible.

Paying foreign suppliers

Payments to foreign contractors and SaaS providers are deductible under Lucro Real when real, necessary and documented. Plan for taxes on the way out. Withholding income tax on services is generally 15%, or 25% for tax havens. CIDE adds 10% on royalties and certain technical services. Imported services also bear PIS at 1.65% and COFINS at 7.6% (PwC, secondary).

Losses and undocumented payments

Losses carry forward without time limit, but each year they can only cut taxable profit by 30%. So a profitable company always pays some tax.

Undocumented spending is worse than a lost deduction. Under art. 61 of Law 8.981/1995, payments to an unidentified beneficiary, or without proof of their cause, bear 35% withholding. The amount is treated as net, so the tax is grossed up.

How do self-employed professionals deduct costs?

If you invoice as an individual, you deduct costs through the livro-caixa, a monthly cash book. It reduces the base of your carnê-leão, the monthly self-assessment for income from abroad or from individuals. The Receita's deductions page lists the rules.

What fits:

• pay of your own employees, with their labour and social charges;
• fees paid to third parties;
• running costs: office rent, utilities, supplies, conference fees.

What doesn't:

• transport, fuel, parking, car insurance and car tax (sales representatives excepted);
• depreciation and equipment purchases: only consumption expenses count;
• leasing, repairs to property you own, and your own social security contribution.

Home office. If you work from home and cannot split the costs, you may deduct one fifth of rent, utilities and condo fees. Deductions are capped at the month's professional income. Unused excess rolls forward only until December.

Honestly? Above a certain income, a company usually beats the livro-caixa, because personal tax reaches 27.5%. See legal forms of business in Brazil.

Freelancer or company: how do costs count?

Two warnings for foreign founders. A company with a partner domiciled abroad cannot use Simples Nacional, per the Simples Nacional Q&A. And if you run a foreign company from Brazil, it may acquire a taxable presence there. Heavnn's business setup service checks both before you register.

How do you document expenses so they survive an audit?

1. Get a nota fiscal in the company's CNPJ for each domestic purchase. A receipt in your CPF is a personal expense.
2. Pay from the company account. Mixed payments weaken the deduction and your limited liability.
3. Keep contracts and remittance records for foreign suppliers, with the withholding you applied.
4. Keep identified receipts in the livro-caixa. Cash-register slips without your details do not prove expenses.
5. Keep everything for at least five years, the usual audit window.

Undocumented costs feed straight into assessments. See tax fraud regulations of Brazil for the fines.

Common mistakes (and what they cost)

• Collecting receipts under Lucro Presumido → hours of admin that never reduce IRPJ or CSLL by a single real.
• Buying in your CPF instead of the company's CNPJ → the expense is disallowed in the company's books.
• Running the family car or flat through the company → disallowed under art. 13 of Law 9.249/1995 and added back, with a 75% assessment fine on the extra tax.
• Paying without an identified beneficiary → 35% withholding, grossed up, on top of the lost deduction.
• Deducting a new laptop in the livro-caixa → rejected, because equipment purchases are not consumption expenses.

Frequently asked questions

Can I deduct business expenses under Lucro Presumido?

No. Under Lucro Presumido, IRPJ and CSLL fall on a fixed share of revenue: 32% for most services and 8% for IRPJ on most trade. Your actual costs do not change that. They still matter for your accounts and for how much profit the company can distribute.

What makes an expense deductible in Brazil?

Under Lucro Real, art. 47 of Law 4.506/1964 requires an operating expense to be necessary for the company's activity and usual or normal in that type of business. In practice it also needs an electronic invoice in the company's CNPJ, payment from the company account and a clear link to producing revenue.

Can I deduct my home office in Brazil?

As a self-employed individual, yes, through the livro-caixa. If you cannot prove which share of home costs relates to work, the Receita allows one fifth of rent, utilities and condo fees. Inside a company, renting part of your own home is harder to defend; a coworking contract in the company's name is cleaner.

Are payments to foreign freelancers deductible?

Yes, under Lucro Real, if they are real, necessary and documented with a contract and remittance record. The company generally withholds 15% income tax, or 25% for tax havens. Technical services and royalties can add 10% CIDE, and imported services bear PIS and COFINS of 9.25% combined.

How long can a Brazilian company carry forward losses?

With no time limit under Lucro Real. Each year, however, past losses can offset only 30% of that year's taxable profit, so a profitable company always pays some tax. Companies on Lucro Presumido or Simples Nacional are taxed on revenue, so losses do not reduce their bill.

Can I deduct my car as a freelancer in Brazil?

No. The livro-caixa excludes transport, fuel, parking, car insurance and the vehicle tax. The only exception is for self-employed sales representatives, who may record transport costs. Inside a company on Lucro Real, car costs are deductible only when the car is intrinsically linked to producing or selling the company's services.

Related guides

• Corporate income taxes in Brazil – rates and regime choice
• Legal forms of business in Brazil – which structure fits your cost base
• Specific taxes in Brazil – IOF, ISS, ICMS and the new dual VAT
• Tax fraud regulations of Brazil – penalties when deductions are rejected
• Tax landscape overview of Brazil – every Brazilian tax in one page
• Business expenses in Paraguay – the neighbour's rules
• Business expenses in Mexico – deductions in Latin America's other large market
• All country tax guides

Sources

• Law 4.506/1964, compiled text – Senado Federal
• Law 9.249/1995, compiled text – Senado Federal
• Law 8.981/1995, compiled text – Senado Federal
• Carnê-leão deductions and livro-caixa – Receita Federal
• IRPJ – Receita Federal
• CSLL – Receita Federal
• Simples Nacional Q&A – Receita Federal
• Brazil corporate deductions – PwC Worldwide Tax Summaries (secondary)

This guide is general information, not personalised tax advice. See how we research and review.