The Brazil telecom sector is one of the most heavily regulated and taxed industries in the country. Accounting in this field goes far beyond basic bookkeeping — it requires strategic tax planning, strict regulatory compliance, and a deep understanding of both national and local laws. For foreign investors, the Brazilian tax environment can be especially challenging. Understanding local rules is essential to avoid unnecessary costs and legal risks.

The effective tax burden in telecom can exceed 40% of gross revenue. This is due to the simultaneous incidence of federal, state, and municipal taxes, as well as mandatory sectoral contributions. A specialized accounting partner is essential for operating successfully in Brazil.

 

Key Taxes That Impact Telecom Companies

 

Telecom operators in Brazil must pay a series of complex taxes. The ICMS (Tax on Circulation of Goods and Services) is a state tax that applies to communication services, with an average rate of 25%. The PIS/Pasep and COFINS are federal contributions levied on gross revenue, with rates that vary depending on the taxation regime. The ISS (Service Tax) is a municipal tax that applies to certain service activities and ranges from 2% to 5%.

In addition to these taxes, telecom providers are also subject to two mandatory sector funds: FUST and FUNTTEL, both of which are charged at 0.5% of gross revenue.

 

What are FUST and FUNTTEL?

 

Created by Brazilian law, these funds serve distinct purposes:

• FUST (Fund for Universalization of Telecommunications Services), established by Law 9.998/2000, supports projects that expand internet and telecom access to remote or underserved areas of the country.
• FUNTTEL (Fund for the Technological Development of Telecommunications), under Law 10.052/2000, finances research, innovation, and development in the Brazilian telecom industry.

In short: FUST is about public access, and FUNTTEL is about industry advancement.

 

Real Tax Burden Example

 

For a company with R$10,000 in monthly revenue:

• ICMS (25%): R$2,500
• PIS (0.65%): R$65
• COFINS (3%): R$300
• ISS (2%): R$200
• FUNTTEL (0.5%): R$50
• FUST (0.5%): R$50

Total taxes: R$3,165 — a 31.65% tax load, not including operational and reporting costs.

 

Common Questions from Foreign Investors

 

1. Can foreign companies operate in Brazil’s telecom sector?

Yes, they can. However, the company must meet several legal requirements. It must be registered with the Commercial Board, have an active CNPJ (business ID), and be properly enrolled in federal, state, and municipal tax authorities. Additionally, companies must request a formal license from ANATEL, Brazil’s telecom regulatory agency.

 

2. Can a foreigner open a business in Brazil? What are the conditions?

Yes, foreigners can open a business in Brazil, provided they appoint a local legal representative and obtain a valid CPF (tax ID). If there is foreign investment involved, it must be registered through the Central Bank’s RDE-IED system, which allows for proper capital repatriation and ensures regulatory compliance.

 

 

Read also: How to start a business in Brazil: a step-by-step guide for foreign

3. What is the best tax regime for a telecom company?

Telecom providers are generally not eligible for the Simples Nacional simplified tax regime. Instead, they choose between Lucro Presumido (Presumed Profit) and Lucro Real (Actual Profit). Lucro Presumido is easier to manage but less flexible, while Lucro Real allows deduction of real costs and is recommended for businesses with higher expenses or more complex operations.

 

4. How do companies deal with exchange rate risks?

Companies with foreign capital should adopt hedge strategies to mitigate currency fluctuations. Accounting must also follow both local standards (CPCs) and international guidelines (IFRS) to ensure transparency and protect financial results.

 

5. What are the main compliance obligations for telecom firms?

In addition to paying taxes, telecom companies must comply with several reporting requirements: EFD-Contributions, DCTF, ECF, SPED Accounting, and ANATEL’s technical reports. Missing deadlines or misreporting can lead to fines and operational issues.

 

Invoicing in Brazil: Model 21, Model 22, and NFCom

 

Brazilian telecom firms must issue specific types of invoices. The most common are:

• Model 21: Used for broadcasting, internet, and communication services
• Model 22: Used for telephone services

Both are governed by ICMS Agreement 115/2003 and must be issued using software approved by the State Treasury Department (SEFAZ). Invoices must include all required details such as service descriptions, tax calculations, and client data. The digital files must be validated and stored properly for future audits.

 

Upcoming change: NFCom is mandatory from November 2025

The NFCom (Electronic Communication Service Invoice) will become mandatory as of November 1st, 2025. It will replace Models 21 and 22, standardizing invoicing in the telecom sector and simplifying cross-checking for tax authorities.

 

Why Work with a Specialized Accounting Firm?

 

Due to the complexity of taxes, regulatory requirements, and sector-specific rules, having a specialized accounting partner is crucial. The CLM Controller is a leading accounting boutique in Brazil, with vast experience in helping telecom companies — especially those with international ownership — navigate the local business environment.

CLM offers complete solutions, from company formation and tax planning to monthly accounting, ANATEL compliance, and NFCom transition support. The firm also provides ERP integration and detailed financial reporting, ensuring transparency and strategic insights.

Whether you’re entering the Brazilian market or scaling your telecom operation, CLM Controller accounting offers the expertise and reliability your business needs to succeed.