Do you already know how to calculate the Presumptive Profit Method? It doesn’t matter what line of business you’re in, the size of your company, or where you’re located. Every entrepreneur needs to have some knowledge about the tax regimes that exist here in Brazil.
After all, Brazil is very complex when it comes to taxation and understanding how the current taxes work is essential for the health of your business.
But is your company collecting all the taxes correctly?
Facing difficulties when calculating the Presumptive Profit Method can lead to noncompliance with legal requirements, payment of amounts above what is due, and a negative impact on your finances.
To help you with this, the focus of our article today will be to explain what is the Presumptive Profit Method, which companies fit into it, what are the presumption rates, the advantages and disadvantages of this tax regime, its other main features, and to show practical examples of how it’s calculated.
Keep reading and learn more about the Presumptive Profit Method.
What is the Presumptive Profit Method?
First of all, it’s essential to understand the concept of Presumptive Profit Method and in what context it applies. Let’s go?
Presumptive Profit Method is one of the three ways of paying Corporate Income Tax (IRPJ). Therefore, there are two other ways: the Actual Profit Method and the Simples Nacional (exclusive for companies with sales of up to R$3.6 million per year).
Besides that, the Presumptive Profit Method is a simplified tax regime for companies – foreseen in Decree 3,000, of March 26th, 1999 – and used in the calculation of the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profit (CSLL).
To calculate the Presumptive Profit Method, this system takes into account a projection of sales based on previous calendar years and how much the profit percentage will be on top of this amount. That is, instead of considering the actual profit that the entrepreneur will have, the IRS (Internal Revenue Service) considers a presumed value.
From this, taxes are levied on the Gross Operating Revenue (ROB). Next, other revenues are added to this number and the final result is the Presumptive Profit Method, which is multiplied by the IRPJ and CSLL rates to arrive at the tax amount.
It’s also important to remember that the choice for the Presumptive Profit Method must be made at the time the company is created, and can only be changed once a year, at the beginning of the next fiscal year.
It’s up to every entrepreneur to understand how the forms of taxation work and evaluate which option is the most advantageous for their business strategy. The more information they have, the better their decision-making will be. Some of the benefits of a right choice are, for example, cost reduction and simplification of internal routines.
Now that you have an idea about what Presumptive Profit Method is, let’s talk more about how it works.
How does the Presumptive Profit Method work?
Who fits in?
According to the rules, only companies with an annual revenue of up to R$78 million are eligible to opt for the Presumptive Profit Method. Companies with revenues above this are obligated to select the Actual Profit Method. In this taxation regime, the IRPJ and CSLL are taxed on the Accounting Profit, plus additions and deductions.
Another important point is that the Presumptive Profit Method is considered the most bureaucratic of all. It demands many documents and requires a larger team of people to deal with these processes. For this reason, it’s usually indicated for large companies.
Check out below the main activities that fit into this modality:
- Rural activity;
- Commerce of goods or products;
- Civil construction;
- Liberal professionals, such as lawyers, dentists, administrators, physicians, accountants, engineers, economists, consultants, among others;
- Healthcare services;
- Cargo shipping.
How to calculate and pay?
The calculation of the Presumptive Profit takes place every three months, on March 31, June 30, September 30 and December 31 of each calendar year (Law 9430/1996, articles 1 and 25). As for payment, the IRPJ and CSLL must be paid by the last business day of the month following the end of the quarterly calculation period.
As every tax regime, the Presumptive Profit requires the fulfillment of several accessory obligations:
- Keep commercial books and tax books: Daily Journal, Ledger Book, Cash Book, Duplicate Receipt Book, Book Inventory, Journal Entry, among others that are required only in specific cases;
- DES – Electronic Declaration of Services: mandatory municipal declaration for Service Companies;
- GIA – Information and Calculation Form of ICMS Tax Replacement;
- EFD ICMS/IPI – Digital Tax Bookkeeping;
- DCTF – Federal Tax Debt and Credit Declaration;
- EFD Contributions;
- SEFIP (Company FGTS Payment and Social Security Information System) and GFIP (Severance Premium Reserve Fund and Social Security Information Form);
- ECD – Digital Accounting Bookkeeping;
- ECF – Fiscal Accounting Bookkeeping;
- DIRF – Declaration of Withheld Income Tax;
- RAIS – Annual Social Information Report.
The Presumptive Profit Aliquots
As we already know, calculating the Presumptive Profit Method requires applying a tax rate on gross sales. After this, it’s possible to make a presumption of the profit obtained in the period.
However, this is not done randomly. This is where the presumption rates come in. The profit margins are defined by two tables, the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profit (CSLL), as can be seen below:
Corporate Income Tax (IRPJ)
- 1.6% – Resale of fuels;
- 8.0% – General rule (every company that doesn’t fit into the definitions above or below);
- 16.0% – Transportation services (other than cargo);
- 32.0% – Rendering of services in general, business intermediation, and management, rental, or assignment of movable, immovable, or rights assets.
Social Contribution on Net Income (CSLL)
- 12.0% – General rule (every company that doesn’t fit into the rate below);
- 32% – Rendering of services in general, business intermediation, and management, rental, or assignment of movable, immovable, or rights assets.
It’s very important not to generalize when talking about PIS/Cofins taxation.
Although it may not seem so, it’s quite common to hear people saying that those who are on the Actual Profit Method will be taxed under the Non-Cumulative Regime. Meanwhile, in the Presumptive Profit Method, the collection of the contribution would be made by the Cumulative Regime. However, this statement is not entirely true.
The legislation that regulates this tax, Federal Law 10.833/2003, provides several exceptions to this rule. To give you a broader notion of this arrangement, see below:
- PIS tax rate is 0.65% on monthly revenues;
- Cofins rate is 3% on monthly revenues;
- The PIS rate is 1.65% on monthly revenues;
- Cofins is levied at 7.6% on monthly revenues.
Allows companies taxed under the Actual Profit Method to receive credit in some types of purchases and expenses. This grants a reduction at the final value of the contribution because of the discount made on sales.
ISS and ICMS
ISS (Service Tax) is a municipal tax levied on the turnover of companies that provide services, and varies between 2% and 5%, according to the municipality.
ICMS (Tax on Circulation of Goods and Services) is a state tax paid by companies that operate with the circulation of goods and specific services.
Therefore, the entrepreneur opting for the Presumptive Profit Method has to look for more information about these taxes in the city and state where the business is located. In this way, it’s possible to stay up to date with fiscal obligations.
How to calculate the Presumptive Profit Method?
The next step after learning how the Presumptive Profit taxation system works and identifying the calculation basis of your line of business is to apply the IRPJ and CSLL tax rates to it. But what is their percentage?
- CSLL: 9% on the calculation basis;
- IRPJ: 15% on the Presumptive Profit Method calculation basis, plus 10% on the portion that exceeds R$20,000.00 a month.
Let’s get to the point now. How to calculate the Presumptive Profit Method? To simplify this once and for all, we’ll address each tax separately: IRPJ, CSLL, PIS/COFINS, and ISS or ICMS. In addition, we have prepared a step-by-step guide that you should follow for clearer orientation:
- Know your revenue in the ascertainment period (quarterly);
- Identify what is the assumed profit margin – according to the tables we saw earlier;
- Apply the assumed profit margin on sales;
- Calculate the tax due according to the rate provided by law.
We use the following formula to calculate IRPJ with Presumptive Profit Method:
- 15% on presumed profit;
- 10% for assumed profit higher than R$20,000/month (Law 9249/1995, article 3).
So, if after calculating the Presumptive Profit Method for the period the computed value is R$30,000.00, the calculation must be as it follows:
- R$30.000 * 15% = R$4.500,00
- R$10.000 * 10% = R$1.000,00
- Total IRPJ = R$5.500,00
As you already know, CSLL is calculated with a rate of 9% on the Presumptive Profit Method for most cases. Therefore, a company that had a presumed profit of R$30,000.00 must pay R$2,700.00 (R$30,000 * 9%).
PIS/COFINS are calculated based on the monthly billing as the calculation basis. In a company that had a monthly billing of R$100,000.00 and R$40,000.00 of creditable expenses, the bill would look like this
PIS = R$100.000 * 0.65% = R$650,00
COFINS = R$100.000 * 3% = R$3.000,00
- PIS = R$100.000 * 1,65% = R$1.650,00
- PIS credit = R$40.000 * 1,65% = R$660,00
- Total = R$1.650,00 – R$660,00 = R$990,00
Calculation of COFINS
- COFINS = R$100.000 * 7,6% = R$7.600,00
- COFINS credit = R$40.000 * 7,6% = R$3.040,00
- Total = R$7.600 – R$3040 = R$4.560,00
ISS or ICMS
Service providers must pay ISS. Since it varies from municipality to municipality, between 2% and 5%, it’s important to check the rate practiced by your city.
Based on the gross monthly revenue of a company that profited R$100.000 and provides a service taxed at 5% ISS, it’s necessary to collect R$5.000,00.
Other companies, on the other hand, must collect ICMS on each product that is sold. That is why this calculation is so simple. All you have to do is apply the value of the goods at the prevailing rate. However, it’s necessary to pay attention to all the rules of this tax – such as the credit system and tax substitution.
An example of how to calculate the Presumptive Profit Method
Just so that you no longer have any doubts about how to calculate the Presumptive Profit Method, we decided to bring you an example that illustrates well the calculation of all the taxes we have just shown you.
If in a quarter the accumulated revenue of a business that provides accounting services is R$ 500.000, its assumed profit will be R$ 160.000 (32%). Then, federal taxes such as IRPJ and CSLL should be levied on this amount.
Quarterly revenue: R$ 500.000,00
500.000 x 32% = 160.000 → IR Presumed Profit 160.000 x 15% = R$ 24.000 → IRPJ to be paid in the quarter
500.000 x 0.32 = 160.000 → Additional IRPJ
(160.000 – 60.000) x 10% = 10.000 → Additional IRPJ to be paid in the quarter
500,000 x 32% = 160,000 → Presumptive Profit Method CSLL
160,000 x 9% = 14,400 → CSLL to be paid in the quarter
500,000 x 0.65% = 3,250 → PIS to be paid in the quarter
500,000 x 3% = 15,000 → Cofins to be paid in the quarter
500,000 x 5% = 25,000 → ISS to be collected in the quarter
Thus, the summary of the taxes will be as follows:
Quarterly turnover: R$ 500,000.00
|Taxes||Rate||(%) W/Turnover||Quarterly Value (R$)|
With this, the final amount to be paid in taxes will be R$91,650.
Advantages and disadvantages of Presumptive Profit Method
When it’s time to decide the tax regime for your company, some more doubts may arise. Learn about the advantages and disadvantages of presumed profit and decide, once and for all, if it’s the best choice for your business:
- Lower PIS and COFINS tax rates;
- Lower volume of stored documents;
- More assertiveness in the value of the collections;
- Possibility of more profit if the percentage charged is lower than it would be in Actual Profit Method;
- Reduction of necessary calculations.
- Possibility of collecting taxes more than necessary;
- Risk for companies that are not 100% structured;
- More intensive monitoring by the Fisco;
- More bureaucracy with accessory obligations.
Which is more worthwhile? Presumptive Profit, Actual Profit or Simple National
At first, every entrepreneur must ask himself which tax regime is more worthwhile for his business model: Presumptive Profit Method, Actual Profit Method, or Simples Nacional?
The Presumptive Profit Method, for example, makes much more sense for companies that have obtained revenues corresponding to the high bands of the progressive table of Simples Nacional or exceeded the limit of this taxation system (limited to 4.8 million).
In this sense, Simples Nacional tends to become expensive after certain attachment ranges, while presumed has fixed rates. Calculating the Presumptive Profit will also be beneficial for organizations that have small payrolls. In this system the employer’s INSS and third party charges are levied, while Simples Nacional companies don’t collect these charges.
Is it more advantageous to adopt the Actual Profit Method or the Presumptive Profit Method? The answer to this question depends on a number of factors. A company can, for example, vary the regime from one year to another, depending on which is more beneficial according to its billing. Therefore, it’s best to know the differences between these regimes well in order to always make the best decision.
While the Actual Profit Method could be a great alternative for a company that goes through a period of low profitability, the Presumptive Profit Method is a great solution for a company that obtains profits above the presumption of this system – avoiding the payment of higher taxes.
You have learned in our article how to calculate the Presumptive Profit, how it works, and its main features, haven’t you? Now that you understand everything about it, you can calculate it in a simple and intuitive way. Just follow the tips we gave you to fulfill your tax obligations throughout the year.
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