CSLL – Social Contributions

Brazil, for foreign entrepreneurs, can be a complex and confusing melee of federal taxes and each one with a different acronym. You will see these acronyms appear in many of these articles. PIS, COFINS, IPI, IRPJ are just a few on this list, together with the CSLL, which will be covered in the article below.

What is CSLL?

CSLL is the abbreviation for Contribuição Social sobre o Lucro Líquido (Social Contribution on Net Profits). It is one of the contributions destined to finance the Brazilian social security system and its payment is required from every legal person resident in Brazil. Any corporation that is incorporated in the country must also contribute to CSLL.

How is the CSLL Collected?

As the name indicates, the CSLL is levied on net profit at a rate of:

  • 12% for financial institutions
  • 9% for other institutions

In order to know how much you need you pay on CSLL, it is necessary to understand that, in Brazil, companies may opt to pay their taxes out of two forms of ascertainment. 

Those systems determine the company’s profit, which will be used as calculation basis for CSLL and other tributes’ collection. 

Understanding which taxation applies to my business?

According to its legal form and profitability, companies may opt between these two taxation arrangements, foreseen in Brazilian tax legislation:

Lucro Real (Actual Income)

With this method, the rate of CSLL will be applied over the net profit ascertained (revenue minus certified expenses). Contributors can also chose to establish their profits on an annually or quarterly basis. The Lucro Real system is indicated to companies with an uncertain profitability or a very variable profit during the year. 

Lucro Presumido (Presumed Income)

Under this system, the CSLL is levied on a presumed profit, pre-established by the Brazilian tax legislation. The calculation is based according to the following fixed coefficients:

  • 12% of the gross revenue when it comes to commercial and industrial activities as well as hospital and transportation services.
  • 32% of the gross revenue for services in general; business brokerage; administration, hiring out or transfer of movable or immovable assets and rights of whatever nature.

In the Lucro Presumido system, it does not really matter how much the company have profited. To compose the calculation basis for CSLL, the fixed percentages above will always be used, whatever makes it easier to determine. 

Overall, this system tends to be the best alternative for companies with a guaranteed annual profit higher than the percentages established by the Federal Revenue. In this option, CSLL is calculated on a quarterly basis. 

For companies with annual billing revenue in excess of BRL 48.000.000, the Lucro Real system is mandatory.

Mini or small businesses and small sized companies must pay CSLL (amongst other taxes) in a unified payment, according to the Simple Nacional Law.