Simples Nacional: How It Works and Why It Isn’t So “Simple”

Understand what the Simples Nacional is, how it works, and why adopting this tax regime is not as “simple” as the name suggests, and it might even be hindering your company’s growth.

Unified taxes in a single guide (DAS), administrative simplification, social security contribution based on revenue, benefits for bidding and exports, the possibility of paying lower tax rates.

These are some of the benefits of Simples Nacional that make it very attractive for many micro and small businesses.

Without a doubt, this tax regime is very advantageous for many companies – but this may not be true for others.

The issue of taxes in Brazil is complex and laborious, and choosing the right tax regime is a strategic decision that can determine the direction of a company’s growth.

Revenue limits, complexity, and frequency of declarations, and especially the company’s cash flow depend on this. And of course, all these factors also influence the final price of products or services offered, thus affecting business competitiveness.

Currently, in Brazil, there are three main tax regimes: Simples Nacional, Lucro Presumido, and Lucro Real, each with its particularities, rules, advantages, and disadvantages.

Simples Nacional is a regime aimed at micro and small businesses, including MEIs, promising simplification and tax relief, offering advantages for various companies, although it may not always be the most appropriate choice (as you will understand below), and many doubts may arise along the way.

Keep reading if you are considering adopting this regime or are already in it!

What is Simples Nacional?

The Simples Nacional tax regime, created by Complementary Law No. 123/2006, is an option aimed at micro-enterprises (ME) and small businesses (EPP), also including Individual Microentrepreneurs (MEI).

Its proposal is to offer a unification of taxes, where companies can consolidate various taxes and contributions into a single payment guide (DAS), significantly simplifying the process of fulfilling their tax obligations.

Moreover, by adhering to Simples Nacional, depending on the individual characteristics of each company, it is possible to reduce the tax burden, among other advantages listed below.

Its type of taxation is based on the company’s REVENUE, with progressive rates, and it has several rules to be chosen as a tax regime.

What are the Rules for Qualification in Simples Nacional?

Revenue Limit:

  • Microenterprise (ME): Revenue up to 360 thousand reais in the last 12 months.
  • Small Business (EPP): Revenue from 360 thousand reais to 4.8 million reais in the last 12 months.

Besides the annual revenue limit of up to 4.8 million, other conditions for qualification include:

  • No other companies in the shareholder structure, allowing only individuals as partners.
  • No participation as a partner in another company, avoiding linking the CNPJ to the capital of another entity.
  • The total revenue of all the partners’ companies should not exceed the limit of 4.8 million.
  • Not being a corporation (S/A).
  • No foreign partners.
  • No unresolved debts with the Federal, State, Municipal Revenue or Social Security.
  • Activities in accordance with the permitted annexes. Consult the Simples Nacional Table.
  • Applies to Microenterprises (ME) and Small Businesses (EPP).
  • No unresolved debts with the Government.
  • The Individual Microentrepreneur (MEI) also integrates Simples Nacional, with different rules that will be addressed in another text.

What are the Main Advantages of Simples Nacional?

Less Complex Tax Regime

Simples Nacional offers a simplified tax regime for companies, with progressive rate tables that consider the business revenue.

Unified Tax Collection

The unification of federal, state, and municipal tax collections into a single guide (DAS) simplifies the payment process and facilitates the regularization of companies’ tax obligations.

Simplified Accounting

Accounting is simplified, and many declarations are not required, such as DCTF, SPED, and SISCOSERV, following the purpose of reducing bureaucracy. Also, the presentation of Negative Certificates for contractual changes is not required.

Possibility of More Favorable Taxation

Depending on the company’s peculiarities, Simples Nacional offers more advantageous taxation possibilities compared to other tax regimes, allowing significant savings for companies.

Incentive for Angel Investors

Simples Nacional has mechanisms that facilitate investment by angel investors, promoting the raising of funds for business growth.

Preference in Bidding Processes

Companies opting for Simples Nacional enjoy preference in public bidding, increasing their chances of participating in these processes and expanding their business opportunities.

Benefits in Title Protest

Companies opting for Simples Nacional can benefit from special rules for title protest, including reduced fees and the option to pay by check.

Digital Certificate

Service companies with less than five employees do not need to have a digital certificate, representing cost savings and a simplified process to meet legal requirements. Some municipalities still require this Certificate, even with less than five employees, like Belo Horizonte – MG and Porto Alegre – RS, but the vast majority do not.

Participation in Specific Purpose Company (SPE) and Consortia

Simples Nacional allows the formation of Specific Purpose Companies (SPE) and participation in consortia for joint purchases and sales, increasing the competitiveness of companies.

What are the Main Disadvantages of Simples Nacional?

No Tax Refund for Clients

Companies under Simples Nacional do not detail the amounts of IPI and ICMS taxes on invoices, resulting in the unavailability of tax credits for clients.

Calculation Base Linked to Revenue

It is crucial to keep in mind that the calculation of Simples Nacional is based on the company’s revenue, not profit. This can lead to situations where the company pays equivalent amounts of taxes even when operating at a loss. Therefore, it is essential to consider the nature of the activity and the corresponding rate before opting for the Simples Nacional regime.

Payroll Does Not Generate Tax Reduction

As mentioned, the tax calculation base of Simples Nacional is the company’s revenue, not profit. Therefore, a company with many employees to pay and without being able to deduct this as an expense might find itself at a disadvantage in Simples Nacional, and opting for other tax regimes might be better. It is ideal to have good accounting advice when analyzing or choosing tax regimes.

Export Limit

Small Businesses (EPP) under Simples Nacional face an export limit set at R$ 3.6 million for goods and services. In certain situations, this can impact the company’s growth.

Why Simples Nacional Can Hinder the Growth of Some Companies

The main factors for this include:

  • Restriction by the qualification rules.
  • The false belief that staying in Simples Nacional is more advantageous than growing.
  • Peculiarities of each company, which, when analyzed in depth, are more profitable under another regime, even if they qualify for Simples.
  • Very high expenses.

Various elements can influence the disadvantage of Simples Nacional, including the company’s annual revenue, the nature of the activity performed, and the number of employees.

Taxation based on revenue, without deducting expenses, is something that hinders adherence to Simples in many cases.

With a nature full of rules and limitations for a company to qualify for this regime, coupled with the illusion that staying in Simples Nacional is more advantageous for the company, many end up sabotaging their growth by remaining in this regime, opting to earn less than to grow. A kind of “Peter Pan syndrome” in business.

Given this scenario, it is crucial to conduct a thorough evaluation of the potentialities and limitations of this tax regime before making a definitive decision.

How to Make More Efficient and Competitive Choices for Your Company’s Taxation?

The antidote for this and all other issues related to taxation and the laws governing it is to have good accounting advice.

Choosing this advice is truly impactful for companies, as offices that treat each company as unique should be chosen, looking at their peculiarities, with an experienced, multidisciplinary team (after all, the company is a system and should be analyzed as a whole, not just the accounting part), acting as a true partner for your business.

Numeric offers just that. We are more than accounting and numbers. We are business strategy and competitiveness for your company.

To discover how Numeric Brasil can drive your company´s growth, contact our team of specialist. We are ready to provide the ideal solution for your needs.

See you next time!

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