Simples Nacional: how it works and why it’s not that “simple”

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

Unified taxes in a single tab (DAS), administrative simplification, social security contributions included in billing, benefits for bidding and exports, possibility of paying a lower tax burden.

These are some of the benefits of Simples Nacional that make it very attractive for many micro or 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 the choice of tax regime is a strategic decision that can determine the direction of a company's growth.
Billing limit, complexity and frequency of statements and, most importantly, a company's cash flow depend on this. And of course, all these factors also influence the final price of products or services offered, therefore, it also affects the competitiveness of the business.

Currently, in Brazil, there are 3 main Tax Regimes: Simples Nacional, Presumed Profit and Real Profit, each with its own particularities, rules, advantages and disadvantages.

Simples Nacional is a regime aimed at micro and small companies, also encompassing the MEI, and promises simplification and relief of the tax burden, offering advantages to several companies, although it is not always the most appropriate choice (you will understand this later), and There are many doubts that may arise along the way.

Keep reading if you are thinking about joining this regime or are already on 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-sized companies (EPP), also including Individual Micro-entrepreneurs (MEI).

Its proposal is to offer unified taxes, where companies can concentrate various taxes and contributions in a single payment guide (DAS), significantly simplifying the process of complying with their tax obligations.

Furthermore, by joining Simples Nacional, it is possible, depending on the individual characteristics of each company, to have a reduction in tax burden, among other advantages listed below.

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

See below:

What are the rules for applying to Simples Nacional?

Billing Limit:
Microenterprise (ME): Revenue of 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.

In addition to the revenue limit of up to 4.8 million annually, other qualifying conditions include:

  • Absence of other companies in the corporate structure, allowing only individuals as partners.
  • No participation as a partner in another company, avoiding linking the CNPJ to the share capital of another entity.
  • The sum of the revenue of all partners’ companies must not exceed the limit of 4.8 million.
  • Not be a joint stock company (S/A).
  • Absence of foreign partners.
  • No debts not negotiated with the Federal, State, Municipal Revenue or Social Security.
  • Activities in accordance with attachments permitted. Consult the Simples Nacional Table.
  • Applies to Microenterprises (ME) and Small Businesses (EPP).
  • Absence of debts not negotiated with the Government.
*Individual Microentrepreneur (MEI) is also part of Simples Nacional, with different rules that will be covered 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 take into account the business’s revenue.  

Collection Unification:

The unification of tax collection (federal, state and municipal) in a single tab (DAS) simplifies the payment process and facilitates the regularization of companies’ tax obligations. span>  

Accounting Simplification

Accounting is simplified and many declarations are not necessary, such as DCTF, SPED and SISCOSERV, with the aim of reducing bureaucracy. Também não é exigida a apresentação de Certidões Negativas para alterações contratuais.  

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:

The Simples Nacional regime has mechanisms that facilitate investment by angel investors, promoting fundraising for company growth.  

Preference in Bidding Processes:

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

Benefits in Title Protest:

Companies opting for Simples Nacional can take advantage of special rules for protesting titles, also including reduced fees and the option to pay by check.  

Digital Certificate:

Service companies with less than 5 employees do not need to have a digital certificate, which represents cost savings and a simplified process to meet legal requirements.
  • Some city halls still require this Certificate, even with less than 5 employees, such as Belo Horizonte – MG and Porto Alegre – RS , but the vast majority dismiss it.
 

Participation in Special Purpose Entities (SPE) and Consortiums:

Simples Nacional enables 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 customers:

Companies included in Simples Nacional do not detail the amounts of IPI and ICMS taxes in their invoices, resulting in the unavailability of tax credits for customers.  

Calculation basis linked to billing:

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

Payroll does not generate tax reduction

As stated, the basis for calculating Simples Nacional taxes is on the company’s revenue, not profit. Therefore, a company with many employees to pay and without being able to deduct this as an expense, may find itself at a disadvantage in Simples Nacional, making it better to opt for other Tax Regimes. The ideal is to have good accounting advice when analyzing or choosing tax regimes.  

Export limit

Small Businesses (EPP) within the scope of 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 can Simples Nacional hinder the growth of some companies?

The main factors why this can happen include:
  • Framing by framing rules
  • False belief that remaining in Simples Nacional is more advantageous than growing up
  • Peculiarities of each company, which if analyzed in depth, end up being more profitable under another regime, even though they can be included in Simples
  • Very high expenses
Several 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 on top of revenue, without deducting expenses, is something that harms adherence to Simples in many cases. With a nature full of rules and limitations so that a company can be included in this regime, combined with the illusion that remaining in Simples Nacional is more advantageous for the company, many end up sabotaging its own growth by remaining in this regime, choosing to earn less than to grow. A business Peter Pan syndrome. Given this scenario, it is essential to carry out a thorough assessment of the potential and limitations of this tax regime before making a definitive decision. Understand better:  

How to have more efficient and COMPETITIVE choices for my company in relation to taxation?

The antidote to this and all other issues related to taxation and the laws that govern it is to have good accounting advice. The choice of this consultancy is truly impactful for companies, and offices must be chosen that treat each company as unique, looking at its peculiarities, with an experienced, multidisciplinary team (after all, the company is a system, and must 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. Discover all our services by clicking here, or even get in touch speak to one of our experts to learn more or answer any questions. See you next time!

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