Brazil's Lei do Bem offers tax incentives for R&D innovation

In Brazil, Law 11.196/05, known as the ‘Lei do Bem’, serves as a primary instrument to stimulate technological innovation. This legislation allows companies operating under the ‘Lucro Real’ tax regime to deduct Research, Development, and Technological Innovation (PD&I) expenses from their IRPJ and CSLL tax bases.

Key fiscal incentives include the exclusion of 60% to 80% of R&D expenditures from the tax base, depending on the increase in the number of researchers. Additionally, companies may benefit from a 50% reduction in IPI on equipment purchased for R&D, as well as full depreciation and accelerated amortization of intangible assets related to innovation.

Effective application of these benefits requires precise data management from payroll departments. Because human capital represents the largest portion of deductible costs, companies must provide documented evidence and total traceability to prove the specific time employees dedicate to innovation projects to satisfy audits by the Federal Revenue Service and the Ministry of Science, Technology and Innovation.