R&D tax credits in Brazil are mainly delivered through Lei do Bem, the federal incentive for companies investing in technological research and innovation development. For UK companies with Brazilian operations, the scheme can be a valuable local-country route where R&D activity, expenditure and evidence sit within Brazil.

R&D Tax Credits in Brazil: How Lei do Bem Supports Local Innovation

R&D tax credits in Brazil are mainly delivered through Lei do Bem, the federal incentive for companies investing in technological research and innovation development. For UK companies with Brazilian operations, the scheme can be a valuable local-country route where R&D activity, expenditure and evidence sit within Brazil.

What are R&D tax credits in Brazil?

Brazil’s main R&D tax incentive is Lei do Bem, introduced by Law No. 11.196/2005 and regulated by Decree No. 5.798/2006. Rather than operating as a refundable cash credit, the incentive generally works through enhanced deductions for eligible R&D expenditure, reducing the basis for corporate income tax and social contribution on net profit for qualifying companies.

The scheme is designed for companies taxed under the Lucro Real regime that carry out technological research and innovation development. The practical benefit depends on the level of eligible expenditure, the company’s tax position, the number of dedicated researchers and whether specific outputs, such as patents or registered cultivars, are achieved.

Brazil R&D tax credit benefit amounts

Lei do Bem deduction route	Indicative benefit amount	Who it may help	Key points to review
Base enhanced deduction	Additional deduction of 60% of eligible R&D expenditure. At a combined 34% tax rate, this can equate to an estimated 20.4% tax impact on eligible costs.	Profitable Lucro Real companies carrying out eligible R&D in Brazil.	The company must be tax compliant and the expenditure must be linked to qualifying technological innovation activity.
Researcher headcount uplift	Additional deduction can rise to 70% or 80% depending on growth in dedicated researcher numbers. This can equate to an estimated 23.8% to 27.2% tax impact on eligible costs.	Companies increasing dedicated R&D personnel in Brazil.	Researcher classification, employment records and headcount comparison should be evidenced carefully.
Patent or cultivar uplift	An additional 20% deduction may be available where the R&D results in a patent or registered cultivar, taking the total uplift up to 100% in some cases. This can equate to an estimated 34% tax impact on eligible costs.	Companies with protectable R&D outputs and strong IP governance.	Patent or cultivar status, timing and link to the R&D project should be documented.

Other related Lei do Bem incentives

Related incentive	Indicative benefit amount	Who it may help	Key points to review
IPI reduction for R&D equipment	50% reduction of IPI on certain equipment used exclusively for R&D.	Companies buying qualifying equipment for R&D activity.	Exclusive use for R&D and asset documentation should be retained.
Accelerated depreciation and amortisation	Immediate depreciation or amortisation may be available for certain R&D-related assets.	Companies investing in equipment or intangibles used in R&D.	Asset classification, use and accounting treatment should be reviewed.
Withholding tax reduction	100% reduction of withholding tax for registration and maintenance of trademarks, patents and cultivars.	Companies incurring qualifying IP registration and maintenance costs.	The costs must be linked to eligible IP registration or maintenance activity.

Who can claim Lei do Bem?

Lei do Bem is not available to every company operating in Brazil. It is generally relevant to companies taxed under Lucro Real that are profitable, tax compliant and undertaking eligible technological research and innovation development. This makes the incentive particularly relevant to established Brazilian subsidiaries, industrial companies, software businesses, engineering groups, agritech operations, energy companies and manufacturers with local R&D activity.

For international groups, the key issue is local substance. The R&D activity and related expenditure must be connected to Brazil. A UK parent company cannot simply treat Brazilian R&D costs as an overseas extension of a UK claim. The Brazilian entity, local project activity, technical evidence, tax treatment and reporting requirements need to be assessed in their own right.

Eligible activity: what counts as R&D in Brazil?

Brazilian R&D tax relief is focused on technological research and technological innovation development. This can include the design of new products, processes, services or systems, as well as the addition of new characteristics or functionality that improve competitiveness, quality or productivity. Software development can qualify where it meets the relevant innovation and technical criteria.

The distinction between genuine technological innovation and routine business change is important. Routine implementation, adaptation without technological uncertainty, commercial rollout or ordinary maintenance activity should not be treated as R&D without a clear technical basis.

What costs can be included?

Cost category	Potentially eligible where…	Evidence to retain
Staff costs	Employees are directly involved in eligible R&D activity.	R&D role descriptions, payroll records, time allocation, project records and researcher headcount analysis.
Inputs and consumables	Materials are consumed or transformed during R&D activity.	Invoices, stock movements, lab records, production trial notes and allocation methodology.
Third-party services	External services directly support eligible R&D activity.	Contracts, statements of work, test reports, deliverables and technical rationale.
Equipment and assets	Assets are used exclusively or directly in eligible R&D activity.	Asset registers, invoices, usage records and accounting treatment.
IP-related costs	Costs relate to qualifying trademarks, patents or cultivars under the relevant rules.	Registration documents, maintenance records and project linkage.
University or R&D centre collaboration	The project is developed with relevant research institutions or universities.	Collaboration agreements, technical reports, deliverables and payment records.

How the claim and reporting process works

Lei do Bem is claimed through self-assessment, but it is not a low-evidence process. Companies must report their R&D activities to the Ministry of Science, Technology and Innovation through the electronic FormP&D system. The FormP&D 2026 process covers R&D and innovation activities carried out in the 2025 base year and the MCTI has opened the reporting window until 31 August 2026.

The MCTI can evaluate the information submitted and the Brazilian Federal Revenue Office can audit the tax treatment. This means companies need technical evidence and financial evidence that work together. A finance ledger alone is unlikely to be enough if the technical character of the activity is challenged.

Why Brazil should be reviewed in a local-country claim strategy

Brazil is a practical example of why international R&D tax planning cannot be managed through the UK claim alone. The country has its own incentive mechanics, local reporting process, language requirements, tax regime conditions and technical definitions. Companies that already have Brazilian R&D teams may miss value if they only review R&D through the lens of UK, EU or US incentive rules.

A local-country review should also consider Brazil’s wider innovation funding landscape. Brazil’s Nova Industria Brasil policy includes major funding lines for industrial modernisation, innovation and digitalisation, including support administered through institutions such as FINEP, BNDES and EMBRAPII. Tax incentives and public funding should be reviewed together because grant funding, loans and tax relief can interact with the company’s financial plan and documentation strategy.

Common issues for UK companies with Brazilian R&D activity

• Assuming Brazilian R&D relief is a refundable tax credit rather than an enhanced deduction mechanism.
• Failing to check whether the Brazilian entity is taxed under Lucro Real and has sufficient profit position.
• Treating routine software adaptation or local implementation as R&D without technical evidence.
• Not retaining Portuguese-language technical and financial records that support the FormP&D submission.
• Missing researcher headcount evidence that may support a higher deduction rate.
• Separating tax, grants and IP decisions when they should be reviewed as one innovation funding position.

How FI Group by EPSA supports R&D tax credits in Brazil

FI Group by EPSA supports companies with international R&D tax incentives by combining local tax knowledge with a consistent evidence framework across jurisdictions. For groups with Brazilian R&D operations, this can help align Lei do Bem eligibility, FormP&D reporting, local cost treatment and wider group-level innovation funding governance.

Practical checklist before claiming R&D tax credits in Brazil

1. Confirm the Brazilian entity is eligible, including Lucro Real status and tax compliance.
2. Map local R&D projects and separate them from routine operational activity.
3. Identify eligible expenditure by project and cost category.
4. Review researcher headcount and dedicated R&D personnel evidence.
5. Check whether any patent or cultivar-related uplift may be relevant.
6. Prepare the FormP&D submission and supporting technical records.
7. Review interactions with grants, loans, equipment incentives and IP-related benefits.

FAQs: R&D tax credits in Brazil

What are R&D tax credits in Brazil?

Brazil’s main R&D tax incentive is Lei do Bem, which allows qualifying companies to apply enhanced deductions for eligible technological research and innovation development expenditure.

How much is Lei do Bem worth?

The base additional deduction is 60% of eligible R&D expenditure. Depending on researcher headcount growth and eligible IP outcomes, the uplift can rise to 100% in some cases.

Is Lei do Bem refundable?

No. Lei do Bem generally reduces the tax base for companies taxed under Lucro Real. It is not usually a payable cash credit for loss-making companies.

Can a UK company claim Lei do Bem for Brazilian R&D?

The relevant Brazilian entity must meet the local rules. A UK parent company cannot claim Lei do Bem merely because it owns a Brazilian subsidiary. Local expenditure, activity and tax status must be reviewed.

What is FormP&D?

FormP&D is the electronic reporting process used by Brazilian companies to submit information to the MCTI on R&D and technological innovation activities supported by Lei do Bem.