Lei do Bem: Brazil’s R&D Tax Incentive for Technology Subsidiaries

Brazil’s main federal tax incentive for research and development is the Lei do Bem (Law 11,196/2005). It does not give grants or credits: it lets companies deduct more than 100% of qualifying R&D spending when calculating corporate income tax and CSLL. For a technology or industrial subsidiary of a foreign group that already spends on engineering in Brazil, the benefit can be significant. It also comes with conditions that many foreign-owned subsidiaries do not meet without planning, starting with the tax regime and ending with an annual report reviewed by the Ministry of Science. This guide explains how it works in 2026.

What the incentive gives

In simple terms, R&D spending of R$10 million can reduce taxable profit by up to R$16 million to R$18 million, instead of R$10 million. At the combined 34% rate of IRPJ and CSLL, the additional 60% to 80% exclusion is worth roughly R$2 million to R$2.7 million of tax. This is a hypothetical illustration, before the limits described below.

The conditions

Lucro Real

The exclusions work by reducing taxable profit under the actual profit method, so the incentive is in practice available only to companies under Lucro Real. A subsidiary under Lucro Presumido cannot use it (see Lucro Real or Lucro Presumido for a foreign-owned subsidiary).

Profit in the year

The additional exclusion is limited to the taxable profit and CSLL base of the year before the exclusion itself, and any excess cannot be carried forward. A subsidiary in a loss-making year, typical in the first years of operation, gets no benefit from the additional exclusion that year. Proposals in Congress to allow carry-forward had not become law by October 2026.

Tax compliance

The company must prove that it is tax compliant. If it fails to meet the conditions, it loses the incentives and must pay the taxes with interest and penalties.

Spending in Brazil, with specific accounting

Qualifying expenses must be paid to individuals or companies resident in Brazil and recorded in specific accounts. R&D can be contracted with universities, research institutions or independent inventors in Brazil, as long as the paying company keeps the responsibility, business risk, management and control of the results.

The question for foreign groups: whose R&D is it?

Many Brazilian technology subsidiaries develop software or products for their foreign parent, which pays for the work, usually on a cost-plus basis, and owns the intellectual property. The law does not expressly address this case. But the rules require the beneficiary to carry the business risk and control the use of the results when R&D is contracted out, and the incentive is designed for innovation carried out by the Brazilian company. Where the subsidiary works on the parent’s account and risk, a disallowance is a real risk. Groups that want to use the Lei do Bem should look at who bears the risk, who controls the results and how the intercompany agreement is written, and at the interaction with transfer pricing (see technology and SaaS companies in Brazil).

Reporting: FormP&D and the Ministry’s review

Companies that use the incentive must report their R&D projects and spending each year to the Ministry of Science, Technology and Innovation (MCTI) through the electronic FormP&D. Under MCTI Ordinance 9,563/2025, the general deadline is August 31 of the following year; for the 2025 base year it was extended to September 30, 2026. Late submissions are not analyzed.

The Ministry’s technical reviewers assess whether the projects qualify as technological innovation and whether the expenses are appropriate. The company can contest an adverse opinion within 30 days and appeal within 10 days, and the final result is sent to the Federal Revenue. Documentation must be kept for the statute of limitations period. A well-documented project file, with technical goals, uncertainty, people and hours, is the best protection.

2026: protected from the 10% cut

Complementary Law 224/2025 reduced most federal tax benefits by 10% from 2026. The Federal Revenue’s implementing rules (Normative Instructions RFB 2,305/2025 and 2,307/2026) list the Lei do Bem exclusions of articles 19, 19-A and 26 among the benefits kept outside the cut. The treatment of the other article 17 benefits under the cut was not expressly listed. A bill in the Senate (PLP 6/2026) proposes to protect the Lei do Bem from the reduction more broadly.

Other points

• Informatics Law: companies using the Informatics Law incentives cannot use the Lei do Bem for those informatics activities, but can for others.
• Projects with research institutions (article 19-A) follow a separate route, with prior approval, and cannot be combined with the general benefits for the same project.

A checklist

1. Confirm the subsidiary is, or should be, under Lucro Real and expects taxable profit.
2. Identify projects that involve real technological uncertainty, not routine development.
3. Check who bears the risk and controls the results, and align the intercompany agreement.
4. Set up specific accounts and time records for R&D from the start of the year.
5. Prepare the FormP&D during the year, not in August.

How Solidy can help

Solidy already serves subsidiaries of multinational companies in Brazil, including technology companies. Our tax and accounting teams model the benefit, set up the R&D accounting, apply the exclusions in the corporate income tax calculation and organize the documentation for the FormP&D. See our tax advisory service or talk to our specialists.