Can a Foreign-Owned Company Use Simples Nacional in Brazil?

Reviewed by Luiz Eduardo da Silva, director of LegalBR. Updated on 18 October 2026. About 8 minutes to read.

The Simples Nacional is Brazil’s simplified tax regime for small businesses, and it is closed to most foreign-owned companies. A subsidiary with a foreign or Brazilian company as partner, a branch of a foreign company or a company with any partner domiciled abroad cannot opt for it. This guide explains the exact rules, the one situation in which a foreigner can use the regime and the alternatives that work for everyone else.

The short answer on Simples Nacional and foreign owners

If a foreign company will own the Brazilian business, even partly, the Simples Nacional is not available. The same is true if any partner, individual or company, is domiciled outside Brazil. In practice, therefore, nearly every subsidiary of a foreign group is taxed under Lucro Presumido or Lucro Real from day one.

The regime is available only when all partners are individuals domiciled in Brazil, Brazilian or foreign, and the company meets the revenue and activity limits. That is why the question usually comes from entrepreneurs who are moving to Brazil, not from corporate groups.

What the Simples Nacional is

The Simples Nacional, created by Complementary Law 123/2006, unifies up to eight federal, state and municipal taxes in a single monthly payment calculated on gross revenue. It covers micro-enterprises (ME), with annual revenue up to R$ 360,000, and small companies (EPP), with revenue up to R$ 4.8 million. For state ICMS and municipal ISS, a sublimit of R$ 3.6 million applies, above which those taxes are paid separately.

The rate depends on the activity and on revenue over the previous 12 months. Starting rates are around 4% for trade and 6% for many services, rising in brackets. For some services, the annex that applies depends on the ratio of payroll to revenue. The appeal is simplicity: one payment, one main return and less bookkeeping than the other regimes.

The three rules that exclude foreign-owned companies

Three provisions of Complementary Law 123/2006 close the regime to most foreign investment structures.

The first rule is the one that catches every subsidiary. A wholly owned SLU of a foreign parent, or an Ltda in which a foreign company holds even one quota, is excluded. The rule is not about nationality: a Brazilian holding company as partner has the same effect.

The third rule is about domicile, not citizenship. Complementary Law 214/2025 updated article 17, item II, which now refers to a company “whose owner or partner is domiciled abroad”. As a result, a Brazilian citizen living in Lisbon also blocks the regime, while a foreign citizen living in São Paulo does not.

In addition, article 17 excludes certain activities regardless of ownership, such as several financial activities. Check the activity codes (CNAE) before assuming the regime is available.

The exception: a foreign individual living in Brazil

A foreign individual who is domiciled in Brazil can be a partner of a company that opts for the Simples Nacional. In practice, this person usually holds a residence permit and the National Migration Registry card (RNM), a CPF registered with a Brazilian address and files Brazilian tax returns. For example, a foreign entrepreneur who moved to Brazil on an investor or work visa can open a small company and opt for the regime, provided the other conditions are met.

Those conditions include the revenue ceiling, permitted activities and the rules on the partner’s other businesses. If the same person also owns more than 10% of another company outside the Simples, or manages another company, the combined revenue counts against the R$ 4.8 million limit. Our guide on the investor visa and residence covers how foreigners establish residence through an investment.

When an existing company loses the Simples Nacional

Foreign investors often meet the regime when they buy or invest in a Brazilian small business. The target is frequently a Simples company, and the deal itself ends that status. Typical triggers:

• A foreign or Brazilian company buys quotas. The company stops qualifying once the legal entity becomes a partner.
• A partner moves abroad. When a partner becomes domiciled outside Brazil, the company falls under article 17.
• Revenue exceeds the ceiling. Growth above R$ 4.8 million in the year, or above the sublimit for ICMS and ISS, has its own consequences.

In these cases, the company must communicate the exclusion, and the effects generally start from the month following the impeding event. The buyer should therefore plan the switch to Lucro Presumido or Lucro Real before closing, including systems, invoicing and the cash impact. In due diligence, also check whether the company was entitled to the regime in past years, because an undue option can lead to retroactive assessments.

Alternatives: Lucro Presumido and Lucro Real

Outside the Simples Nacional, a company chooses between two income tax regimes. The choice is made each year with the first tax payment and binds the whole calendar year.

Lucro Presumido applies fixed percentages to revenue, generally 8% for IRPJ and 12% for CSLL in trade, and 32% for both in most services. It often suits service companies with high margins. However, since 2026, Complementary Law 224/2025 increases those percentages by 10% on revenue above R$ 5 million per year, so larger companies should recalculate.

Lucro Real taxes actual profit and is mandatory above R$ 78 million of revenue and in some other cases. It usually wins when margins are thin or when the company expects losses in its first years. Our page on corporate tax in Brazil compares the regimes in detail.

For foreign-owned companies, profits paid abroad also matter. Since January 2026, dividends paid to shareholders resident abroad bear 10% withholding tax under Law 15,270/2025, regardless of the regime.

How the tax reform changes the comparison with the Simples Nacional

The consumption tax reform (Constitutional Amendment 132/2023 and Complementary Law 214/2025) replaces PIS, COFINS, ICMS and ISS with the CBS and the IBS between 2026 and 2033. The Simples Nacional survives, but its competitive position changes.

• Credits for customers. Business customers of a Simples company can take only limited credits of CBS and IBS. Therefore, B2B suppliers inside the regime may become less attractive.
• Hybrid option from 2027. Simples companies may choose to pay CBS and IBS under the regular regime, outside the single payment. According to Resolution CGSN 186/2026, the window for the first half of 2027 ran from 1 to 30 September 2026.
• Non-cumulative regimes. Companies under Lucro Presumido and Lucro Real will take full credits of CBS and IBS on their inputs, which narrows the gap with the Simples for many businesses.

For a foreign-owned company, these changes do not reopen the Simples Nacional. They do, however, make a well-run Lucro Presumido or Lucro Real company more competitive against small local suppliers. Our guide on the tax reform for foreign-owned companies covers the calendar.

Once the apostilled documents arrive in Brazil, our team typically has the company ready to operate within 15 to 30 days, unless the activity requires a specific license. The tax regime is chosen with the first payment, so settle it with your accountant during that window. See how to open a company in Brazil for the full sequence.

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