Law No. 11,196/2005 — Chapter III
Lei do Bem
If your company files under lucro real and had taxable profit in the period, part of what it invests in research and development reduces the IRPJ and CSLL base — and with it, the tax due.
No call for proposals
The benefit does not depend on any public call or selection round.
No counterpart required
The company is not required to put up matching funds.
Incremental improvement counts
The law covers gains in quality or productivity, not only breakthrough invention.
Legal basis: Law No. 11,196/2005 (Chapter III), regulated by Decree No. 5,798/2006.
The mechanism
Automatic incentive, evidence afterwards
Chapter III of Law No. 11,196/2005 — the Lei do Bem — regulated by Decree No. 5,798/2006, grants tax incentives to companies carrying out technological research and the development of technological innovation. Under Articles 17 and 19, unlike the Information Technology Act and EMBRAPII, there is no project submission and no prior approval: the company claims the benefit in its own tax return and reports to the Ministry of Science, Technology and Innovation afterwards. The exception is Article 19-A, further down this page, which does require the project to be approved in advance by a committee.
The law defines technological innovation as “the conception of a new product or manufacturing process, as well as the addition of new features or characteristics to a product or process that implies incremental improvements and an effective gain in quality or productivity, resulting in greater market competitiveness” (Article 17, paragraph 1). Incremental improvement counts — you do not have to invent a new product category.
What the company gains
The incentives in Articles 17 and 19 add up. The main one is the exclusion.
60% to 80%
Exclusion from net income
An additional exclusion of up to 60% of R&D outlays when computing lucro real and the CSLL base. It rises to up to 70% if the company increases its number of researchers by up to 5%, and to up to 80% if it increases them by more than 5%.
+20%
Patent or cultivar
An additional exclusion of up to 20% on outlays tied to a granted patent or a registered cultivar, in the period when the grant comes through.
50%
IPI reduction
A 50% reduction of IPI on equipment, machinery, apparatus and instruments intended for technological research and development.
100%
Full depreciation
Full depreciation, in the year of purchase, of new machinery and equipment used in R&D, for both IRPJ and CSLL.
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Accelerated amortisation
Deduction as cost or operating expense of outlays on intangible assets tied exclusively to R&D activities.
0%
Withholding tax on trademarks and patents
A zero withholding income tax rate on remittances abroad for the registration and maintenance of trademarks, patents and cultivars.
Percentages as per Articles 17 and 19 of Law No. 11,196/2005 and Article 8 of Decree No. 5,798/2006. Calculating your company's benefit is a tax matter and should be checked with your finance department.
Where the Institute fits
Contracting R&D here counts as an outlay
Article 17, paragraph 2 extends the incentive to R&D outlays contracted within Brazil with a university, a research institution or an independent inventor. Instituto Iracema is a non-profit research institution with its own premises and laboratories in Fortaleza: what your company contracts here counts towards the outlays it excludes.
The law imposes one substantive condition, and it shapes the contract: the contracting company must retain responsibility, business risk, management and control over the use of the results. The project is yours; the Institute executes it.
Unlike the Information Technology Act, the Lei do Bem does not require the executing institution to be accredited by any committee. What the law requires is the nature of the institution and the nature of the expense.
Our own facilities
Laboratories for embedded systems, SMD production, mechanical prototyping and software, at our own premises in Fortaleza.
Team and governance
Technical staff and a Technical-Scientific Council responsible for managing, monitoring, evaluating and reporting on projects.
Documentation and financial reporting
Technical and financial reports with full traceability of scope, targets and funds applied.
The enhanced route in Article 19-A
There is a route with a multiplier. Article 19-A allows a company to exclude, at its option, between 0.5 and 2.5 times the value of the outlays on a scientific and technological research project executed by an ICT or by a non-profit private scientific and technological entity.
In exchange, it carries requirements of its own: the project must be presented by the institution and approved in advance by an inter-ministerial committee (paragraph 8), the funds go into an account at an official federal financial institution opened in the institution's name and used solely for that project (paragraph 5), ownership of the intellectual property follows a formula set out in the law itself (paragraph 6), and the benefit cannot be combined with those of Articles 17 and 19 on the same project (paragraph 11).
Before structuring a project through this route, confirm with your legal counsel the current status of the committee referred to in paragraph 8 — we could not verify from an official source whether it is operating today.
Who can use it
Four requirements, and the second is the one that rules out most companies in practice.
Lucro real
The Ministry of Science, Technology and Innovation describes the target audience as “legal entities in good standing with the tax authorities, under the lucro real tax regime, that carry out research and technological innovation activities”. The incentive reaches only those filing under lucro real.
Taxable profit in the period
The exclusion is capped at the amount of lucro real and the CSLL base before the exclusion itself, and the law forbids carrying any excess to a later period (Article 19, paragraph 5). With no taxable profit in the year there is nothing to exclude — and it is not deferred.
No tax arrears
Enjoyment of the benefits is conditional on proof that the legal entity is in good standing with the tax authorities (Article 23).
Payments within Brazil
Outlays are only deductible if paid to individuals or legal entities resident and domiciled in Brazil (Article 22, II).
Important
The Lei do Bem and the Information Technology Act do not simply stack
Article 26 is explicit: Chapter III does not apply to companies using the benefits of Laws No. 8,248/1991, No. 8,387/1991 and No. 10,176/2001. If your company is already a beneficiary of the Information Technology Act, that changes the design — but it is not a total block, and the distinction is worth money.
Under paragraph 4, a company carrying out other activities beyond those that generated the Information Technology Act benefit may use the Lei do Bem for those other activities. And under paragraphs 1 and 2, for informatics and automation activities the deduction can reach up to 160% of R&D outlays, or up to 180% depending on the number of researchers employed.
There is also a detail that is often missed: non-reimbursable public funds do not count towards the outlays (Article 17, paragraph 4). EMBRAPII's contribution to a project, for instance, cannot be counted as the company's own investment.
See the Information Technology Act route →The obligations
The incentive is automatic in the tax return, but the evidence is taken seriously.
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Report to the Ministry every year
The benefiting company reports on its R&D programmes to the Ministry of Science, Technology and Innovation, electronically, through the FORMP&D. The deadline is set by the Ministry: Decree No. 9,947/2019 removed the date from the regulation, and it has since varied between July, August and September by ministerial order. Check the date for the current base year on the Ministry's page.
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Keep the documentation
Documentation on the use of the incentives must be kept available to the Federal Revenue Service throughout the statutory limitation period.
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Separate accounting
Outlays must be tracked in specific accounting entries (Article 22, I).
Improper use means losing the right to incentives not yet used and paying back the taxes not collected, with interest and penalties (Article 24). That is why the project's technical documentation weighs as much as its execution — and it is part of what the Institute delivers.
Want to know whether your company qualifies?
Bring us the project and your tax regime. Our team helps design the technical scope and the documentation that supports the incentive.
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