Lawful tax planning: pay less within the law

For many profitable companies, tax is the largest of all costs, and also the least understood. It is paid because it has always been paid, in the regime the company was born into, without anyone stopping to ask whether there is a legitimate way to pay less. There is, and it has a name: tax planning. What tends to be missing is the clear distinction between what is lawful and what crosses the line into evasion. This text addresses that boundary, explains the legal paths to reduce the burden and shows why the choice of regime and the recovery of credits are usually the first steps.

Key points

Lawful tax planning is organizing the company's activity to pay the least tax possible within the law. It is called tax avoidance, and it is different from evasion, which is unlawful concealment.
The most basic and impactful decision is usually the tax regime, Simples Nacional, Lucro Presumido or Lucro Real, which changes according to revenue, margin and sector.
Beyond reducing future tax, many companies have tax credits to recover because they paid too much tax in the past.

When tax becomes the largest cost of the business

Brazil's tax burden is recognizably high and complex, and the practical effect is that many companies pay more than they need to, not by choice, but by inertia. They keep the regime they started in, even though reality has changed; they do not review operations in light of the law; and, for fear of crossing the line into illegality, they fail to take perfectly legitimate opportunities to save. The result is a tax that erodes margin and limits growth. Tax planning exists to reverse that inertia, and the first thing it requires is understanding what the law allows.

What tax planning is, and what it is not

Tax planning is the lawful organization of economic activity with the aim of reducing, deferring or avoiding the incidence of taxes, always within the limits of the law. Note the word lawful: legitimate planning does not hide facts nor defraud reality; it simply chooses, among the paths the law offers, the one of least cost. That is what distinguishes it from evasion. Those who plan do not lie to the tax authority; those who evade do.

Avoidance, evasion and abusive planning

The decisive distinction of the subject fits in three ideas. Tax avoidance is lawful planning: before the taxable event occurs, a legal and true form is adopted that results in less tax. Tax evasion is concealment: the fact is hidden or falsified after it occurred, and that is unlawful, with consequences that can reach the criminal sphere. Between the two there is a gray zone, abusive planning, in which an artificial structure is created, with no real business purpose, merely to escape the tax. Brazil's National Tax Code authorizes the authority to disregard simulated acts and transactions, so the planning that holds up is the one with economic substance, and not mere appearance. To plan well is, therefore, to plan in a legitimate and defensible way.

The tax regimes: the first big decision

Before any sophisticated technique, the most impactful planning is usually also the most basic: the choice of regime. In Brazil, a company as a rule falls into one of three, Simples Nacional, Lucro Presumido or Lucro Real, and the correct choice depends on revenue, profit margin, sector and cost structure. A regime that was advantageous when the company earned little can become costly when it grows, and the reverse also occurs. Comparing the regimes in light of the company's real numbers, often with the support of a spreadsheet that sets, for example, Lucro Presumido against Simples Nacional, is the starting point of all serious planning.

The types of tax planning

People often speak of types of tax planning. The most useful classification is by timing. Preventive planning is that done before the taxable event, and it is the legitimate one par excellence, because it acts on the form of the operation while it can still be designed. There is also a strategic dimension, tied to structural decisions such as corporate reorganization or the choice of regime, and an operational one, aimed at the routine of assessment and the correct use of credits and benefits. What they all share is the same condition: to act within the law and with a real purpose.

How it is done, in practice

Tax planning usually follows a clear path. It begins with a diagnosis of the current burden, which surveys what the company pays, in which regime and on what. This is followed by the analysis of the most suitable regime for the present and projected reality. Then comes the review of operations and contracts, because the legal form of an operation changes its taxation. The use of benefits and credits to which the company is entitled is assessed. And, where appropriate, corporate reorganization is considered, which can, lawfully, produce efficiency. A good example of planning is not an isolated trick, but this coherent set of choices, each defensible before the tax authority.

Recovery of tax credits: the tax paid in excess

Planning is not only looking ahead. Many companies paid, in the past, excess or undue tax, whether through an assessment error or through positions already recognized by the courts, and are entitled to recover those amounts. The recovery of tax credits is done through the administrative or the judicial route, as the case may be, and can represent significant cash relief, besides correcting the method of assessment for the future. Checking whether there are credits to recover is often the step that most quickly returns money to the business.

Tax planning and the tax reform

The subject gained urgency with the tax reform, which gradually replaces taxes such as PIS, Cofins, ICMS and ISS with new taxes on consumption, in a transition that stretches over the coming years. The change alters the logic of many planning arrangements and requires companies to review structures that were efficient under the old model. Following that transition, and adjusting the planning at each stage, has ceased to be optional for those who want to preserve competitiveness. For companies with operations abroad, there is the added layer of international tax planning, which engages the rules of more than one jurisdiction.

Frequently asked questions

What is tax planning?

It is the lawful organization of the company's activity to reduce, defer or avoid taxes within the law, choosing among the legal paths the one of least cost. Conducting that study in a technical and defensible way is a tax consulting service provided at Grisostolo Advocacia.

What is the difference between tax avoidance and tax evasion?

Avoidance is lawful planning, done before the taxable event, with a legal and true form. Evasion is unlawful concealment, which hides or falsifies the fact after it occurred. There is also abusive planning, artificial, which can be disregarded by the tax authority. Keeping the planning in the lawful and defensible field is precisely the value of the firm's legal work.

What are the tax regimes?

As a rule, Simples Nacional, Lucro Presumido and Lucro Real. The choice depends on revenue, margin, sector and cost structure, and the ideal regime changes as the company grows. Comparing the regimes in light of the real numbers is an analysis the firm conducts, in coordination with the accounting.

What are the types of tax planning?

By timing, one speaks of preventive (before the taxable event, the legitimate one par excellence), strategic (structural decisions, such as the regime and corporate reorganization) and operational (routine of assessment and use of credits). Designing the combination suited to the case is part of the firm's consultative advisory.

Who can do tax planning? Can the accountant?

Planning is joint work: the accountant handles the assessment and the numbers, and the tax lawyer handles the legal structure of the operations, the analysis of lawfulness and the defense of the positions. At Grisostolo Advocacia, the legal front integrates with the accounting so that the planning is, at once, efficient and safe.

How is tax planning done?

In stages: diagnosis of the current burden, analysis of the regime, review of operations and contracts, use of credits and benefits and, where appropriate, corporate reorganization. Conducting this path on the basis of the company's real numbers is the service the firm offers on this front.

How much does tax planning cost?

It depends on the complexity: the number of operations, the regimes involved and whether or not there are credits to recover change the scope of the work. That is why there is no generic figure. In a conversation, it is possible to set the scope of your case before any estimate, bearing in mind that the gain is usually measured by the lawful savings and the credits recovered.

How the firm works on this subject

The need to reduce the burden safely usually translates into the following areas of legal work:

Consulting and preventive advisory: diagnosis, analysis of regime and the design of lawful and defensible planning, integrated with the accounting.
Constitutive and corporate advisory: reorganization of structures when it lawfully produces tax efficiency.
Credit recovery and tax litigation: identification and recovery of taxes paid in excess and defense in tax assessments.
Drafting of documents and opinions: the legal grounding that supports each choice before the tax authority.
International focus: tax planning of operations between Brazil and other jurisdictions.

It is with this set that Grisostolo Advocacia is concerned in tax matters, always within the law and in coordination with the accounting.

Do you feel your company pays too much tax?

If you want to understand, lawfully, whether there is room to reduce the burden or recover credits, it is possible to begin with a diagnosis of your case. We can talk.

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This text is informative in nature and does not constitute legal advice. All tax planning depends on the analysis of the concrete case and must observe the limits of the legislation in force.