Brazil's Lei do Bem: innovation incentives for companies

Investing in innovation takes time, people, experimentation and often technological risk. Brazil's Lei do Bem (Law No. 11,196/2005) encourages this investment by allowing eligible companies engaged in research, development and technological innovation (R&D&I) to use tax incentives.

According to Brazil's Ministry of Science, Technology and Innovation (MCTI), it is the country's main public instrument supporting business R&D&I.

How does Lei do Bem work?

Eligible companies may claim tax benefits linked to qualifying research and technological development expenses.

These include an additional deduction of up to 60% of eligible R&D&I expenses when calculating taxable income and the Social Contribution on Net Profit (CSLL). The percentage can rise in certain circumstances. Other provisions address the acquisition and depreciation of research and development equipment.

The law also provides, among other measures, a 50% reduction in the federal excise tax (IPI) on certain R&D equipment, full depreciation of eligible assets and provisions related to intellectual property.

Who may qualify?

Generally, Lei do Bem targets legal entities taxed under Brazil's Lucro Real regime, with regular tax status and genuine activities in technological research and innovation development.

Innovation does not necessarily mean inventing something that has never existed anywhere. Applied research and experimental development may involve new products, processes or systems, or substantial improvements in quality, productivity or technological capability.

Simply purchasing ready-made technology or carrying out routine implementation without a relevant technological challenge or uncertainty does not automatically qualify as R&D&I.

Technology and software can also qualify

Software, automation, AI and data engineering projects may qualify when they address a real technological challenge. An AI project, for example, may involve testing architectures, developing integration methods, evaluating models and working through technical problems not previously solved by the company.

The essential question is whether the company can demonstrate the technological challenge, the research or experimentation performed and the advancement sought.

Why can this matter to a business?

Lei do Bem can reduce the effective cost of innovation and help companies sustain research, test new technologies and build competitive solutions. It also encourages better documentation of project goals, technical activities, teams, investments and results.

For 2024, MCTI reported 4,252 participating companies, R$51.59 billion invested in R&D and an estimated R$11.98 billion in tax expenditure.

Claiming the incentive requires organization

Under its general framework, Lei do Bem operates without prior approval of each project. Companies remain responsible for demonstrating that their projects and expenses meet the legal criteria.

Beneficiaries must keep appropriate technical and financial records and submit annual information to MCTI through FormP&D. Projects can be reviewed later by the responsible authorities. Technical, accounting and tax teams should therefore work together.

Innovation can be an investment, not only a cost

Companies developing new products, software, automation, AI or technologically improved processes may already be doing R&D&I without recognizing it as such. Mapping these activities is the first step toward assessing eligibility and building a more structured innovation strategy.

Giongo helps build innovation projects and technology solutions. Contact us to discuss how to turn operational challenges into structured technology and R&D&I initiatives.

This article is informational and is not a substitute for specific accounting, tax or legal advice. Eligibility and use of incentives depend on each company's circumstances and current law.