Tax Tips: Rural Producer as a Legal Entity – How Does Your Rural Business Work?

A rural company—whether it's a limited liability company (Ltda.) that operates a grain farm, a livestock corporation (S/A), or any other legal entity with agricultural activity—operates under the regular IBS and CBS tax regimes from the outset. There is no revenue threshold for the legal entity: it is a taxpayer, calculates debits on sales, accumulates credits on inputs, and pays the difference.

The logic of the regular regime for agriculture

Under the regular regime, the company calculates the IBS and CBS as follows: it records as a debit the tax levied on each sale (with the reduced rate of 60% for unprocessed products), and records as a credit the tax paid on each purchase — inputs with a reduction of 60%, machinery and equipment at the full rate, services at the full rate. The difference between debits and credits is the amount to be collected. If the credits are greater than the debits, a credit balance is formed.

Why do rural businesses tend to accumulate a credit balance?

The asymmetry is structural. The rural company sells raw products at a reduced rate—around 4.4% of effective tax burden. But it buys machinery, tractors, storage facilities, fuel, maintenance and logistics services at the full rate—around 9.6%. The result is that the credit accumulated on purchases often exceeds the debit generated on sales. This is especially true for companies that export, as exports are exempt from IBS and CBS but retain input tax credits.

What to do with the credit balance

The regulations provide for two options for accumulated credit balances. The first is offsetting: the balance is used to reduce IBS or CBS debts in subsequent periods. The second is reimbursement: when there are not enough debts to absorb the balance, the taxpayer can request a cash refund, according to articles 39 and 40 of the IBS Regulations. The reimbursement request follows an administrative procedure and, based on historical experience with PIS/COFINS, can take time. Properly structuring the management of credit balances from the outset will be fundamental to the financial health of the rural enterprise.

Simples Nacional: the decision that needs to be made.

Rural companies under the Simples Nacional tax regime have an important decision to make. Under the standard Simples regime, the legal entity pays the DAS tax on gross revenue and does not generate IBS/CBS credits for the buyer. This means that whoever buys from this company will not have credits to claim—and may prefer to buy from a company under the regular regime that generates credits. The regulations allow legal entities under the Simples regime to opt for the regular IBS/CBS regime. Depending on the buyer profile and the volume of transactions, this option can be economically advantageous.

For rural businesses, the new system tends to be more transparent and predictable than the current one. The operational challenge lies in credit management: correctly identifying each credit, calculating it at the right time, and monitoring the credit balance are tasks that will require an adequate accounting structure.

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