Brazilian startups could operate tax-free

Small technology companies in Brazil with quarterly earnings of up to R$ 30,000 ($14,000) and up to four members of staff could become tax-exempt if a recently approved senate bill becomes law.

The project was initiated by the Science, Technology, Innovation, Communication and Informatics Commission (CCT) of the Brazilian Senate and approved this week. The bill will now be scrutinized by the Commission of Economic Matters (CAE) and then voted by the Chamber of Deputies.

Under the proposed Special Treatment System for New Technology Enterprises (Sistenet), new companies will be able to operate tax-free if takings stay within the established limits for a two-year period, which can be extended for another two years before the company needs to sign up for the Simples Nacional regime (a simplified taxation system designed for SMEs with gross income per calendar year equal or lower than $114,000).

If approved, the law will be a major boost for new entrepreneurs across the country, since the tax burden currently applicable to new ventures in Brazil is one of the main obstacles in increasing the chances of business survival.

The tax exemption law is part of a series of recent initiatives geared at fostering entrepreneurship in Brazil, such as the recent creation of the Start-Up Brasil programme, which will invest R$ 40mi ($18.9mi) by 2014 in 150 IT and services ventures, as well as the new injection of capital into Porto Digital, a technology park in the northeast of the country.