Federal tax incentives were not abolished by the reform, but their rules changed twice in two years — and the second change brought a deadline that has already passed. Lei 14.789/2023 replaced the old exclusion of investment subsidies from the IRPJ and CSLL base with a tax credit conditioned on prior authorization from the Receita Federal (Federal Revenue Service). And Lei Complementar 224/2025, published on December 26, 2025, cut the value of federal benefits across the board starting in 2026. For industry, infrastructure and the incentivized projects of the North and Northeast, the practical consequence is direct: the size of the incentive the company will enjoy over the coming years now hinges on a date that has already passed — December 31, 2025 — and on an authorization that must be in order. Whoever treats the federal incentive as a stable given is calculating the investment on a premise that no longer exists.
Lei 14.789/2023 (in effect since 01/01/2024) replaced the exclusion of investment subsidies with a tax credit of 25% on subsidy revenues, requiring prior authorization from the Receita Federal and a link to an implementation or expansion project. LC 224/2025 reduced federal benefits across the board starting 01/01/2026 (IRPJ) and 01/04/2026 (CSLL, PIS/Cofins, IPI, social security contribution) — in a cumulative manner differentiated by benefit type, not as a pure linear cut. The preservation rule saves only benefits with a fixed term whose holder has already met an onerous condition, defined as investment in a project approved by the federal Executive branch by 31/12/2025. This is Window 3 of the transition calendar: the door for federal incentives that narrows in 2026.
Two laws, two moves over the same benefit
Whoever is deciding on an incentivized investment in 2026 is looking at terrain that changed in two stages: first a change of mechanism, then a cut in value. The first move is Lei 14.789/2023 (published on 29/12/2023, in effect since 01/01/2024), which ended the model of excluding the subsidy from the IRPJ and CSLL base and established a subsidy tax credit. The second is Lei Complementar 224/2025 (of 26/12/2025), which reduced federal incentives across the board. These are distinct logics: the first reorganizes how the subsidy enters the tax calculation; the second discounts a fraction of the benefit, whatever its nature. A single company may be subject to both at the same time — and adding them up incorrectly is the first budget stumble.
The distinction matters because the two moves have different legal natures. Lei 14.789 is an ordinary law and targets a specific type of benefit — the investment subsidy, typically ICMS-based, but recognized and credited at the federal level. LC 224 is a complementary law and has cross-cutting reach: it hits exemptions, zero rates, base reductions, presumed credits and other species of federal benefit, whatever the program that granted them. That is why reading each case requires knowing, first of all, which of the two the company is dealing with — or whether it is dealing with both.
Lei 14.789: from base exclusion to tax credit
Until 2023, the regime for investment subsidies rested on art. 30 of Lei 12.973/2014: the amount received as an incentive — provided it was earmarked to implement or expand an enterprise and kept in a profit reserve — was excluded from the IRPJ and CSLL base. Lei 14.789/2023 repealed that art. 30 and the corresponding PIS and Cofins exclusions, and built a different mechanism.
Under the new design, the subsidy goes back into the calculation base, but the legal entity now computes a subsidy tax credit equal to subsidy revenues multiplied by 25% — the IRPJ rate, including the surcharge (art. 6º). This credit can be offset against taxes administered by the Receita Federal or refunded in cash. The trade-off is procedural and strict: the credit exists only for those who obtain prior authorization from the Receita Federal (Chapter II, from art. 3º onward) and demonstrate that the subsidy is linked to a project to implement or expand the economic enterprise.
For the decision-maker, the change has two immediate effects. On governance: the company must be authorized and have its project documentation in order before computing the credit — receiving the subsidy is not enough. And on risk: subsidies recognized without project backing and without authorization are exposed to full taxation and disallowance. The eligibility analysis is a tax planning task, done before — and not after — the Receita asks for explanations.
The mechanics of the tax credit, step by step
The subsidy tax credit is not calculated on profit nor on the tax due: it is calculated on the subsidy revenues recognized in the year. The path, in short, runs through four stations — recognition, base, rate and destination — and each has its own rule that tends to escape anyone still thinking in terms of the old model.
The credit base is not the entire subsidy
Here lies the most expensive nuance of the regime. The credit does not apply to the full amount of the subsidy received. Under art. 8º of Lei 14.789, the credit base includes only the subsidy revenues related to depreciation, amortization or depletion expenses, or to the leasing or rental of capital goods tied to the implementation or expansion of the enterprise — and the law further excludes any portions exceeding the amounts effectively invested. In other words: a subsidy that does not translate into a depreciable asset or a capital good allocated to the project generates no credit. Whoever projects the benefit on the gross value of the subsidy overestimates the credit and, with it, the return on investment.
Rate, offsetting and refund
A 25% rate applies to this base (the IRPJ rate, with surcharge). The computed credit, once demonstrated in the Tax Accounting Bookkeeping (ECF), has two possible destinations (art. 9º): offsetting against the company’s own debts, due or coming due, of taxes administered by the Receita Federal; or a cash refund. The point that changes the project’s cash flow is in art. 10: the cash refund is paid in the twenty-fourth month counted from the filing of the ECF in which the credit is demonstrated. Two years of waiting for the cash is a real financial cost, and often offsetting — which is faster — becomes the preferable route for those with federal debts to settle.
Authorization at the Receita: what to prove and how
Without authorization there is no credit. The entry point to the regime is the request for prior authorization regulated by Normative Instruction RFB 2.170/2023, filed digitally through the e-CAC. The logic is one of prior approval: the company only starts computing the credit after the Receita recognizes that it meets the requirements — or after the review period elapses without a response.
The requirements of the request
Under IN 2.170/2023, the legal entity must, in short, meet five conditions to be authorized: (1) be taxed under the actual profit (lucro real) method; (2) be a beneficiary of an investment subsidy granted by a government entity; (3) present the granting act of the subsidy, issued by the entity before the implementation or expansion of the enterprise and setting out the conditions and counterparts to be observed; (4) be in tax compliance regarding federal taxes and contributions; and (5) have adhered to the Electronic Tax Domicile (DTE). The central documentation is the granting act and proof that it predates the investment — this is the point at which most requests are challenged.
The deadline and the positive silence
Once the request is filed in the e-CAC, the Receita has 30 days to respond. If that period elapses without a response, the legal entity is deemed authorized — this is the positive silence. If there is a later denial or cancellation, a window opens for an administrative appeal. The operational detail that tends to be overlooked: authorization is not a permanent stamp. It can be canceled if the company stops meeting the requirements, which reinforces the need to keep tax compliance and project documentation alive throughout the entire period of enjoying the credit.
LC 224/2025: the cut that applies on top
On top of this scenario came, at the end of 2025, Lei Complementar 224/2025. Unlike Lei 14.789, which reformed the subsidy mechanism, LC 224 is cross-cutting: it reduces the value of federal incentives across the board, regardless of their nature. It is the move the Receita Federal summarizes as a “linear 10% reduction” — a useful simplification for communicating, but imprecise for calculating. The reach is broad: the reduction hits benefits relating to IRPJ, CSLL, PIS/Pasep and Cofins (including on imports), IPI, Import Tax (II) and the employer social security contribution.
Art. 4º, §4º, of LC 224 details how the reduction applies according to the type of benefit, across seven items. The table below organizes the main species and the effect of each.
| Type of benefit | How the reduction applies (art. 4º, §4º) | Practical reading |
|---|---|---|
| Exemption | Becomes taxation at 10% of the tax’s standard rate | What was exempt now pays a fraction — it stops being “zero” |
| Zero rate | 10% of the regime’s standard rate applies | Same logic as the exemption: 90% of the benefit disappears |
| Reduction of the calculation base | The reduction is capped at 90% of the previously applicable value | The calculation base rises — tax is paid on a larger slice |
| Presumed credit | Usable up to 90% of the value | 10% of the credit that offset the tax is lost |
| Tax credit | Usable up to 90% of the value | Applies even to the Lei 14.789 subsidy credit |
| Reduced rate | New rate = 90% of the reduction + 10% of the standard full rate | The effective rate rises in a compound, non-linear way |
| Other species | Cumulative and differentiated adjustment, under the items of §4º | Deferral, suspension and others require case-by-case reading |
The technical point to keep in mind is that the cut is cumulative and differentiated: it does not lower every benefit in the same mechanical proportion. That is why the TaxUp team avoids reducing the reading to a round number. Saying “the incentive dropped 10%” may be right in spirit and wrong in the math — and in long-term investment decisions, the math is what matters.
The presumed profit toll
LC 224 opened a front that caught many companies by surprise: besides touching the benefits, it raised the presumption percentages of the presumed profit (lucro presumido) method by 10 percentage points for taxpayers with annual revenue above R$ 5 million, increasing the IRPJ and CSLL base of that group. This is not a benefit reduction, it is a direct increase in the tax burden — and the topic has already yielded injunctions in Federal Regional Courts disputing the validity and reach of the measure. For those on the presumed profit method earning above the threshold, reviewing the 2026 base is a priority, not a detail.
Who is affected — and what the text actually names
Here lies a point of rigor that separates reading the law from reading the market. LC 224/2025 does not name SUDAM, SUDENE or REIDI in its text. These regimes are reached by the generic framing of art. 4º, §2º, which defines the universe of benefits subject to the reduction. In its Questions and Answers material, the Receita Federal names only REIDI and the Manaus Free Trade Zone as examples of impact.
For infrastructure, energy and logistics, REIDI is the most sensitive case: cited by the Receita as affected, it loses its advantage in the investment phase. The IRPJ reduction incentives in the SUDAM and SUDENE areas enter through the door of the general scope — which does not make them less relevant, only requires case-by-case reading of how §4º applies to each modality.
The rule that decides everything: project approved by 31/12/2025
If there is one provision to memorize in LC 224, it is the preservation rule of art. 4º, §8º, IV. It establishes that the reduction does not apply to benefits with a fixed term whose holder has already met the onerous condition — and it defines that condition, exclusively, as the investment provided for in a project approved by the federal Executive branch by December 31, 2025.
The word that separates those who were saved from those who were cut is approved. It is not enough for the project to be “under execution,” “filed” or “under review” at year-end. The rule requires formal approval by the federal Executive branch by the cutoff date. Companies that had an investment underway, but without the approval act by 31/12/2025, as a rule do not fall under preservation — and see their benefit reduced by the general rule.
The strategic effect is silent and definitive: the project’s approval date now sets the size of the incentive for the entire remaining term of the benefit. For a long-maturing infrastructure project, the difference between having the approval act inside or outside the deadline can add up to millions. The window for new eligibility has already closed — what remains is to prove the condition for those who met it and to reprice projects for those who did not.
“LC 224 did not cut every incentive with the same ruler, and it did not cut them in a linear way. What it did was turn the project’s approval date — December 31, 2025 — into the watershed between the preserved benefit and the reduced one. Whoever still reads the law as ‘minus 10% for everyone’ is calculating the investment on a wrong premise.”
TaxUp Team · Tax Practice
Sector scenarios: how the cut reaches each company
The reduction does not weigh equally on every business. The effect depends on the type of benefit the company enjoyed, the tax it referred to and whether the company has — or does not have — a project approved within the deadline. Four profiles concentrate most of the questions.
| Profile / program | What is at stake | Priority move in 2026 |
|---|---|---|
| SUDENE / SUDAM (North and Northeast) | IRPJ reduction reached by the general scope of art. 4º, §2º; not named in the text, but within the affected universe | Check whether the project has a fixed term and federal approval by 31/12/2025; read case by case how §4º applies to each modality |
| REIDI (infrastructure, energy, logistics) | Named by the Receita as affected; loses its advantage in the investment phase (suspension of PIS/Cofins/IPI on acquisitions) | Reprice the capex of works in progress and check preservation for projects already approved |
| Subsidy credit (Lei 14.789) | The 25% tax credit itself is a “tax credit” and, as such, subject to the 90% usability cap under LC 224 | Recalculate the net credit post-LC 224 and review the authorization at the Receita |
| Presumed profit > R$ 5 mi | Not a benefit reduction, but an increase: +10 points on the presumption percentage, raising the IRPJ and CSLL base | Review the 2026 base and assess the court dispute over the validity of the increase |
The pattern that emerges from these four cases is the same: none is solved by reading the round number. Each requires knowing which item of §4º applies, whether there is a project approved within the deadline and which tax, on which date, suffers the cut. It is exactly the kind of reading that sustains — or topples — the viability of a long-term investment.
When the cut starts to hurt
LC 224/2025 did not produce immediate effects on all taxes. Art. 14 staggers its entry into force according to the type of tax, respecting the constitutional anteriority rules. The calendar is as follows.
In practice, the 2026 tax year is already born with the IRPJ base reflecting the cut, while the impact on CSLL, PIS, Cofins, IPI and the social security contribution only begins in the second quarter — from January to March, the IRPJ is paid on the new base, but the CSLL still on the original base. It is a detail that changes cash-flow projections and recommends reviewing the year’s tax estimates with the correct ruler for each tax. The difference in dates also creates a transition period in which the company must compute taxes under distinct rules in the same quarter, which demands extra attention from the tax accounting to avoid getting each base wrong.
The timeline of federal incentives
Seen from above, the move is a sequence of three milestones: the change of mechanism in 2024, the cut in value published at the end of 2025 and the staggered entry into force in 2026. Understanding where on the line each company stands is the first step to knowing what to do.
Where this fits in the reform
This article covers the federal side of incentives: the investment subsidy of Lei 14.789 and the LC 224 cut. It is one of the nine timed decisions the TaxUp team organized in the calendar of tax reform planning windows — specifically, the federal incentives window, which narrows in 2026. The calendar’s guiding thread holds here too: in the transition, the cost of not deciding has a set date.
There is an important neighbor not to confuse. The ICMS incentives — the state tax war — follow their own track: they are progressively reduced from 2029 to 2032 and migrate to presumed credits and to the Tax Benefits Compensation Fund, a topic covered in the end of ICMS tax incentives. They are two distinct clocks: the federal one, with a cut already in force in 2026; the state one, with a reduction staircase starting in 2029. Mixing the two is a common reading error — and a budgeting one.
The decision-maker’s playbook: what to do now
The window for new eligibility under the preservation rule already closed on 31/12/2025. What remains open is careful execution, depending on where each company stands. The checklist below organizes the moves by situation — and each line has an associated date or trigger.
| Company situation | Priority move in 2026 |
|---|---|
| Project approved by the federal Executive branch by 31/12/2025 | Document and prove the onerous condition to sustain full preservation of the benefit (art. 4º, §8º, IV) — gather the approval act and proof of the investment |
| Subsidy recognized without authorization at the Receita | Assess the prior authorization of Lei 14.789 (IN 2.170/2023) and the project backing, regularizing before an audit — the positive silence does not validate a poorly prepared request |
| Project under execution, but without approval by the date | Recalculate the benefit reduced by LC 224 and reprice the investment with the correct ruler for each tax (IRPJ on 01/01, CSLL/PIS/Cofins/IPI on 01/04) |
| Presumed profit with revenue above R$ 5 million | Review the 2026 IRPJ and CSLL base with the presumption increase and follow the court dispute over its validity |
| Group with a parent abroad | Cross the subsidy tax credit with the group’s international taxation, avoiding unwanted interaction with the parent |
The costliest mistake in this window is treating the federal incentive as a stable given. It changed mechanism in 2024 and size in 2026, and proving the onerous condition cannot be improvised during an audit. The precise reading of each benefit — which rule applies, on what date, on what base — is tax planning work, and the aggregate impact on the business enters the broader conversation about the impact of the reform on companies.
The risks that cost dearly
Three failures concentrate most of the possible loss in this window — and all are avoidable with timely diligence.
Not getting authorized in time. Whoever recognizes subsidy revenues and does not get authorized at the Receita cannot compute the 25% credit — and, worse, is exposed to full taxation of the subsidy that goes back into the base. Authorization is not automatically retroactive: each assessment period without valid authorization is a lost credit and an accumulated disallowance risk.
Project without formal approval by 31/12/2025. The preservation rule is categorical: it requires the approval act by the federal Executive branch by the cutoff date. An investment “under execution,” advanced work or a request “under review” at year-end does not preserve the benefit. Companies that confused progress with approval will discover the difference when calculating the 2026 benefit.
Disallowance of a poorly backed credit. The subsidy credit has a narrow base (only the revenues tied to depreciation, amortization, depletion or leasing of capital goods, under art. 8º) and requires a granting act predating the investment. A credit calculated on the full value of the subsidy, or without a valid granting act, is a natural candidate for disallowance — with retroactive collection and a fine. The defense begins with the quality of the documentation, assembled before the audit arrives.
Frequently asked questions
Did the reform abolish federal tax incentives?
No. They were not abolished, but they changed in two moves: Lei 14.789/2023 swapped the exclusion of subsidies from the IRPJ and CSLL base for a 25% tax credit conditioned on prior authorization from the Receita Federal; and LC 224/2025 reduced federal benefits across the board starting in 2026. The incentive still exists, but with a different rule and a different size.
What changes with Lei 14.789/2023 for those who receive a subsidy?
The investment subsidy stopped being excluded from the IRPJ and CSLL base and now generates a tax credit equal to subsidy revenues multiplied by 25%, the IRPJ rate. This credit exists only for the company that obtains prior authorization from the Receita Federal and demonstrates a link to an implementation or expansion project. Lei 14.789 repealed art. 30 of Lei 12.973/2014 and the corresponding PIS and Cofins exclusions.
How does the subsidy tax credit work, step by step?
First the company recognizes the subsidy revenues of the year. Then it delimits the credit base, which under art. 8º considers only the revenues tied to depreciation, amortization, depletion or leasing of the project’s capital goods — not the full value of the subsidy. On that base it applies the 25% and demonstrates the credit in the Tax Accounting Bookkeeping (ECF). Finally, it chooses the destination: offset against federal debts or request a cash refund, the latter paid in the twenty-fourth month counted from the ECF filing (art. 10). Offsetting tends to be faster than the refund.
How do I obtain authorization for the subsidy credit at the Receita?
The request is filed digitally in the e-CAC, under IN RFB 2.170/2023. The company must be taxed under the actual profit (lucro real) method, be a beneficiary of a subsidy granted by a government entity, present the granting act issued before the implementation or expansion and setting out conditions and counterparts, be in federal tax compliance and have adhered to the Electronic Tax Domicile. The Receita has 30 days to respond; if the period elapses without a response, authorization is deemed granted (positive silence). That grant, however, can be canceled later if the requirements do not hold up.
Does LC 224/2025 really reduce all benefits by 10%?
The Receita Federal presents LC 224 as a linear 10% reduction, but technically the cut is not purely linear. It is applied in a cumulative manner differentiated by benefit type, under art. 4º, §4º, items I to VII: an exemption or zero rate becomes 10% of the standard rate; a base reduction is capped at 90% of the reduction; a presumed or tax credit becomes usable up to 90%; a reduced rate is recomposed in a combined way, and so on. For the correct calculation, each benefit must be read by the specific rule of its type.
Which taxes does LC 224 affect?
The reduction reaches benefits relating to IRPJ, CSLL, PIS/Pasep and Cofins (including on imports), IPI, Import Tax and the employer social security contribution. In addition, LC 224 raised by 10 points the presumption percentages of the presumed profit method for taxpayers with annual revenue above R$ 5 million, increasing the IRPJ and CSLL base of that group — a measure already subject to a court dispute over its validity and reach.
Were SUDAM, SUDENE and REIDI reduced by LC 224?
LC 224/2025 does not name SUDAM, SUDENE or REIDI in its text. These regimes are reached by the generic framing of art. 4º, §2º, which defines the universe of benefits subject to the reduction. In its Questions and Answers material, the Receita Federal names only REIDI and the Manaus Free Trade Zone. The regional incentives of the North and Northeast, therefore, are reached by the general scope, with a case-by-case analysis of how the cut applies to each modality.
My project is under execution. Is the benefit preserved?
Being under execution is not enough. The preservation rule of art. 4º, §8º, IV, requires the benefit to have a fixed term and the holder to have already met the onerous condition, defined exclusively as the investment provided for in a project approved by the federal Executive branch by December 31, 2025. A project merely underway, filed or under review, without the formal approval act by the date, as a rule does not fall under preservation and has its benefit reduced by LC 224.
From when does the LC 224 cut apply?
Under art. 14 of LC 224, the reduction takes effect from January 1, 2026 for the IRPJ, and from April 1, 2026 for CSLL, PIS, Cofins, IPI and the social security contribution, under the ninety-day rule. That is why the 2026 tax year is already born with the IRPJ base adjusted, while the impact on the other taxes begins in the second quarter — from January to March, the IRPJ is paid on the new base, but the CSLL still on the original base, requiring assessment under distinct rules in the same period.
Is the federal incentives cut the same as the end of the ICMS tax war?
No, they are distinct tracks. The LC 224 cut hits federal incentives and is already in force in 2026. The ICMS incentives, which are state-level, follow the consumption reform schedule: progressive reduction from 2029 to 2032 and migration to presumed credits and to the Tax Benefits Compensation Fund. Treating the two as a single move distorts both the legal reading and the company’s budget.
Who should review their incentives as a priority in 2026?
Industry, infrastructure, energy and logistics, incentivized projects of the North and Northeast and greenfield investment backed by a subsidy. For these profiles, having the project approved inside or outside the cutoff deadline, and being or not being authorized at the Receita, can represent millions over the benefit’s term. Companies on the presumed profit method above R$ 5 million and groups with a parent abroad have additional layers to review.
We map what the reform did to your federal incentives
The TaxUp team reads each benefit by the rule that actually applies — Lei 14.789 and LC 224 —, proves the onerous condition for those who met it and reprices the investment for those who did not, in an initial meeting, at no cost.
Sources: Lei 14.789/2023 (planalto.gov.br/ccivil_03/_ato2023-2026/2023/lei/l14789.htm); LC 224/2025 (planalto.gov.br/ccivil_03/leis/lcp/lcp224.htm); Normative Instruction RFB 2.170/2023 and IN RFB 2.214/2024; Receita Federal — Q&A LC 224/2025 (gov.br/receitafederal). Informational content; not legal advice.
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