Self-employed professionals are not exempt from settling accounts with the Lion. Even paying simplified taxes, individual microentrepreneurs (MEI) must declare the Income Tax if the profit exceeds the exemption limit.
According to the Federal Revenue, the declaration is mandatory because the MEI is considered an individual and a legal entity at the same time. Each role involves a series of requirements to fulfill.
As a legal entity participating in Simples Nacional, MEI is obliged to collect the Simplified Collection Document of the Individual Microentrepreneur (DAS) monthly, which unifies in a guide the contribution of 5% of the minimum wage to Social Security and the payment of R$ 1 of Tax on Services, if the self-employed person works in this field, or R$ 5 of Tax on Circulation of Goods and Services (ICMS), if the professional works in commerce.
In the role of a legal entity, the individual microentrepreneur must also submit the Annual Declaration of Simples Nacional every year. The obligations, however, do not end there. As an individual, the MEI may also have to fill out the Income Tax return and even pay the tax, depending on the case.
As in the case of other individual taxpayers, the submission of the Individual Income Tax Declaration becomes mandatory if the MEI has taxable income above the exemption range of R$ 28,559.70, which is equivalent to R$ 2,379, 97 per month. If the MEI or any of its dependents received emergency aid in 2021, the limit drops to BRL 22,847.76, BRL 1,903.98 per month.
As the MEI does not receive a salary, the taxable income is equivalent to the evidenced profit, the amount left over for its own expenses after the payment of the costs of the enterprise. To arrive at the evidenced profit, the MEI must take the annual gross revenues – everything that the business generated from money in the previous year – and subtract all the costs related to the enterprise (water, electricity, telephone, gas, purchase of goods, rent, among others).
Based on the profit shown, the MEI must follow a series of steps to calculate how much it will pay in Income Tax. This is because he must subtract from the evidenced profit a portion of the gross revenue that is exempt from the tax and varies according to the branch of activity. Only then will the generating program calculate the tax that the MEI will need to pay.
Check the necessary steps for the MEI to declare Income Tax
Step 1
Calculate previous year’s gross revenue and subtract all business-related expenses to arrive at evidenced profit
step 2
Take the gross income and apply the following percentage to calculate the Income Tax-exempt portion
• 8% of gross revenue for commerce, industry and cargo transportation;
• 16% of gross revenue for passenger transport;
• 32% of gross revenue for services in general.
step 3
Fill in the amount of the exempt portion in the section “Exempt Income – Profits and
Dividends Received by the Holder”
step 4
Calculate the taxable portion of the profit (taxable income), subtracting the evidenced profit from the exempt portion
step 5
Fill in the amount of the taxable installment in the “Taxable Income Received from PJ” section
The generating program will calculate the Income Tax payable based on the rates of 7.5%, 15%, 22.5% and 27.5% applied to other individuals. The rate is progressive. The more the microentrepreneur earns above the exemption range, the more tax he will pay.
If the taxpayer has other income outside the MEI, he must inform them in the same declaration. This is because it is not possible to make two declarations with the same Individual Taxpayer Identification Number (CPF).
In addition to taxable income above the exemption range, there are criteria that require the completion of the declaration, even by MEI. They are as follows.
• Taxable income above R$ 22,847.76 in the previous year, if the MEI or its dependents were beneficiaries of the emergency aid;
• Received more than R$ 40 thousand exempt, non-taxable or taxed at source in the year (such as labor compensation or savings income);
• Gained from the sale of goods such as houses and cars, among others;
• Bought or sold shares on the stock exchange;
• Earned more than BRL 142,798.50 in rural activities or had rural losses to be compensated in calendar year 2021 or in the coming years;
• Owned assets worth more than R$300 thousand;
• Moved to Brazil in any month of the last year, staying in the country until December 31;
• Sold a property and bought another within 180 days.
In these cases, the MEI must follow the same route outlined above to calculate the Income Tax payable.
