Fator R under Simples Nacional

Fator R is the ratio that decides which Simples Nacional tax schedule applies to a Brazilian service company: at 28% or above, the company is taxed under Anexo III, starting at a 6% rate; below 28%, it falls under Anexo V, starting at 15.5%. The ratio compares payroll costs to gross revenue over the trailing 12 months, and it applies to roughly 30 service categories, including software development, engineering, architecture, medicine, dentistry, accounting and legal services.

How Fator R is calculated

The formula is: Fator R = (payroll and pro-labore over the trailing 12 months) ÷ (gross revenue over the same 12 months). The payroll side includes employee salaries, partner withdrawals (pró-labore), 13th-month pay, vacation pay, employer INSS contributions and FGTS. A company that just opened, without a full 12-month history, uses a proportional average of the months it has operated.

The 28% threshold

A Fator R of 28% or higher places the company in Anexo III, where the initial rate is 6% and increases progressively with revenue. Below 28%, the company falls under Anexo V, which starts at 15.5% and is consistently more expensive across the same revenue bands. The company recalculates Fator R every month using the rolling 12-month window, so a company can move between Anexo III and Anexo V as payroll and revenue shift.

Example

A consulting firm with R$ 600,000 in annual revenue and R$ 180,000 in payroll costs has a Fator R of 30% (R$ 180,000 ÷ R$ 600,000), which qualifies it for Anexo III. If the same firm’s payroll dropped to R$ 150,000 while revenue stayed the same, its Fator R would fall to 25%, pushing it into the more expensive Anexo V.

Which activities are subject to Fator R

Fator R applies to service-based activities under Simples Nacional, including software development, IT consulting, engineering, architecture, medicine, dentistry, physiotherapy, accounting and legal services. Roughly 30 service categories fall under this rule; commerce and manufacturing activities are taxed under separate Simples Nacional annexes that don’t depend on Fator R.

Why the ratio matters for tax planning

Because Fator R is recalculated monthly on a trailing 12-month basis, a company’s own payroll decisions, hiring an employee, raising a partner’s pró-labore, directly change which tax annex applies the following month. A company weighing Simples Nacional against Lucro Presumido needs the Fator R outcome as part of that comparison, since it determines the effective Simples Nacional rate before any regime comparison makes sense. Founders new to the Brazilian tax system can review the broader Simples Nacional framework and the recurring DAS and DEFIS filing deadlines that apply regardless of which annex Fator R assigns.