The Individual Microentrepreneur (MEI) pays a fixed monthly contribution (DAS guide). However, at the end of the year, when transferring the business profit to the owner's personal account, it is necessary to calculate which earnings are exempt from Income Tax and which are taxable.
Yes, the MEI and the Individual are distinct legal entities. Although the MEI company pays taxes on the unified DAS guide, the profit transferred to the owner's personal account is subject to the common rules of IRPF collection. The government grants an exemption installment that depends on the company's activity:
The formula to find the installment that enters as Taxable Income in the annual IRPF declaration is:
Taxable Income = Net Profit - (Gross Revenue * Exemption Percentage %)
If the resulting amount exceeds the current annual IRPF exemption threshold (approximately $ 30,639.90), the entrepreneur will have tax to pay on this taxable installment.
The annual revenue limit for MEI in Brazil is $ 81,000.00 (proportional average of $ 6,750.00 per month). There are bills in Congress to raise this ceiling to $ 108,000.00, but the current official limit remains at $ 81,000.00.
If you earn up to 20% more ($ 97,200.00), you will have to pay an additional tax on the excess in the annual declaration, and your company will be disaffiliated from MEI in the following year, becoming a Microenterprise (ME) enrolled in the common Simples Nacional. If you exceed more than 20%, the disaffiliation is retroactive to the beginning of the year.