R Factor Simulator (Simplified Small-Business Tax)

Discover whether your service-providing company is classified under Annex III (with rates starting at 6%) or Annex V (with rates starting at 15.5%). Plan the ideal pro-labore to reduce your taxes legally.

Quick presets:
IT/Dev (Monthly Revenue $10,000) Medical Clinic (Monthly Revenue $40,000) Architecture (Monthly Revenue $20,000)
Your Current R Factor
0.00%
Target for Annex III: ≥ 28.0%
Classification Annex
Annex V
Estimated Effective Rate: 0.0%
Current Month Tax
$ 0.00

Recommended Tax Optimization

To safely migrate to Annex III and reduce your business taxes, use the following recommended pro-labore:

Recommended Pro-Labore for this Month
$ 0.00
Estimated Monthly Savings
$ 0.00

R Factor Gauge

Monthly Tax Annex III vs. Annex V

Technical Comparison of Rates

Regime / Classification Nominal Rate Estimated Effective Rate Monthly Tax Status

What is the R Factor of Simplified Small-Business Tax?

The R Factor is a monthly calculation performed by service-providing companies opting for Simplified Small-Business Tax to determine whether the taxation of their services will occur under the rates of Annex III (starting at 6%) or under the higher rates of Annex V (starting at 15.5%).

This rule applies to a series of intellectual, technical, or scientific activities, such as software development, consulting, engineering, medicine, psychology, architecture, design, and dentistry.

How does the R Factor formula work?

The base formula is the division of the total spent on payroll by the gross revenue, always considering the last 12 months prior to the calculation period:

R Factor = Payroll in the last 12 months / Gross Revenue in the last 12 months

Deductible items as "Payroll"

To sum up the Payroll for the last 12 months, you can include:

  1. Pro-Labore: Monthly withdrawals by partners with social security contributions.
  2. Gross Salaries: Payroll of registered employees.
  3. Employer Contributions: Severance fund and social security contributions for employees.
  4. 13th Salary and Vacation: Amounts paid to employees during the period.

Pro-Labore Planning as a Strategy

For IT companies or consulting firms without employees, the standard tax planning strategy is to adjust the pro-labore of the sole partner to exactly 28% of the company's revenue. Although there are social security contributions (11%) and progressive IRPF on pro-labore, in most cases, the savings obtained by reducing the Simplified Small-Business Tax rate from 15.5% to 6% largely offset these additional costs for individuals.

Frequently Asked Questions (FAQ)

No. The Simplified Small-Business Tax legislation explicitly states that the R Factor must be calculated using the accumulated amount of the 12 months prior to the calculation period. If your company has been open for less than 12 months, there are proportional calculation rules for Gross Revenue and accumulated Payroll.

Those activities described in the paragraphs 5º-I and 5º-J of Article 18 of Law 123/2006 are subject to the R Factor. Examples include engineering, architecture, software development, website hosting, IT planning, medicine, dentistry, psychology, physiotherapy, administrative consulting, law, and auditing.

All monitoring is performed when filing the monthly Simplified Small-Business Tax declaration on the e-CAC portal of the Federal Revenue Service (via PGDAS-D). The payroll information sent through eSocial and DCTFWeb is electronically and immediately cross-checked with the invoices issued in the month. The classification is automatic.