LC 224/2025: the 10% cut in corporate tax incentives and sports

Lei Complementar nº 224/2025 (a complementary law) requires companies’ tax benefits, including those on IRPJ (corporate income tax) and CSLL (social contribution on net profit), to be applied at 90% of their value. In the most common reading, the 2% deduction from a company’s IRPJ under the federal Sports Incentive Law becomes 1.8%. Individuals are not affected. This is how companies in Brazil do it; readers abroad do not pay tax in Brazil, but the rule explains why Brazilian sponsors now have slightly less room to give. This article explains the rule, what it changes and what it does not, so you can take it to your accountant.

What LC 224/2025 says

The law was signed on December 26, 2025 and aims to reduce federal tax benefits across the board. Art. 4 contains the core rule:

• § 1, III: brings benefits related to IRPJ and CSLL within the scope of the law;
• § 4, V: requires the “application of 90% of the reduction” provided for in the benefit.

In other words: if a law allows the tax to be reduced by a certain amount, the company applies 90% of that reduction. The cut is 10% of the benefit, not of the tax.

How this hits the Sports Incentive Law

LC 222/2025, art. 9, § 1, I, allows a company under lucro real (actual profit regime) to deduct up to 3% of the IRPJ due for sports sponsorships and donations; art. 23 sets 2% until 2027. § 4 allows 4% for social inclusion projects.

Decree nº 12,861/2026, art. 2, § 10, says that applying these limits must observe the reduction in art. 4 of LC 224/2025. That is the direct link between the two laws.

In the market’s most common reading, the limits look like this:

LC 222 limit	With LC 224’s 90%
2% (2026 and 2027)	1.8%
3% (from 2028)	2.7%
4% (social inclusion)	3.6%

Ask your accountant to confirm the calculation. The exact way to apply the 90% depends on how the Receita Federal (federal tax authority) interprets it, and the guidance may change.

Example with round numbers

A company under actual profit with R$ 1,000,000 of IRPJ due in 2026:

1. LC 222 limit: 2% = R$ 20,000.
2. With LC 224’s 90%: R$ 18,000.
3. Social inclusion project: 4% = R$ 40,000; with the 90%, R$ 36,000.

For those who used to do the math under the old rule, the difference is R$ 2,000 less per million of tax. Small for the company, significant for the project that no longer receives it.

From when it applies

Art. 14 of LC 224 sets the effects from January 1, 2026. For art. 4, the law provides for effects from the first day of the fourth month after publication, to respect the noventena, the constitutional rule that prevents a higher tax from being charged before 90 days have passed. Since publication was in December 2025, this points to April 2026. Check with your accountant how to apply it in your assessment period.

What does not change

• Individuals: the 7% in art. 9, § 1, II, of LC 222 remains the same. Someone with R$ 10,000 of imposto devido (tax due) can still allocate up to R$ 700. See the 7% limit.
• PIE/SC (Santa Catarina’s Sports Incentive Program): it is a state ICMS (state tax on goods and services) incentive, outside the scope of LC 224, which deals with federal taxes. See the PIE/SC limit.
• Simples Nacional (the simplified regime for small businesses) and lucro presumido (presumed profit regime): still no deduction, as before. See Simples and presumed profit.
• No deduction from actual profit: the amount donated already could not be deducted as an expense (LC 222, art. 9, § 2).

Common mistakes

• Applying the 10% to the tax instead of to the benefit.
• Cutting the 7% for individuals.
• Forgetting the cut in annual planning and exceeding the limit.
• Applying the cut to PIE/SC, which is a state program.
• Ignoring Decree nº 12,861/2026, art. 2, § 10, which requires LC 224 to be observed.

How the accountant should handle it

1. Read LC 224, art. 4, and Decree nº 12,861, art. 2, § 10.
2. Recalculate the 2% (or 4%) limit with the 90%.
3. Check the start date for the company’s assessment period.
4. Follow Receita Federal guidance on how to apply it in practice.
5. Document the math in the IRPJ calculation worksheet.

See also sports sponsorship under actual profit.

What about Muaythai in Balneário Camboriú?

The usual reminder: Projeto Campeões do Futuro (“Future Champions”), Mestre Paulo Ribeiro’s free project for children after school hours, and FECAMTT, the Santa Catarina Traditional Muaythai Federation, do not receive Imposto de Renda (income tax), either from companies or from individuals. The Muaythai nas Escolas (“Muaythai in Schools”) project is under PIE/SC, which uses ICMS from Santa Catarina companies and is not affected by LC 224: see Muaythai nas Escolas.

For Santa Catarina companies, this is practical news: the federal cut does not touch the state route. The ways to support are on the Support page.

How to do it today

1. If your company is under actual profit, send this article to your accountant along with LC 224 and Decree nº 12,861.
2. Ask for the new limit for 2026.
3. If your company is in Santa Catarina, consider PIE/SC, which was not cut.
4. If you are an individual, nothing changes: your 7% remains intact.

This is how companies in Brazil do it. If you live abroad, you do not pay tax in Brazil, but you can still support the project. Want to understand how a company can support Muaythai in schools? Talk to the Mestre.

This content is for information only and does not replace advice from your accountant. Rules may change: always check the wording currently in force.