“Law of Good”celebrates 10 years conceding benefits to the ICT sector


This year the Law of Good (Law No. 11.196/ 05) will celebrate 10 years providing benefits to companies of Information and Communication Technology sector (ICT). Stablished in 2005 by Provisional Measure No. 252, it provides to technological innovation companies great opportunities to reduce their tax costs, considering investments in Research, Development and Innovation (RD&I). In a questions and answers frame, this article aims reviewing few important points of this law and its contributions. See below: 

What is the Law of good?

A: The Law 11.196 / 05, which became known as the “Law of Good “, creates tax incentives to companies that conduct research and technological innovation development. 

How does it work?

A: The law provides tax incentives such that:• Deduction of 20.4 % to 34% in income tax (corporate income tax ) and CSLL (Social Contribution on Net Income ) for expenditure on R & D;• 50% reduction in the IPI in the purchase of machinery and equipment for R & D;• Depreciation and accelerated depreciation of goods (2 times the normal rate) for the purposes of income tax on machinery, equipment, apparatus and instruments for R & D;• Credit withholding tax on royalties paid by technical or scientific received from abroad;• Federal grants for researchers employed by companies (60 % in the NE and NO and 40 % other regions). 

What are the main advantages to profit from tax incentives of the Law of Good?

  • • Ability to reinvest the amounts deducted in Research and Development;
  • • Continuous improvement of products, services and processes;
  • • Increased competitiveness in the market;
  • • Innovation Generation leverages the growth of organizations;
  • • To be considered an innovator by MCTI (Ministry of Science, Technology and Innovation);

Who can benefit?

A: In principle, any business with expenses or investments in Technological Research activities and technological innovation development can use the tax incentives provided by Law No. 11.196 / 05

What sets Research and Development of Technological Innovation activities? What is considered innovation? What are the criteria that companies will have to meet to get the tax incentives of the Law of Good?

A:  Brazilian government create the Law of Good using concepts obtained in the Frascati Manual to define what actually does and is not part of Research and Development. This brings the definition of R & D divided into three groups: 


  • Basic or Basic Research: consists of experimental or theoretical work undertaken primarily in order to acquire new knowledge of the fundamentals of observable phenomena and facts, without considering an application or a particular use.·


  • Applied research: is the creation of original works with the purpose of acquiring new knowledge; especially directed at a goal or a certain practical purpose.·


  • Experimental development: is to do systematic studies based on pre-existing knowledge, obtained through research and / or practical experience, with a view to manufacturing new materials, products or devices, processes, systems and services or considerably improve existing ones.

To sum up: It is considered technological innovation: the “conception of a new product or manufacturing process as well as the addition of new features or characteristics of the product or process involving incremental improvements and effective gain in quality or productivity, resulting in greater competitiveness in the market .”

Which regions, areas, and companies can benefit from the Law ?

A: All regions can benefit from the law, however once the incentive is greater for companies under the taxable income system, and as it depends on certain expertise to take advantage of the law, the largest beneficiaries have been big companies that focus on the state of São Paulo.

Why many companies still do not use the features and benefits from the Law of Good?

A: Many companies still do not know it. The lack of expert advice, that it is still lack of knowledge; is an exclusion factor of benefit. The fear of tax authorities; doubts as to the interpretation of the law and internal management errors are other apparent reasons.

Where can I get more information on this issue?

A: Referring to the law in http://www.planalto.gov.br/ccivil_03/_Ato2004-2006/2005/LEI/L11196.htm  or through expert advice, such ours at Paseli Consultants.


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