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2019-07-22 09:20:02

RIO DE JANEIRO, BRAZIL – The individual micro-entrepreneur (MEI) program completed its tenth year this month with 8.6 million small entrepreneurs registered, but with a long-standing problem remaining: a high rate of default.

In May of this year, the latest available data, 54 percent of the entrepreneurs were not in good standing with their contributions, according to the Federal Treasury.

The stylish new Sebrae headquarter in Brasilia. (Photo internet reproduction)

MEI was created to encourage the low-cost incorporation of small businesses and self-employed workers such as salespeople, confectioners, manicurists, hairdressers, electricians, among others. Businesses that invoice up to R$81,000 per year (or R$6,700 per month) and have at most one employee are eligible to join the program.

The registration of MEIs allows the microentrepreneur to have CNPJ (National Corporate Taxpayer’s Registry ), to issue invoices, to rent card machines and to have access to loans (with cheaper interest rates).

In addition, their products or services may also be sold to the government, and they may access the expertise of the Brazilian Micro and Small Business Support Service (Sebrae).

To reduce default on the program, the government has sought to “ease as much as possible” the issuing of payment slips, which can be made online (including through automatic debit), on the micro-entrepreneurs website, and also raise awareness among workers, according to the under-secretary for Development of Micro and Small Enterprises, Entrepreneurship and Crafts of the Ministry of Economy, José Ricardo da Veiga.

“Overall, the program has shown a default rate that has peaked at 70 percent [in the past]. However, it’s not cumulative default. It features ‘skipped’ installments, people who are paying a little late,” said José Ricardo da Veiga in an interview with G1.

MEIs are very practical, tax-efficient and relatively easy to manage for small businesses. (Photo internet reproduction)

He noted that entrepreneurs with debts in arrears may settle their bills through the current installment plan – whose rules are available on Federal Treasury’s website. The minimum amount for each parcel is R$50,00.

Over the past five years, since the pre-recession period, the number of MEIs in the country has grown by more than 120 percent.

How does an MEI work?

Individual entrepreneurs with gross revenues that do not exceed R$81,000 per year can register their business as Individual Micro-Entrepreneur (MEI), Microempreendedor Individual in Portuguese. This allows an entrepreneur to establish a company and create a Brazilian Tax ID number. In order to register as an MEI, the entrepreneur must meet these conditions:

Gross annual revenue does not exceed BRL 81,000.00;Cannot be a partner, administrator or owner of another business;Cannot have more than one employee;The type of business must be listed in MEI table.MEI law allows craftsmen, tailors, hairdressers, electricians, photographers, painters, carpenters, plumbers, and several other professionals to formalize as an MEI, obtain a Tax ID number and pension coverage. The MEI can also do business with government entities, issue local tax invoices (Nota Fiscal) and request bank loans.

The big advantage of MEI is tax requirements. Different from other entities, the MEI does not need to pay several taxes to different tax authorities and file several tax forms. The MEI is not required to pay Income Tax, but is required to pay the following taxes on a monthly basis:

Social Security: 5% of the minimum salary.ISS: BRL 5.00 for service businesses.ICMS: BRL 1,00 for goods and manufacturing businesses.For businesses that have the possibility to be registered as an MEI, there is no other solution that has such benefits as paying less tax. (Photo internet reproduction)The tax payment is made electronically on a single tax form named DAS. The MEI must annually file the DASN, short for Declaração Anual de Faturamento do Simples Nacional in Portuguese, and should report all revenues for the year.

For businesses that have the possibility to be registered as an MEI, there is no other solution that has such benefits as paying less tax, not filing income tax returns, no need for an accountant, no registration fees for setting up the legal entity, and several other advantages.

riotimesonline.com @TheRioTimes
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