Simples Nacional for an HOF Clinic: Annex and R Factor
For many orofacial harmonization (HOF) professionals in Brazil, the Simples Nacional (the simplified tax regime) is the regime that fits at the start of a clinic: a single payment slip, a progressive rate and little bureaucracy. What confuses people most is the annex: the same clinic can pay much more or much less tax depending on the R factor, and many people only find this out when the accountant explains why the tax went up.
This guide explains the logic of Annex III and Annex V, shows what goes into the R factor calculation, gives a hypothetical example and lists what to bring to your accountant. It does not replace an accountant or serve as tax planning: the rules change and depend on the CNAE code, the legal entity type and details that only accounting can see. The values used in the examples are fictional.
What is the Simples Nacional, in a few lines?
It is a simplified tax regime for micro and small businesses, created by Complementary Law 123/2006 (text on the Planalto site) and regulated by the Steering Committee (CGSN Resolution 140/2018). Several taxes are paid in a single monthly slip, calculated on gross revenue, with a rate that rises in brackets according to the revenue of the last 12 months.
Basic points:
- There is an annual gross revenue limit, currently set by law at R$ 4.8 million. Going over it takes the business out of the regime. Confirm the current brackets and sublimits.
- The activity must be allowed in the regime (this depends on the CNAE code, see CNAE code for a harmonization clinic).
- The annex defines the rate table. Health services are generally split between Annex III and Annex V, and the R factor decides which one the business falls under.
What is the R factor?
The R factor is a ratio calculated as follows, in plain language:
R factor = payroll for the last 12 months ÷ gross revenue for the last 12 months
If the result is equal to or above 28%, the activity is taxed under Annex III, which has lower rates. If it is below 28%, it falls under Annex V, with higher rates. The calculation is done every month, looking at the previous 12 months.
What usually counts as "payroll" for this calculation: salaries paid to employees, partners' pró-labore, applicable payroll charges (such as the employer's social security contribution and FGTS), according to the rules and the company's regime. What usually does not count: profit distributions and payments to freelancers or to contracted companies. These details vary, so checking with your accountant is essential.
| Item | Usually counts toward the R factor? | Note |
|---|---|---|
| CLT employee salary | Yes | With payroll charges |
| Partner's pró-labore | Yes | Has its own INSS and partner income tax cost |
| FGTS and employer charges | Yes | Per the rules |
| Profit distribution | No | Not payroll |
| Payment to a freelancer (RPA) | Generally no | Confirm with your accountant |
| Payment to another company (PJ) | No | It is an expense, not payroll |
Why does the annex change the tax so much?
The difference between the annexes shows up from the first bracket. In the first revenue bracket, Annex III's nominal rate is lower than Annex V's, and the gap tends to persist in the following brackets. The exact numbers change by bracket and by deduction amount, so the real calculation is done on the current table, which the accountant consults.
Hypothetical example: fictional values, with effective rates chosen only to illustrate. A clinic bills R$ 600,000.00 over 12 months.
| Scenario | 12-month payroll | R factor | Annex | Effective rate (hypothetical) | Tax for the year |
|---|---|---|---|---|---|
| A | R$ 108,000.00 | 18% | V | 14% | R$ 84,000.00 |
| B | R$ 168,000.00 | 28% | III | 8% | R$ 48,000.00 |
The tax difference would be R$ 36,000.00. But that does not mean you "just need to raise payroll." To go from 18% to 28%, payroll would rise by R$ 60,000.00 a year, and that has a real cost: higher pró-labore generates INSS and income tax for the partner, and salaries generate payroll charges. The right math compares the Simples savings against the total cost of raising payroll. In some situations it pays off, in others it does not, and some people decide on another regime.
Does the R factor apply to every HOF clinic?
No. The R factor applies to some activities listed in the rules. Health activities such as medicine, nursing and dentistry appear among those subject to the R factor, according to the Receita Federal (Brazil's tax authority) materials. But the classification depends on the main CNAE code and on the activities the clinic declares, and HOF is practiced by professionals from different categories (dentists, physicians, biomedical professionals, pharmacists, nurses).
That is why the questions for your accountant are:
- What is my main CNAE code, and is it allowed in the Simples?
- Is that activity subject to the R factor, or is it taxed directly under a fixed annex?
- If the clinic has professionals from different categories, do the main and secondary activities change the classification?
- Does the clinic have other activities (selling products, for example) that follow their own annex?
If you are still choosing a regime, also see individual or company (PJ) in HOF and use the Simples Nacional vs. individual simulator as a starting point, always checking the results with your accountant.
What other regimes can the clinic consider?
The Simples is not the only path. Depending on revenue and margin, these may enter the comparison:
| Regime | General idea | When it is usually compared |
|---|---|---|
| Simples Nacional | Single slip on revenue, in brackets | Early and mid-size revenue, compatible margin |
| Presumed profit (lucro presumido) | Tax on a presumed margin of revenue | High revenue and low expenses relative to revenue |
| Actual profit (lucro real) | Tax on accounting profit | Low margin or losses, larger structures |
| Individual (freelancer) | Cash book and monthly self-assessed income tax | Early stage, low volume, when the activity allows it |
The choice depends on numbers, not on a general rule. The same revenue can favor different regimes in clinics with different payrolls. Plan the choice before opening or at the start of the year, because switching regimes has deadlines and rules.
How does the Simples relate to pricing, margin and cash flow?
Tax is part of the price. Anyone who prices without considering the Simples percentage and the card terminal fee is selling at a lower margin than they think. In the pricing math, taxes and fees go in as a percentage of the price, in the divisor, together with the desired margin. See pricing per ml and use the price per ml and margin calculator to test it.
It is also worth remembering:
- Tax is calculated on the month's gross revenue, even if the patient pays in card installments and the clinic receives the money later. This affects cash flow. See cash flow in an HOF clinic and installment payments for aesthetic procedures.
- Invoice issuance and the calculation base follow municipal rules. See service invoices in an HOF clinic.
- The tax reform changes the design of consumption taxes over the coming years, with transition rules. See IBS and CBS in an HOF clinic.
Which documents and data should you bring to your accountant?
For a productive conversation, prepare ahead:
- monthly revenue for the last 12 months (or a projection, if the clinic is new);
- payroll with charges and current pró-labore;
- a list of professionals, with category and type of arrangement (CLT, partner, PJ, freelancer). See hiring another professional in an HOF clinic;
- fixed and variable expenses, especially product, rent and commissions. See fixed and variable costs of an HOF clinic;
- current or intended CNAE code;
- a growth plan for the next 12 months, because the ideal regime today may not be the ideal one when revenue doubles.
Common mistakes
- Assuming that "physicians and dentists pay less" without checking the month's R factor.
- Forgetting that the R factor is rolling: it changes every month with the payroll and revenue of the previous 12 months.
- Paying a token pró-labore and then being surprised by the more expensive annex.
- Hiring freelancers or PJs thinking that counts toward the R factor.
- Ignoring the revenue limit and blowing past the ceiling without planning.
- Not separating activities (services and product sales) when the clinic does both.
- Choosing the regime only by the nominal rate, without looking at the whole picture including the cost of payroll.
Checklist for the conversation with your accountant
- Is my CNAE code allowed in the Simples Nacional?
- Is the activity subject to the R factor?
- What is my R factor today, and what is the projection for the coming months?
- What would it really cost to raise payroll to 28%?
- Which regime delivers the best result for me and for the clinic?
- What are the sublimits, and what happens if revenue grows?
- How do card installments and invoicing apply to my case?
- How should the tax reform affect the clinic?
The Simples Nacional can be a good regime for an HOF clinic, but the annex and the R factor make a real difference in the tax. Knowing the logic before starting the conversation with your accountant helps you ask better questions, understand the answer and decide with numbers, instead of accepting the first slip that arrives.
Frequently asked questions
What is the R factor in the Simples Nacional?
It is the ratio between the payroll of the previous 12 months (with payroll charges and pró-labore, per the rules) and gross revenue for the same period. For activities subject to it, a result of 28% or more leads to Annex III, and anything below that leads to Annex V.
Does a facial harmonization clinic fall under Annex III or Annex V?
It depends on the activity (CNAE code) and on the R factor. Health activities subject to the R factor fall under Annex III when the ratio is 28% or more, and under Annex V when it is lower. Your clinic's classification should be confirmed with your accountant.
Does pró-labore count toward the R factor?
Generally yes: the payroll considered includes pró-labore and payroll charges, in addition to salaries, under the Simples Nacional rules. Raising pró-labore can raise the R factor, but it has its own cost (INSS social security and the partner's income tax) that has to be part of the math.
What is the revenue limit for the Simples Nacional?
Complementary Law 123/2006 sets the maximum gross revenue to remain in the regime at R$ 4.8 million per year, with special rules for anything above R$ 3.6 million for some taxes. Confirm the current figures with your accountant.
Is it worth staying in the Simples Nacional as an HOF clinic?
It depends on revenue, payroll, margin and the alternatives (presumed profit, for example). Compare the total tax under each regime using the clinic's real numbers, not just the nominal rate.