We would like to inform that Law No. 15.270/2025 has been enacted without vetoes, resulting from the conversion of Bill of Law No. 1.087/2025. The new law will significantly impact profit distribution in Brazil and abroad starting next year. 

This new law, of great public interest for providing income tax exemption for individuals receiving up to R$ 5,000/month, reintroduces dividend taxation in Brazil under certain circumstances as a trade-off, and establishes minimum annual taxation for “high income” taxpayers. 

Below we highlight the key developments and critical considerations for companies, particularly regarding dividends paid to foreign beneficiaries. 

1. Taxation of Dividends Paid to Individual Taxpayers in Brazil

Effective as of 2026, Law No. 15.270/2025 reinstates withholding tax (IRRF) on dividends paid to individuals’ resident in Brazil when these payments exceed R$ 50,000/month to the same individual from the same company. The withholding tax will be an advance payment to be computed with the annual 10% minimum tax now owed by high income individuals. 

For Brazilian legal entities receiving dividends from other domestic legal entities, withholding tax exemption remains applicable. 

2. Taxation of Dividends Paid to Foreign Beneficiaries

All dividends paid to any foreign shareholders or investors will be subject to withholding tax at a 10% rate. 

This taxation will apply at the time of payment or credit of dividends, regardless of the amount or the beneficiary’s country of residence. 

3. Transitional Rule: Profits Determined and Approved by December 31, 2025

The law provides that dividends relating to profits determined through 2025 (including prior years), deliberated and approved by December 31, 2025, will remain exempt from taxation, even if payment of such dividends occurs after 2025 – provided that payment terms follow the corporate resolution. 

To benefit from this transition rule, it is essential that companies determine their profits (we recommend by November 2025), formally approve the distribution, and file the corporate act with the Commercial Registry before year-end 2025. 

It is important that the corporate resolution clearly establish the payment timeline to avoid questions regarding potential same-year payment obligations, which might be required for companies under certain circumstances applicable to corporations and limited liability companies. 

4. 10% Rate Reduction Mechanism

The new law establishes a potential credit for foreign beneficiaries when the sum of the paying company’s effective tax rate (ETR) in Brazil (IRPJ/CSLL) plus the 10% dividend withholding tax exceeds a threshold of 34% (general rule – specific rates apply to certain sectors). The “excess” may be recoverable as a credit, subject to pending regulation. 

5. The Importance of Evaluating Double Tax Conventions

For companies with foreign shareholders or investors, it is essential to analyze existing Double Tax Conventions (DTC) between Brazil and the countries of residence of such shareholders (or reciprocity agreements when applicable). 

These treaties may provide for tax credits in the investor’s country of residence or exemptions, mitigating double taxation. 

Even with an existing DTC, the new 10% dividend taxation may represent an additional cost that must be carefully evaluated in international tax planning. 

6. Interest on Equity (JCP) – An Efficient Alternative

Payment of Interest on Equity (JCP) is now consolidated as an advantageous tax strategy. Its deductibility may represent significant tax savings, and the rate (currently 15%) was not increased as the government intended during the year. 

Additionally, a recent decision by the Superior Court of Justice (STJ) confirmed the possibility of calculating and deducting JCP on profits from prior years, further enhancing its tax efficiency. 

Recommendation: It is highly advisable to evaluate and maximize JCP payments, within legal limits, as an efficient tax optimization tool. 

The recent changes to dividend taxation introduce a scenario of greater complexity and require proactive tax and corporate planning. We remain available to assist your company with detailed analysis of these impacts and the development of customized strategies that ensure compliance and tax efficiency.