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  • Foto do escritorGabriel Quintanilha Advogados

The Chamber ends the vote on the IR reform. Dividend taxation lower

Atualizado: 5 de dez. de 2023

than the government’s proposal was the only change approved.

BRASILIA – The Chamber of Deputies has finalized the vote on the bill that modifies the discipline of income tax, with an analysis of the salient points. Only one was approved: the reduction of the tax on dividends from 20% to 15%.

This was a major obstacle to approving the proposal and was negotiated with the business team. The original text sent by the Executive to Congress called for a tax rate of 20%.

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The change in the rate was not included in the final version of the report by the deputy Celso Sabino (PSDB-PA), the main text of which was approved yesterday, so as not to displease the opposition parties, which have always defended the taxation of dividends.

However, it was agreed with grassroots leaders that the IR rate cut would be approved during the key vote, presented by the Republican party.

Government leader Ricardo Barros (PP-PR) reiterated that President Jair Bolsonaro will not veto the tax cut on dividends.

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The rate cut, however, has bothered the opposition. Congresswoman Fernanda Melchionna (Psol-RS) said maintaining the agreements was very important as she led the bench vote to another highlight, which would further reduce this taxation.

1; We were, in fact, stunned, because the overwhelming majority of the plenary reduced the tax rate of profits and dividends from 20% to 15%, violating the agreement that was made yesterday and which obviously led to our vote in favor of the merits of the question, with our reservations, with our criticisms. But for us, the common understanding is that it would be 20%. It is clear that 15% is better than nothing, but we think it is necessary to tax even more – he said.

Impact of the proposal

After the approval of the project, the rapporteur Celso Sabino was asked about the tax impact of the measures. The text, in addition to having promoted a reduction in the taxation of dividends, has recalibrated the taxes imposed on companies and updated the table of personal income.

Zero impact. Our project is zero impact. And, to get a House bill approved, we have a consultancy from the Budget Commission which requires us to have zero impact. We will have no contribution to the increase in the fiscal deficit. On the contrary, these measures to reduce the burden on productive capital will revive the economy, which will generate even more revenue, “Sabino said.

However, the rapporteur has not presented the calculations.

Dividends at the center of the controversy

The restitution of the taxation of dividends was a delicate point of the proposal. Exempt from payment since 1995, the return of this tax was defended by the Minister of Economy, Paulo Guedes. The rapporteur also said that it was the capital lobby, which wanted to keep the exemption, that stopped processing the proposal on other occasions.

Several business sectors came out against the proposal during the discussion, arguing that the debate has been accelerated and that such taxation would penalize businesses, as the relief granted in the IRPJ reduction would not compensate for the new taxation.

The lawyer Gustavo Brigagão, partner of Brigagão, Duque Estrada Advogados and president of the Center for Legal Studies (Cesa), articulated a manifesto that brought together about 70 entities opposed to the text. The return of this taxation was identified as a problem by the group.

“That vote was frivolous. They bring in an absolutely drastic amendment, they destroy a 30-year-old system in a debate that didn’t even have an official document. There are no numbers for this. When we look, we see that there is an increase in the nominal tax rate. You see that even the changes, such as the smaller decrease in the IRPJ to serve states and municipalities, ended up not meeting, ”he said.

Despite the reduction in the dividend tax rate, the stock market fell by more than 1% this afternoon, driven by the decline in bank stocks.

The main text of the reform of the RE was approved last night, and the deputies left to today the analysis of the salient points, which could still modify the proposal. Of the original 26 highlights, a leader agreement reduced the total to 17. Only the dividend highlight was approved. At the end of the vote, the final text will go to the Senate.

The main points of the IR change

Personal Income Tax (IRPF)

Exemption range

Like: currently, people earning up to R $ 1,903.98 per month are exempt from income tax.

How it looks: the exemption range is extended to R $ 2,500.

IR table

Like: the last correction of the IR table was made in 2015

Range 1: up to R $ 1,903.98: exempt

Range 2: BRL 1,903.99 to BRL 2,826.65: 7.5%

Range 3: BRL 2,826.66 to BRL 3,751.05: 15%

Range 4: BRL 3,751.06 to BRL 4,664.68: 22.5%

Range 5: above BRL 4,664.69: 27.5%

How it looks: The proposal extends the exemption range by 31%, resulting in an average readjustment of 13% in the other ranges.

Range 1: up to R $ 2,500: exempt

Range 2: BRL 2,500.01 to BRL 3,200: 7.5%

Range 3: BRL 3,200.01 to BRL 4,250: 15%

Range 4: BRL 4,250.01 to BRL 5,300: 22.5%

Range 5: above BRL 5,300.01: 27.5%

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Simplified discount

Like: Taxpayers can opt for the simplified declaration model, with a 20% discount. There is no income limit, but there is a ceiling of R $ 16.7 thousand for using the discount.

How it looks: After the government’s proposal to end the simplified discount, the approved text kept the model. The threshold for using the discount has been reduced, set at R $ 10,5 thousand, with no income limits.

complex system

The main purpose of the reform is to simplify tax collection Photo: Edilson Dantas / Agência O Globo

Photo: Edilson Dantas / Agência O Globo

The government presented the bill that messes with the income tax table, considered the second part of the tax reform. The main part of the reform is the unification of taxes. But reaching an agreement on how to do this is as complex as the Brazilian tax system itself. States and municipalities are afraid of losing a share of their collection and the taxes are many.

tangle of taxes

Products and services are subject to municipal, state and federal taxes Photo: Ana Branco / Agência O Globo

Photo: Ana Branco / Agência O Globo

Brazil has at least five taxes incorporated into the prices of goods and services: three collected by the Union (IPI, PIS and Cofins), one by states (ICMS) and one by municipalities (ISS). The ICMS alone has 27 different formats, one for each state and the DF. In other words, in order to sell in other states, the entrepreneur must pay and know the different taxes.

High cost

Medicines in Brazil cost, on average, five times more than abroad Photo: Pixabay

Photo: Pixabay

In addition to the amount of taxes, the cost is high. One example is the general tax on drugs, one of the highest in the world, at around 33%. In developed countries it is around 6%. Another essential element with a high tax burden, for example, is the tampon: only 27% tax.


Perfume is more taxed than eau de cologne Photo: Rag Dutra / Rag Dutra

Photo: Rag Dutra / Rag Dutra

Classification is another recurring problem. Is it perfume or cologne? The rate of the concentrated formula is 42%. Already the lightest fragrance, 12%. “A big difference”, according to Gabriel Quintanilha, specialist in tax law and FGV.

Endless bureaucracy

Brazil is the country where companies spend the most time calculating and paying taxes Photo: Pixabay

Photo: Pixabay

Brazil is the country where companies spend the most hours on tax bureaucracy, according to a World Bank report that rates 190 countries. A Brazilian company spends, on average. 1,501 hours per year for the management of tax obligations. It is five times the average expenditure of the countries of Latin America and the Caribbean.

Waterfall effect

Too many rules for so many taxes hurt businesses Photo: Pixabay

Photo: Pixabay

This knot of so much information and burdens makes life and money difficult for companies, as well as making mistakes easier. According to Endeavor, 86% of Brazilian companies have some kind of irregularity in paying their taxes. These gaps are often due to a lack of knowledge of the numerous rules. Even so, they can generate high fines and expenses.

Corporate Income Tax (IRPJ)

Like: Currently, corporate income tax (IRPJ) has a rate of 25% (15% of the general rate and 10% for earnings over R $ 20,000). The Social Contribution on Net Income has an average rate of 9%.

How it looks: The text combined an 8 percentage point reduction in both fees. For the IRPJ, the reduction is 7 pp to the general rate from 2022. The corporation tax will be 18%. The cut in CSLL is up to 1 pp and could be 8% from next year. The text guarantees a reduction of 0.5 pp, but conditions the remaining part of the cut to the reduction of tax breaks.

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Interest on capital

Like: The JCP is used by companies to distribute profits to shareholders and can be counted as an expense for tax relief.

How it looks: The government had suggested an end to the deductibility of the JCP. The project foresees the end of the mechanism.

Taxation of profits and dividends

Like: they are not taxed. Dividends have been exempt in Brazil since 1995.

How it looks: A rate of 15% has been approved, with exemption for monthly earnings of up to R $ 20,000 for individuals receiving from a micro or small business, for Simples companies (with annual revenues up to R $ 4.8 million $) and for those who opt for the alleged profit regime (with revenue limitation up to R $ 4.8 million), as well as releasing the burden for companies that distribute profits within the economic group and to connected.

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Property value update

Like: declaration retains the original real estate values. On the sale, the tax collected varies between 15% and 22.5% on the capital gain.

How it looks: the government will allow an update of the assets, with an incidence of 5%. The provision will be valid only for 2022, with accessions between January and April.



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