Tax | Tax Reform in Brazil: How Fast It Can Affect Investors and Lenders

Some pivoting changes can occur in Brazilian tax system in the near future. Started last week discussions about taxation on the gross income social contribution. 

The gross income from some activities which currently are exempt, possibly will be taxed with special attention to the gross income related to financial revenue, such as interest on financial investments, income from exchange variation, income from derivatives, when these are the main activities of a tax payer.

Nevertheless, the discussions are still at their beginning, it is important to be aware of how fast they can be implanted once passed by the Congress. 

By law, some taxes can only be enforced at the beginning of the following fiscal year in Brazil, which is from January 1st. That is the case of Corporate Tax (on income) and the Income Tax on individuals. So, if it is approved at the end of a year, let us say, December 20th, it can be valid from the next January. 

Some taxes can only be enforced after 90 days from the bill’s publicization, but do not need to wait until the next year. That is the case of the social contribution on profits and the social contribution on gross income

And some taxes can only be enforced after the 90-day and after the beginning of following year. So to be enforced in January 1st the bill must be publicized until September 30th, that is the case of the states tax on consume. 

Thus it is important to be aware of the particularities of ones investments and assets allocations to program the monitoring of the tax changes.


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