One of the attractions of Brazil, from a tax point of view, for foreign capital is the absence of taxation on the distribution of profits/dividends.
The Tax Reform that has just been presented by the federal government provides for the taxation of dividends paid and credited to individuals and legal entities at a general rate of 20%.
This taxation applies to most financial market operations with the stock exchange and even investment funds. And, also, it will apply to distribution directly by companies.
If the foreign beneficiary is headquartered in a country whose taxation is considered low by Brazilian legislation, the percentage of income tax on profits (WHT) will be 30%. Among these jurisdictions are Ireland, the British Virgin Islands, Cayman Islands, as well as some privileged fiscal regimes in Uruguay (Safis), United States (LLC), Netherlands (Holding), among others.
But it is not just the rate that came into being. In some cases, the fixed taxation time is already suffering criticism. For example, the profits of branches, agencies or representations in the country, of legal entities headquartered abroad, are automatically considered by the head office on the closing date of the calculation period, which will be mandatory quarterly, and will be subject to the levy of tax on withholding income at the rate of 20%.
In the latter case, the taxation of profits will occur even if there is no effective remittance of them to headquarters abroad.
Due to the complexity of the measures, it is important that all companies already carry out analyzes on the impacts on their operations.