Bill Nº. 1,087/2025, approved by the Senate and sent for presidential sanction, introduces significant changes to the taxation of individuals and legal entities in Brazil starting in 2026, particularly by establishing income tax on dividends and a minimum tax on high income.
These changes directly affect corporate cash flow, profit distribution policies, and tax planning structures, requiring immediate attention from companies and investors to adapt to the new scenario.
Below, we highlight 5 key points that summarize the main aspects and implications of the Bill.
1. Taxation of dividends: Starting January 1, 2026, dividends paid by legal entities to individuals residing in Brazil will be taxed at a 10% rate on amounts exceeding R$ 50,000 per month, applying to the total amount once the threshold is surpassed. The same tax applies fully to dividends distributed abroad, with no exemption limit. Distributions resolved by December 31, 2025, remain exempt, provided the original terms are observed, reinforcing the importance of planning and approving distributions still in 2025.
2. Impacts on cash flow and withholding at source: The new rule establishes withholding income tax (IRRF) by payers, immediately reducing shareholders’ net income. Since refunds will only occur through the annual tax return the impact on cash flow is direct. Without progressivity or deductions, the flat 10% rate may be more burdensome for recipients of higher amounts. Therefore, financial planning and cash reserves become critical to manage this new tax cost.
3. Minimum taxation on high income: The Bill establishes a minimum personal income tax (IRPF) of 10% for those earning annual income above R$ 600,000, including dividends, tax-exempt gains, and zero-rate income. The computation will be progressive: for income between R$ 600,000 and R$ 1.2 million, the formula Rate (%) = (INCOME ÷ 60,000) – 10 applies, reaching the 10% cap above that threshold. The measure seeks to combat tax avoidance and reinforce the principle of contributive capacity, although it also increases the risk of double taxation and adds complexity to the annual adjustment.
4. The calculation and complexity of the Reductor: To prevent overlapping taxation between legal entities and individuals, the Bill introduces the Reductor, which limits the combined effective tax rates of IRPJ/CSLL and IRPF when they exceed 34% (non-financial companies), 40% (insurance and capitalization companies), or 45% (financial institutions). The mechanism requires individual calculation of the effective rates of both the company and its shareholders, considering accumulated profits and personal income. Companies with effective tax rates below 24% may not qualify for the benefit, leading to a higher overall tax burden. Understanding its application within each corporate structure is crucial to ensuring fiscal efficiency.
5. Corporate reorganization and conflicts with corporate law: The new rules also have direct corporate implications. Although the Bill allows dividends resolved by 12/31/2025 and paid until 2028 to remain exempt, the Brazilian Corporate Law (“Lei das S.A.s”) requires payment within the fiscal year in which the profits were earned, a legal and practical conflict. Companies that delay payments to maintain the exemption may face challenges from the Tax Authority or shareholders. Therefore, it is essential to review distribution policies, analyze corporate structures, and anticipate resolutions during 2025.
Bill 1,087/2025 inaugurates a new phase in income taxation in Brazil, narrowing the space for tax-free distributions and encouraging greater transparency and alignment between corporate and individual taxpayers. While dividend taxation and the minimum tax on high income aim to enhance progressivity, they also increase operational complexity and may create distortions. With its implementation set for January 2026, this is the ideal moment to reassess corporate structures, distribution flows, and capitalization plans to ensure a smooth and legally secure transition.
