News

Income Tax Reform approved; new rules take effect January 1, 2026

Sanctioned on Wednesday by the President of Brazil, Law No. 15,270, of November 26, 2025 (“Law 15,270/25”), resulting from Bill No. 1,087, of 2025 (“PL 1,087/25”), was published yesterday in the Federal Official Gazette. The final text reflects the version approved by the Federal Senate, and the new law, which modifies the tax regime applicable to the distribution of profits and dividends, will take effect on January 1, 2026.

 

In addition to the significant changes made to the Individual Income Tax (“IRPF”) system – see our client alert on the matter – Law 15,270/25 reinstates the taxation on the distribution of profits and dividends, requiring immediate action by most companies and their partners, especially as a result of the following changes:

 

• Resident Individuals: profits and dividends paid, credited, employed, or delivered to the same individual resident in Brazil, exceeding R$ 50,000.00 per month, will be subject to WHT at a rate of 10% on the total amount, without any deduction;

 

• Non-residents (individuals or legal entities):profits and dividends paid, credited, delivered, employed, or remitted abroad will be subject to WHT at a rate of 10%, both in the case of individuals and legal entities, regardless of the amount. Profits and dividends distributed to foreign governments will not be subject to the new rules, provided there is reciprocal treatment, nor will be those distributed to sovereign wealth funds, and pension entities, in accordance with regulations yet to be published.

 

According to Law No. 15,270/25, profits and dividends calculated up to the 2025 calendar year will not be subject to the new WHT, provided that:

 

• distribution is approved by December 31, 2025; and
• the dividends credit is enforceable under the applicable civil and/or corporate law, and its payment, credit, employment, or delivery occurs under the terms originally provided for in the act of approval.

 

For other cases, such as the distribution of profits among companies domiciled in Brazil and profits whose distribution does not exceed R$ 50,000.00 per month, the exemption provided for by Law 9,249/95 remains valid.

 

In addition, for the purposes of the new Minimum Taxation Regime for High-Income Individuals (“IRPFM”), profits and dividends relating to results calculated up to the calendar year 2025 may be deducted from the taxpayer’s total annual income, provided that they meet the above requirements and that their payment, credit, use, or delivery occurs in 2026, 2027, and 2028.

 

The conditions established by Law No. 15,270/25 to maintain tax exemption on profits prior to the new regime have been widely criticized, among which we highlight:

 

• Operational challenge: in practice, the results for the 2025 fiscal year are unlikely to have been formally calculated and approved by the date required for deliberation.
• Conflict with the Brazilian Corporations Law (Law 6,404/1976): Article 205 of the Brazilian Corporations Law provides that dividends must be paid in the same fiscal year in which they are approved.
• Applicability to Non-Residents: due to the wording adopted by Law No. 15,270/25, there are discussions regarding the applicability of the exemption rule to non-residents of Brazil.

 

Certain alternatives to comply with the requirements set forth in Law No. 15,270/25 and mitigate potential risks are currently under discussion, and a strategic review of corporate structures, as well as their current and accumulated results, is essential to promptly determine the measures necessary to preserve the tax exemption on profits calculated up to December 31, 2025.