Brazil has issued Complementary Law No. 224 and Decree No. 12,808, introducing stricter rules and significant reductions in federal tax incentives across major levies.
Brazil has issued Complementary Law No. 224 of 26 December 2025, along with implementing regulations in Decree No. 12.808 of 29 December 2025. Both the law and the decree introduce a broad reduction in tax benefits across key federal taxes, including IRPJ, CSLL, PIS/Pasep, COFINS, IPI, and employer social security contributions.
Complementary Law No. 224 of 26 December 2025 reforms the framework for federal tax, financial, and credit incentives by introducing stricter criteria for granting, extending, and evaluating benefits, requiring impact estimates, defined performance targets, transparency, and periodic review.
It also mandates the reduction of several federal tax incentives across key taxes such as PIS/Pasep, Cofins, IRPJ, CSLL, IPI, Import Tax, and employer social contributions, while exempting certain social and regional programs, and establishes a 2% of GDP cap on total tax incentives unless compensatory measures are adopted.
The law also creates joint liability for financial institutions and advertisers involved in illegal fixed-odds betting operations, updates several existing fiscal and tax laws, and sets staggered effective dates, with most provisions starting on 1 January 2026.
Reduction of federal tax incentives
Exemptions and zero rates are reduced by applying a 10% tax rate to the standard rate, while reduced rates are recalculated as 90% of the original reduced rate plus 10% of the standard rate. Reduced tax bases are capped at 90% of their original reduction, and financial or presumed credits can only be used up to 90% of their initial value, with the remaining 10% cancelled.
Additionally, presumed profit regime companies with gross revenue over BRL 5 million will have their tax base presumption percentage increased by 10%.
The reduction does not apply to:
The reduction does not apply to constitutional immunities or key tax and benefit regimes, including incentives for the Manaus Free Trade Zone and Free Trade Areas, zero-rated basic food items, benefits for non-profits (Laws 9,790/1999 and 9,637/1998), and those under Article 146 (e.g., Simples Nacional).
It also excludes benefits subject to a global cap with prior authorisation, Minha Casa, Minha Vida housing benefits, Prouni education benefits, ad rem tax rates, free political airtime, and ICT/semiconductor industrial policy benefits.
Additionally, if total tax incentives exceed 2% of GDP, new or expanded incentives are prohibited.
Tax increases
The law increases several taxes, including raising the withholding tax on interest on net equity (JCP) from 15% to 17.5% effective 1 January 2026.
It also raises the CSLL rate for payment institutions, exchanges, clearing entities, and similar companies to 12% until December 31, 2027, and 15% from 1 January 2028.
For capitalisation companies and credit, financing, and investment firms, the CSLL rate increases to 17.5% until 31 December 2027, and 20% from 1 January 2028.
Additionally, the tax on gross gaming revenue is increased to 13% in 2026, 14% in 2027, and 15% from 2028. All increases, except the JCP change, generally take effect on 1 April 2026.
