On 6 May 2019, Brazil has published general rules 7018 of 21 March 2019 in the official gazette clarifying calculation and deduction of interest on net equity. The calculation will take into account for the following equity accounts:
- Share capital;
- Capital reserves;
- Profit reserves;
- Treasury shares; and
- Accumulated losses.
Moreover, the general rule explains that the deductible portion of interest on shareholders’ equity is limited to the pro rata variation of the long-term interest rate (Taxa de Juros de Longo Prazo – TJLP) corresponding to the time passed from the beginning of the calculation period up to the date of payment or interest credit, and applied to shareholders’ equity at the beginning of that period, with the changes to more or less occurring in its course, since the purpose of interest on equity is to remunerate the capital for the time it was available to the company.
