Bill 3.540/2026 would reduce the CSLL rate for local reinsurers from 15% to 9% and remove the 30% cap on tax loss offsets for reinsurance and retrocession activities, aiming to address tax differences between domestic and foreign reinsurers and strengthen Brazil’s local reinsurance market.
Brazil’s Senate has approved Bill 3.540/2026 and forwarded it to the Executive Branch for sanction or veto on 3 September 2026.
Bill 3.540/2026 (PLP 3540/2026) addresses a long-standing structural imbalance in Brazil’s financial sector by establishing a tailored tax regime for local reinsurance companies. The bill amends Law 7.689/1988 and Law 8.981/1995 to align domestic taxation with international industry standards and restore competitive neutrality
This legislative proposal seeks to revitalise Brazil’s domestic reinsurance market by correcting tax imbalances between local firms and foreign competitors. The bill proposes reducing the Social Contribution on Net Profit (CSLL) rate to 9% for local reinsurers and removing the 30% cap on offsetting tax losses.
The local vs. foreign tax asymmetry
Reinsurance is the only segment of the Brazilian financial system where foreign entities can compete directly with domestic firms without establishing a physical presence or local fiscal domicile in Brazil. Under Complementary Law 126/2007, foreign reinsurers operate as eventuais or admitidas:
- Local reinsurers: Subject to full Brazilian corporate taxation, facing a combined corporate tax burden (IRPJ + CSLL) exceeding 40% (25% IRPJ + 15% CSLL).
- Foreign reinsurers: Exempt from Brazilian IRPJ and CSLL on operations conducted from abroad, operating under significantly lighter tax regimes in their home jurisdictions.
CSLL rate reduction to 9%
Bill 3.540/2026 amends Article 3 of Law 7.689/1988 to lower the Social Contribution on Net Income (CSLL) rate for local reinsurers from 15% to 9%.
The measure relies on Article 195 of Brazil’s Federal Constitution, which allows differentiated social contribution rates based on objective economic factors. Supreme Court precedent in ADI 4.101 supports this approach when the criteria are proportionate and economically justified.
Removal of the 30% tax loss offset cap
The bill amends Articles 42 and 58 of Law 8.981/1995 to remove the statutory 30% annual limitation on offsetting accumulated corporate tax losses and negative CSLL calculation bases for reinsurance and retrocession activities, specifically when losses are not fully absorbed within 3 years.
- Reinsurance model: The 30% loss-offset cap can create tax on temporary accounting profits because reinsurance premiums may cover risks and claims arising several years later. Removing the cap would better reflect the sector’s long-term and volatile business cycle.
- Agribusiness analogy: Similar relief exists for rural activities because of climate and seasonal risks. Applying comparable treatment to reinsurance is presented as consistent with the constitutional ability-to-pay principle.
- Tax deferral: Removing the cap is described as a timing adjustment rather than a tax exemption or revenue waiver, allowing taxation of actual long-term net profits. The text notes that the US, UK, Germany, and France permit broader use of tax losses.
Strategic role of the domestic reinsurance market
Strengthening local reinsurers can provide broader economic benefits by supporting the solvency of primary insurers during major domestic disasters, developing specialised actuarial expertise on Brazilian risks, and increasing domestic investment, as local reinsurers are required to hold guarantor assets in Brazil and invest in government securities and domestic capital markets.
The Bill will now be submitted to the President for sanction or veto.
