The new tax will take effect for fiscal years beginning on or after 1 January 2026.
Brazil’s Federal Senate has approved Bill 1.087/2025, introducing a 10% withholding tax on dividends paid to foreign entities, effective for fiscal years starting after 1 January 2026.
Exemptions include profits calculated until 2025 and dividends paid to certain foreign governments, sovereign funds, and entities managing retirement and pension benefits.
Taxpayers may apply for a tax credit if the combined corporate income tax and withholding tax rates exceed the nominal corporate tax rate. Applications are due within 360 days of the end of the fiscal year.
Bill 1.087/2025 also exempts individuals earning up to BRL 5,000 per month from Income Tax (IR) and reduces tax rates for those earning between BRL 5,000.01 and BRL 7,350. Additionally, the bill increases taxation on high incomes, starting at BRL 600,000 annually.
Brazil’s Chamber of Deputies approved the Bill in October 2025. The bill now awaits presidential approval and is expected to be enacted soon.
