Brazil’s government has proposed imposing a 10% tax on corporate profits and dividends sent abroad on 17 March 2025 to offset the revenue loss from expanding the tax exemption brackets for low-income individuals.

According to the country’s central bank, profits and dividends sent abroad from Brazil totalled USD 69.7 billion in 2024, while inflows in the same category were USD 24.1 billion.

The measure would hurt multinationals with subsidiaries in Brazil, which currently benefit from remittance exemptions under a 1995 corporate tax law.

The taxes on corporate profits and dividends sent abroad will complement the government’s previous minimum tax on individuals earning over BRL 600,000 annually. The effective rate will rise 10% for those earning more than BRL 1.2 million a year.

The proposal also includes a 10% withholding tax on profits and dividends exceeding BRL 50,000 per month from a legal entity to an individual, starting January 2026.

Beginning in 2027, taxpayers will pay a minimum tax on earnings over BRL 600,000 annually. This includes all income, even those taxed exclusively, finally, or exempt.

The proposed taxation plans align with President Luiz Inacio da Silva’s administration’s commitment to expanding the income tax exemption for individuals.

The government estimates that expanding the income tax exemption for individuals earning up to BRL 5,000 monthly will cost BRL 25.84 billion (USD 4.54 billion) in 2026, BRL 27.72 billion in 2027, and BRL 29.68 billion in 2028.  Currently, individual earnings up to BRL 2,824 per month are exempt from income taxes.

Brazil’s finance minister, Fernando Haddad, also believes the income tax exemption proposal will cost less than initially forecasted.

Haddad said the projected cost of President Luiz Inacio Lula da Silva’s proposal is BRL 27 billion (USD 4.75 billion) per year, down from a previous estimate of BRL 35 billion, following the government proposal of raising the personal income tax exemption from BRL 2,824 per month (twice the minimum wage) to BRL 5,000 per month by 2026.