01/09/2021 – 22:43
• Updated on 09/01/2021 – 22:45
Cleia Viana/Chamber of Deputies
Plenary Session of the Chamber of Deputies
On Wednesday (1), the Chamber of Deputies approved the basic text of the project that alters Income Tax rules (PL 2337/21). By 398 votes to 77, the substitute the rapporteur, deputy Celso Sabino (PSDB-PA). This Thursday (2), the deputies will vote on the highlights presented by the parties in an attempt to change the text.
According to the substitute, profits and dividends will be taxed at 20% as Income Tax at source, but stock investment funds are left out. In the previous version, the rate was 5.88% for funds.
The Corporate Income Tax (IRPJ) will be reduced from 15% to 8%. In the previous version, the reduction took the tax to 6.5%.
The Social Contribution on Net Income (CSLL) will decrease 0.5 percentage point in two stages, subject to the reduction of tax deductions that will increase collection. After the end of the deductions, the total will be 1 percentage point less, going from 9% to 8% in the general case. Banks will go from 15% to 14%; and other financial institutions, from 15% to 14%.
“The proposed correction in the income tax table’s exemption range will be the largest since the Real Plan. Taxpayers will notice a significant reduction in the income tax owed. And about 16 million Brazilians – half of the total number of deponents – will be exempt”, said the rapporteur.
One of the points on which the negotiations have evolved to the point where the opposition supports the text is the maintenance of the simplified discount in the annual adjustment declaration.
Currently, the discount is 20% of taxable income, limited to R$16,754.34, and replaces all allowed deductions, such as expenses with health, education and dependents.
According to the initial proposal, this discount would only be possible for those who earn up to R$ 40 thousand per year, limited to R$ 8 thousand (20%). After the negotiations, the limit was increased to R$10.5 thousand.
profits and dividends
As for the taxation of profits and dividends distributed by companies to individuals or legal entities, the bill proposes a 20% withholding tax, including for those domiciled abroad and in relation to any type of action.
Most countries in the world carry out this type of taxation. Among the Organization for Economic Cooperation and Development (OECD) countries, only Latvia does not tax profits and dividends.
Cleia Viana/Chamber of Deputies
Celso Sabino, rapporteur of the bill
However, the micro and small businesses participants of the Simples Nacional and companies taxed by the presumed profit with sales up to the limit for qualifying under this special taxation regime, currently equivalent to R$4.8 million, as long as they do not meet the corporate restrictions for qualifying under Simples.
Other exceptions are for:
- companies participating in a holding company, when a conglomerate of companies is under common corporate control;
- companies that receive funds from real estate developers subject to the special taxation regime for the allocated assets; and
- supplementary pension funds.
The project is the second phase of the tax reform underway by the government. Opposition parliamentarians, however, expressed support for the vote on the proposal due to the amendments made by the rapporteur.
According to Deputy Afonso Florence (PT-BA), the text is now “a project of the Chamber, in favor of fair and solidary tax reform”. He praised the reduction in income tax for individuals and the taxation of profits and dividends.
Deputy Marcelo Ramos (PL-AM) praised the agreement reached by party leaders, but defended changes in the project through highlights. “We need to have the courage to face the challenge of releasing taxes on consumption, which weighs more on the pocket of the worker, the unemployed, the father of the family.”
Deputy Alexis Fonteyne (Novo-SP) said that the reform of the Income Tax is necessary, but criticized the text by pointing out distortions based on the size of companies, in favor of small ones. “It’s a kind of regressiveness for legal entities, and that way companies won’t want to grow, make money,” he said.
Deputy Ivan Valente (Psol-SP) criticized the speed in the discussion of the project. “We’ve been talking about tax reform for over ten years, and the substitute it does not address the taxation of large fortunes or on added value”, he said. “It’s a small step, there was no regressiveness,” he said, charging lower taxes on the poorest.
The leader of the government in the Chamber, Deputy Ricardo Barros (PP-PR), said that, with the approval of the Executive Branch, the proposal will give rise to a new way of taxing in the country. “This new way of taxing will be fairer, more equitable for society: those who earn more will pay more, those who earn less will pay less.”
During the vote, Barros announced that, except for legal reasons, there should be no presidential veto on the end of interest on equity or the taxation of profits and dividends. “If, by any chance, there is a veto, the government will make an agreement to overthrow it,” he said.
Learn more about the processing of bills
Reporting – Eduardo Piovesan and Ralph Machado
Edition – Pierre Triboli