Chamber approves highlight that reduces dividend tax from 20% to 15%

Session for voting on proposals. Mayor, Arthur Lira (PP-AL)

SAO PAULO – The plenary of the Chamber of Deputies approved, this Thursday (2), the bench highlighting the project for the reform of the Income Tax that reduces the rate of taxation that will focus on the distribution of profits and dividends. The text voted yesterday predicted a 20% incidence of IR in these cases. With the modification, 15% will be charged.

The change was suggested by a prominent authorship of the Republicans’ bench, which asked for a separate vote on the amendment filed by Deputy Neri Geller (PP-MT). This was one of the points of agreement signed the day before by party leaders. The excerpt received 319 votes in favor and 140 against. There are 17 other highlights pending deliberation, which may modify the project.

In this way, profits and dividends distributed to individuals or legal entities, currently exempt, would be taxed at 15% as of January 2022, with no transition rule. There are some exceptions, which would maintain immunity. Are they:

A sign of the agreement had already been given yesterday by the rapporteur of the proposal, deputy Celso Sabino (PSDB-PA), as shown in the newspaper report Economic value. The toucan withdrew from the latest version of the opinion the charge of 5.88% at source by stock funds as a way to facilitate the payment of the fee. The device had been created to facilitate the settlement of 20% – the 5.88% would be at source and another 15% at the time of redemption of the fund’s shares. With the exclusion, only 15% of the withdrawal remained – the same rate now charged to all groups in the distribution of dividends.

During discussions on the prominence of Republicans, this Thursday, the government leader, Deputy Ricardo Barros (PP-PR), guaranteed that the reduction of the tax rate on dividends to 15% will not be vetoed by President Jair Bolsonaro (without broken). “The government accompanies the rapporteur and ensures that there will be no veto in this matter of collecting dividends,” he said.

In discussions on the reform of the Income Tax, the draftsman of the proposal even limited the tax exemption in the case of dividends received by individuals from micro and small companies (gross revenue of less than R$ 4.8 million) up to R$ 20 thousand per month per beneficiary. The measure met with strong resistance from some professional categories, such as doctors and lawyers. In one concession, the ceiling was removed from the final voted version.

The text approved by the deputies promotes a series of changes in the application of the Income Tax for individuals, companies and on investments and in the Social Contribution on Net Income (CSLL).

It is noteworthy, however, that, for the new rules to take effect, the bill must be approved by the Federal Senate and subsequent sanction by President Jair Bolsonaro (no party). If the senators decide to modify the merits of the text received, it will have to undergo a new evaluation by the deputies.

Read too: What changes for investments with the approval of the Income Tax reform in the Chamber?

The taxation of dividends was, together with the extinction of tax benefits to specific economic sectors, a way of offsetting the reduction in revenue with the reduction of the IRPJ and CSLL rates charged to companies and with the updating of the IRPF table.

The substitute, reported by deputy Celso Sabino (PSDB-PA), also establishes the end of interest on equity ‒ an instrument widely used by financial institutions.

In this aspect, the congressman went beyond what was proposed in the original version sent by the federal government, which determined the end of the deductibility of the instrument, but allowed the interpretation that the rate of 15% of the withholding tax would be maintained.

Main changes

The text approved by the deputies expands the exemption range from the Income Tax of Individuals (IRPF) from the current R$1,903.98 to R$2,500.00 and updates the table by 13% in the other ranges.

Thus, the 7.5% rate covers monthly incomes between R$ 2,500.01 and R$ 3,200, and the 15% rate covers the range between R$ 3,200.01 and R$ 4,250. Those with an income of R$4,250.01 to R$5,300 will be subject to the rate of 22.5%. Above that, the rate of 27.5% will apply.

On the other hand, a point that was generating controversy and ended up being changed concerns the simplified discount in the annual adjustment declaration. Currently, the discount is 20% on taxable income, limited to R$16,754.34, and it replaces all allowed deductions, such as expenses with health, education and dependents.

The government intended to limit the adoption of the simplified system only to people with an annual income of less than R$40,000, which corresponds to approximately R$3,333 per month. The voted version, on the other hand, maintained the possibility of a simplified 20% discount to anyone, but it reduces the limit to R$ 10,563.60 as of next year.

During the course of the bill, the rapporteur presented five versions of his opinion. In the substitute voted, he predicted a 7 percentage point cut in the IRPJ rate (from 15% to 8%) and a 1 percentage point cut in CSLL. The deputy’s initial idea was to reduce the IRPJ by 12.5 percentage points and not modify the CSLL.

But governors and mayors put pressure on understanding that the movement could withdraw resources from the State Participation Fund (FPE) and the Municipal Participation Fund (FPM).

for the account to close

The higher IRPJ rate than initially planned is also indicated as a form of compensation for the reduction in the amount charged on the distribution of profits and dividends.

“There was a tax correction and the table above 2%, to compensate for this highlight that would come in. 8% plus CSLL plus 15%, you don’t get a reduction or pay less than any worker,” said Chamber president Arthur Lira (PP-AL), in the plenary session.

“The 2% [a mais] of income tax [para pessoa jurídica] they were already in the text predicting the possibility of this highlight”, he added.

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