Chamber approves main text of new IR; change affects people and companies – 09/01/2021

The Chamber of Deputies approved this Wednesday (1st), with 398 votes in favor and 77 votes against, the basic text of the reform of the IR (Income Tax). The proposal reduces taxes for companies and changes rules for individuals. Deputies will also vote on 26 proposals to amend the bill. After these deliberations, the text goes to the Federal Senate.

The vote took place after an agreement reached by the president of the Chamber of Deputies, Arthur Lira (PP-AL), with party leaders to remove from the text the rule that limited the use of the simplified declaration of income tax.

See the main changes below:

People will pay less income tax

The proposal maintains the increase in the exemption range for individuals, which was already included in the government’s initial proposal. This means paying less tax, but a study calculates that the exemption should be greater to compensate for the gap in the income tax table. The bill would exempt taxpayers who earn up to R$2,500 per month. Today, the exemption range goes up to R$1,903.98. See how the table would look:

  • Range 1 – up to R$2,500: exempt;
  • Range 2 – From BRL 2,500.01 to BRL 3,200: 7.5%;
  • Range 3 – BRL 3,200.01 to BRL 4,250: 15%;
  • Range 4 – BRL 4,250.01 to BRL 5,300: 22.5%;
  • Range 5 – Above R$ 5,300.01: 27.5%.

Simplified declaration will no longer limit

The rapporteur removed from the text the limitation on the use of the simplified discount. In the previous version of the report, only taxpayers who received up to R$ 40 thousand per year could take advantage of the discount, which is equivalent to R$ 3,333 per month. With this, all individuals will retain the option of opting for the simplified declaration model. The reporting judge set the maximum amount of R$ 10,563.60 to be used for said discount.

Real Estate Funds

The approved text maintains exemption from income tax on income from real estate investment funds (FIIs). The government planned to charge 15% on the income of REITs.

stock Exchange

  • The limit for exemption from income tax for the sale of shares goes from R$ 20 thousand per month to R$ 60 thousand per quarter;
  • In practice, the change benefits an investor who sold, for example, R$50,000 in one month and nothing in the other two months;
  • The reform should make it possible to offset profits and losses with shares on the stock exchange for up to three months. If the investor makes a profit, but also has a loss in the quarter, he can balance this and pay tax only if the balance makes a profit;
  • Compensation can be done by including all the different modes of operation, and not separately, as it is today. Example: FII, day trade and swing trade (short term trades).

Properties

  • Text allows individuals to update the value of their properties on their income tax returns even without selling them. The government will charge a 4% rate on this update;
  • Currently, when a property is sold, the taxpayer pays between 15% and 22.5% of income tax on the capital gain that he had in relation to the amount that had been declared;
  • The period for updating the values, according to the rapporteur’s text, runs until April 29, 2022, and only covers properties that were declared in the calendar year 2020

Lower CSLL for companies

The reform foresees a reduction of up to 1 percentage point in the CSLL (Social Contribution on Net Income) collection for companies, already in 2022. With this, the rates charged go from 9%, 15% and 20% to 8%, 14% and 19%. In the original text sent by the government to Congress, this contribution would not change.

The proposal also envisages changing the income tax for companies, which will fall from 15% to 8% in 2022. The additional 10% of the IRPJ on profit that exceeds R$ 20,000 per month, which already exists today, is maintained. With that, the maximum rate will drop from 25% to 18%.

The rapporteur expanded the tax cut for companies, in relation to the proposal of the Ministry of Economy. In the government’s text, the IR rate for legal entities would fall from 15% to 12.5% ​​in 2022 and to 10% in 2023.

Tax reduction for companies includes banks

In the case of banks, the CSLL rate would drop from 20% to 19%. As the UOL, Febraban (Brazilian Federation of Banks) presented to the rapporteur and the Ministry of Economy a proposal to reduce the contribution by five percentage points.

The banks’ argument is that this would allow an increase in the supply of loans. But, according to experts, there is no guarantee that the decrease in CSLL will result in more credit, as there are other factors that affect the amount of money available for loans.

End of rules on interest on equity (JCP)

The rapporteur’s text extinguishes the JCP. The government’s original proposal only ended the possibility of deducting them. JCP is a means used by companies to remunerate shareholders.

More expensive medicine and shampoo to compensate

The approved text provides that the decrease in CSLL collection will be offset by the reduction of tax waivers of another tax, the Cofins (Contribution for Social Security Financing). Thus, according to Sabino, “the sources of funding for Social Security will be kept unchanged”.

The sectors of ships and aircraft, medicines, chemical and pharmaceutical products and thermoelectricity will lose tax benefits.

With this, products such as shampoos and medicines should become more expensive.

Taxation on dividends is maintained

With the justification of offsetting the drop in corporate tax, the rapporteur determined the charging of a 20% rate on profits and dividends, which are currently exempt from taxation. According to the text, Simples Nacional companies will not have to pay the tax.

Small companies, with sales of up to R$ 4.8 million, are also exempt, according to the report. Profits and dividends distributed among members of the same economic group, by supplementary pension entities and by real estate developers subject to the special taxation regime based on earmarked assets are also exempt.