Brazil: New Tax Rates Proposal

The Bill that introduces new tax tables is part of President Jair Bolsonaro’s campaign goal of exempting taxpayers with incomes of up to five times the minimum wages as well as easing the corporate tax burden and taxing profits and dividends.

 

Which Changes are introduced by the new Bill?

Bill 3129/19 updates the values ​​in the tables of deductions applicable to personal income taxation (IRPF). It furthermore:

 

  • reduces the tax rates of this tax on corporations
  • institutes taxation on profits and dividends
  • revokes the possibility of the company distributing interest on equity to shareholders

 

According to the Bill, from 2020 on, monthly earnings of up to $ 3,992 Reais will be exempt from paying income tax. In the progressive table, it also creates a 37% rate for monthly earnings over R $ 33,932.01.

The proposal provides for the collection of 20%, as income tax, on profits and dividends. Currently, Brazil`s legislation allows high incomes to be received without taxation with 67% of the exempt income declared in 2017 corresponding to profits and dividends.

For legal entities, the text proposes to reduce the income tax rate from 15% to 10%. Part of this reduction for companies will come from the increase in tax rates for individuals.

 

When will the Bill come into effect?

The proposal is being finalized and will be reviewed by the Finance and Taxation committee before passing into action.

 

These regulatory changes could affect your business with view to customizing or support of your ERP/SAP system. Please contact us to learn about possible necessary reactions to the changes – we are happy to assist you!