The Brazilian legislation currently stipulates that dividends paid or credited by legal entities shall not be subject to withholding income tax (WHT), nor shall they be included in the income tax calculation base of the beneficiary, whether an individual or legal entity, domiciled in the country or abroad.
However, on March 18, the Executive Branch submitted Bill No. 1,085/25 to the Legislative Branch, proposing amendments to individual income tax legislation. The bill aims to reduce the income tax due on the monthly and annual taxable base for individuals with monthly incomes of up to BRL 7,000, approximately USD 1,200.
Considering that any tax revenue waiver must be accompanied by a proportional reduction in public expenditure or an increase in tax revenue from other sources, the Bill introduces two compensatory measures:
i) a progressive Minimum Individual Income Tax (IRPFM) of up to 10% on dividends paid to resident individuals with high incomes (annual income exceeding BRL 600,000, approximately USD 105,000); and
ii) a minimum WHT rate of 10% on dividends paid, credited, delivered, used, or remitted abroad to nonresidents (both individuals and legal entities).
A nonresident is eligible to claim a credit if it is demonstrated that the sum of the effective tax rate (ETR) on the profits of the legal entity domiciled in Brazil that paid the dividends, plus the 10% WHT, exceeds the combined nominal rates of the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profit (CSLL), which is 45% for banks, 40% for insurance companies and other financial institutions defined by law, and 34% for other legal entities.
The credit shall be equal to the result obtained by multiplying the total amount of dividends paid by the difference between the ETR plus 10% and the nominal tax rate.
A nonresident may claim the credit within 360 days from the end of each fiscal year; however, the bill does not specify the procedure for such claim.
Next Steps
The bill must be reviewed by the Legislative Branch and, if approved, will take effect on January 1, 2026.
Rolim Goulart Cardoso’s Taxteam is available for further clarification and to assist you in discussing the topic.
