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21 September 2021

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Brazilian Senate Analyzing Tax Reform Legislation

The Brazilian Senate has issued a release announcing that it will be analyzing the tax reform legislation approved by the Chamber of Deputies earlier in the month, Bill No. 2337 of 2021. The release notes some of the key measures of the latest version of the bill, including:

  • The introduction of a 15% withholding tax on dividends, including on dividends paid to non-resident beneficiaries and on branch profits remitted to a head office abroad, as well as rules providing certain exemptions, including for qualifying SMEs, holding companies, and real estate companies in Brazil, and rules allowing Brazilian companies to offset the tax on dividends received against the tax on dividends paid;
  • A reduction in the corporate income tax (IRPJ) rate from 15% to 8%, after the implementation of an additional 1.5% Financial Compensation for the Exploitation of Mineral Resources (CFEM) levied on the extraction of iron, copper, bauxite, gold, manganese, kaolin, nickel, niobium, and lithium (10% surcharge maintained on taxable income exceeding BRL 240,000);
  • A reduction in the social contribution on profits (CSLL) rate by 1%, resulting in a reduction from 9% to 8% for legal entities in general, a reduction from 20% to 19% for banks, and a reduction from 15% to 14% for financial institutions;
  • An increase in the exemption threshold (bracket) for personal income tax from BRL 1,903.98 per month to BRL 2,500 per month; and
  • Changes to the 20% simplified discount for individuals, which will be limited to BRL 10,563.60 (down from BRL 16,754.34) instead of the prior proposal to limit the discount to taxpayers with income of up to BRL 40,000 per year.

As the bill goes through the Senate, it is likely that further changes will be made.

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