Brazil’s income tax exemption on dividends

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Brazil’s income tax exemption on dividends

braz.jpg

Cristiane Magalhães and Fernanda Fiasco Ribeiro, of Machado Associados, explore a recent opinion (Opinion 202/2013) issued by the Office of the Attorney General of the National Treasury (PGFN) about the tax exemption applicable to the distribution of profits and dividends established by Article 10 of Law 9249/95.


The context for the issuance of Opinion 202/2013 involves Law 11638/07 which introduced significant changes in the Brazilian accounting rules, seeking convergence with International Financial Reporting Standards (IFRS) adopted in main capital markets.

Aiming at neutralising the tax consequences that would arise from the recognition of revenues, costs and expenses according to such new rules, the Federal Government established the Transitory Taxation System (RTT).

Under the RTT regime (use of which has been mandatory since 2010), legal entities must calculate their tax basis according to the criteria and accounting rules in force on December 31 2007. Such regime encompasses the corporate income tax, the social contribution on net profit and the social contributions on revenues (locally called PIS and COFINS).

In response to the tax authorities’ consultation on the extent of the tax exemption granted under article 10 of Law 9249, PGFN issued the Opinion 202/2013. The Attorney General considered that the exemption rule could not be applied without considering the neutrality brought by RTT, thus concluding that the exemption would only be applied up to the value of profits ascertained according to the accounting rules in force on December 31 2007 (fiscal profit). Therefore, any amount distributed in excess to the fiscal profit should be considered as taxable to the beneficiaries.

Alongside other arguments to defend that this conclusion is not correct, we could mention that according to the Brazilian tax rules taxation cannot be imposed by a mere extensive interpretation of a tax rule. Brazilian constitution requires the issuance of a law to create or increase taxes. Furthermore, there is no guidance on how this taxation should be implemented since previous legislation that deals with the taxation of the distribution of dividends was revoked by Article 10 of Law 9249 and cannot be applied.

We expect a review of this Opinion and will inform in case there are further developments on the matter.

Cristiane Magalhães (cmagalhaes@machadoassociados.com.br) and Fernanda Fiasco Ribeiro (ffiasco@machadoassociados.com.br) are members of Machado Associados, principal Corporate Tax correspondent for Brazil. They are based in the firm’s Sao Paulo office.

more across site & shared bottom lb ros

More from across our site

The threat of 50% tariffs on Brazilian goods coincides with new Brazilian legal powers to adopt retaliatory economic measures, local experts tell ITR
The country’s chancellor appears to have backtracked from previous pillar two scepticism; in other news, Donald Trump threatened Russia with 100% tariffs
In its latest G20 update, the OECD also revealed tense discussions with the US where the ‘significant threat’ of Section 899 was highlighted
The tax agency has increased compliance yield from wealthy individuals but cannot identify how much tax is paid by UK billionaires, the committee also claimed
Saffery cautioned that documentation requirements in new government proposals must be limited if medium-sized companies are not exempted from TP
The global minimum tax deal is not viable without US participation, Friedrich Merz has argued
Section 899 of the ‘one big beautiful’ bill would have spelled disaster for many international investors into the US, but following its shelving, attention turns to the fate of the OECD’s pillars
DLA Piper’s co-head of tax for the US and Latin America tells ITR about her fervent belief in equal access to the law, loving yoga, and paternal inspirations
Tax expert Craig Hillier agrees with the comparison of pillar two to using a sledgehammer to crack a nut
The amount is reported to be up 57% from the £5.6bn that the UK tax agency believes was underpaid in the previous year
Gift this article