Bill No. 1,952/2019 and Bill No. 1,087/2025 in the Federal Senate — Perspectives about the taxation of profits and dividends in Brazil

Originally published on 11/04/2025

Currently, there are two bills in the Federal Senate addressing the possible taxation of profits and dividends in Brazil. The first, Bill No. 1,952, proposed by the Federal Senate in 2019, was approved by the Economic Affairs Committee (CAE) on 09/24/2025 and is now awaiting a vote by the full Senate. The second, Bill No. 1,087, proposed by the Federal Government in 2025, was referred to the CAE for review this past Tuesday (11/04/2025) and, if approved without significant changes, is expected to go before the full Senate later this same week.

Although the government-sponsored bill is moving forward more quickly due to some political factors, both texts share many common points, particularly with respect to: (i) expanding the personal income tax (IRPF) exemption bracket; (ii) taxing profits and dividends in Brazil; and (iii) taxing large fortunes under the Minimum Personal Income Tax (IRPFM).

Let's now look, in schematic form, at the similarities between the two bills.

Main points of convergence between the bills

Both bills propose expanding the IRPF (Individual Income Tax) exemption bracket for individuals earning up to R$ 5,000.00 (five thousand reais) per month, as well as granting additional deductions for those earning up to R$ 7,350.00 (seven thousand three hundred and fifty reais) per month.

As a way to offset the revenue shortfall caused by expanding the IRPF exemption bracket, the proposals also stipulate that, starting in January of the 2026 calendar year, all profits paid, credited, made available, or delivered to an individual resident in Brazil in an amount exceeding R$ 50,000.00 (fifty thousand reais) per month will be subject to withholding income tax at a 10% rate, with no deductions permitted from the tax base. Profits and dividends whose distribution was approved by 12/31/2025 remain exempt from taxation, provided they are paid in accordance with the terms set out in their respective approval instruments.

The bills also converge with respect to taxing large fortunes under the IRPFM (Minimum Personal Income Tax), establishing a progressive rate ranging from 0% to 10% for income between R$ 600,000.00 (six hundred thousand reais) and R$ 1,200,000.00 (one million two hundred thousand reais) — with the maximum rate of 10% applying to amounts exceeding R$ 1,200,000.00. The tax base will include all income received by the taxpayer, including income taxed exclusively or on a final basis, exempt income, and income subject to a zero rate.

Main points of divergence between the bills

Regarding the differences between the bills, we highlight the exclusions from the IRPFM tax base: Bill No. 1,087/2025 provides for the possible exclusion of income derived from tax-incentivized securities (LCI, CRI, CDA, WA, CDCA, LCA, CRA, CRP, LIG, LCD, tax-incentivized debentures, FI-Infra, FII, and FIAGRO).

In addition, only Bill No. 1,087/2025 addresses the possible taxation, via withholding income tax (IRRF) at a 10% rate, of profits and dividends distributed by Brazilian legal entities to parties residing and domiciled abroad. In this case, the beneficiary domiciled abroad may claim a tax credit if the sum of the effective tax rate on the profits of the Brazilian-domiciled legal entity distributing the profits, plus the aforementioned 10% rate, exceeds the sum of the nominal rates set out for corporate income tax (IRPJ) and the Social Contribution on Net Profit (CSLL), which together amount to roughly 34% (for companies subject to the "Lucro Real" assessment method).

Next steps

Bill No. 1,952/2019 still needs to be reviewed by the full Federal Senate and may undergo significant changes during its legislative process. However, there is no indication that this will happen this year. Bill No. 1,087, on the other hand, is moving forward quickly and, if approved in its current form by the end of 2025, will begin to take effect starting in 2026. In any case, profits and dividends are expected to become effectively taxed in Brazil starting next year, requiring taxpayers to adopt new wealth and tax planning strategies.

Lorusso & Partners continues to monitor all updates on this topic and remains available to clarify any relevant questions.