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Bill May Deter Strategic Investments in Brazil, According to the Brazilian Institute of Oil and Gas
The Brazilian Institute of Oil and Gas (IBP) has taken a critical stance regarding the proposed taxation of dividends paid abroad to legal entities, included in the Bill 1087/25, currently under consideration in the National Congress. According to the entity, this measure puts Brazil’s attractiveness for foreign investments at risk, especially in sectors that require high capital volume, such as oil and natural gas.
Bill 1087/25 provides for withholding tax on dividends sent abroad as a way to offset the loss of revenue generated by expanding the exemption threshold of the Personal Income Tax (IRPF) for those earning up to R$ 5,000 per month. However, the IBP warns that this tax compensation may have the opposite effect, reducing the interest of international companies in allocating capital in Brazil. The measure, according to the entity, negatively impacts foreign investors’ confidence.
Impacts on Long-Term Projects in the Energy Sector
The oil and gas industry is highly dependent on long-term planning. Offshore projects, for example, take years from the exploration phase to the start of production. In this scenario, abrupt changes in tax legislation can jeopardize ongoing plans. Bill 1087/25, by introducing new obligations without predictability, poses an obstacle to the continuity and economic viability of these billion-dollar ventures.
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Multinational companies in the sector analyze various markets before investing, comparing regulatory risk, political stability, and financial return. With this proposal, Brazil may lose competitiveness against other oil-producing nations, such as Guyana, Mexico, and Angola, which offer more predictable and attractive tax regimes.
Collateral Effects on Job Creation and Revenue
In addition to discouraging investments, the approval of Bill 1087/25 may negatively impact the generation of qualified jobs in the energy sector. The reduction in investments directly affects local supply chains, reducing contracts with suppliers, infrastructure works, and hiring in the national market.
From a fiscal perspective, the proposal may have a reverse effect than intended: instead of increasing revenue, it may lead to a decline in income in the medium and long term if investments migrate to other countries. Therefore, taxation of dividends sent abroad should be analyzed with caution, considering broader impacts on the real economy.
IBP Advocates for a Comprehensive Review of Corporate Taxation
For the IBP, the discussion about corporate taxation in the country should be conducted in a broad and technical manner, taking into account not only the remittance of dividends abroad but also the revision of the rates of the Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL). Furthermore, the institute reminds that the exemption of dividends, provided by Law No. 9,249/1995, aimed to avoid double taxation and make Brazil more internationally competitive. Altering this mechanism now, merely for revenue purposes, can be a setback.
Studies cited by the IBP indicate that each percentage point reduction in the tax burden can increase Foreign Direct Investment (FDI) by up to 3%. In the current scenario, the average corporate tax rate in European countries is 20.53%, while in Brazil it reaches 34%. With the approval of Bill 1087/25, Brazil would start applying withholding on dividends sent abroad, which does not occur with shareholders residing in the country, generating break of equality and potential violations of the principle of contributory capacity.
Another point criticized by the IBP is the absence of a transition period in the proposal. The text does not protect the distribution of profits generated under the current legislation, which further exacerbates the legal uncertainty scenario. This instability, according to the institute, discourages long-term investment decisions, especially in the oil and gas sector, where investments are billion-dollar and depend on predictability and regulatory stability.
In light of the proposed scenario, the IBP advocates for a more in-depth debate on the impacts of dividend taxation and the Brazilian fiscal structure as a whole. The entity emphasizes that Brazil needs to be competitive and predictable to continue attracting large investments, particularly in energy infrastructure and offshore projects, which are essential for the country’s economic development.
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