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Revenue Shows Concentration of Dividends in Microenterprises; Bill Proposes Exemption Up to R$ 5,000 and New Taxation for Millionaires.
A study by the Federal Revenue Service revealed that more than 25% of tax-exempt dividends in Brazil are distributed by companies with a maximum of one employee. In 2023, nearly R$ 250 billion was paid to owners of “one-person” companies, without income tax being charged.
This scenario pressures Congress to review the rules. This Wednesday (1st), Arthur Lira brings to the floor the bill that expands the tax exemption threshold for workers earning up to R$ 5,000 per month and creates a minimum tax to tax the super-rich, a measure that may affect precisely the dividends currently free from taxation, according to Folha de S. Paulo.
The Concentration of Dividends in Brazil
Companies with only one employee represent about 30% of the studied sample and have low spending on salaries, but high profit margins, averaging 31.5% of revenue.
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Companies with up to five employees account for 50% of the analyzed universe and distribute 45% of the total dividends paid to partners and shareholders residing in the country.
This high volume without taxation puts Brazil in an atypical position.
The country is, along with Estonia and Latvia, one of the few that still do not tax dividends, something that experts see as a distortion of the system.
The Bill Under Vote in Congress
The text reported by Arthur Lira maintains the total exemption up to R$ 5,000 per month and expands the transitional threshold up to R$ 7,350.
As a way to compensate for the loss of revenue, a minimum tax will be created for those earning above R$ 50,000 per month (R$ 600,000 per year). For annual earnings above R$ 1.2 million, the rate will be 10%.
According to official calculations, these amounts account for about 50% of the R$ 960 billion distributed in dividends in 2023.
The change aims to rebalance the tax burden, providing relief for low and middle-income workers and greater contributions from those receiving high profits.
The Argument from Defenders of Exemption
Those who advocate for maintaining the current rule argue that the exemption compensates for the high taxation already applied to corporate profits, which can reach 34% in Brazil.
However, studies by the Federal Revenue Service and the European Tax Observatory indicate that the effective rate is much lower: many companies pay between 10% and 20% in taxes and, in some cases, less than 1% due to tax incentives.
Among smaller companies, 70% pay less than 1% of tax on actual profits, reinforcing, according to Revenue technicians, the need to review the collection structure.
What’s at Stake in the Vote
The government bets that the approval of the bill will ensure tax justice and greater balance in revenue collection. Critics of the text fear that the taxation could disincentivize investment or increase bureaucracy for small and medium-sized enterprises.
For the Ministry of Finance, however, the measure is a matter of equity: those with greater contributive capacity should bear more taxes, especially in a country with structural inequalities like Brazil.
The vote promises to be decisive not only for fiscal policy, but also for how Brazil distributes its tax burden between workers and capital holders.
And you, do you think it is fair that tax-exempt dividends become taxable to compensate for the income tax exemption for the poorest? Leave your opinion in the comments.
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