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Tax Reform Proposes Taxing Profits And Dividends At Up To 10% From 2026. See Who Will Be Affected And How To Prepare.
The federal government’s economic team has once again placed at the center of the debate one of the most controversial and awaited proposals by Brazilian taxpayers: the tax reform, which is expected to fundamentally change how companies, investors, and self-employed professionals deal with taxation on profits and dividends. The initiative, scheduled to be sent to Congress as early as 2025, could come into effect as soon as January 2026, according to sources from the Ministry of Finance.
What Is Being Proposed
According to the preliminary text of PL 1087/2025, which is circulating among the Ministry of Finance and Congressional leaders, the main change involves the taxation of profits and dividends, which have been exempt in Brazil since 1996.
The proposal stipulates that amounts distributed above R$ 50,000 per month will be taxed at 10% at the source, while small and medium-sized enterprises would remain with partial exemption.
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The measure follows an international trend. In OECD countries, taxation on dividends typically ranges from 10% to 30%, placing Brazil among the few large economies that still do not tax this type of income. The government argues that the change is necessary to correct distortions, reduce dependence on consumption taxes, and make the tax system more progressive.
Who Will Be Most Affected
According to estimates from the Federal Revenue Service, the new taxation will affect less than 5% of Brazilian taxpayers, concentrated in higher income brackets. The impact is expected to be stronger on owners of small and medium-sized businesses who receive dividends as part of their compensation, and on investors who hold significant stakes in companies.
For self-employed professionals and partners in Micro and Small Business, the rule is still under discussion, but the government is studying the creation of a broader exemption threshold to avoid tax overlap.
In the case of large corporations, the increased burden may lead to indirect costs being passed on to the end consumer, especially in the energy, technology, and finance sectors.
Impact On The Market And The Economy
Experts believe that the new tax reform could have a dual effect on the economy. On one hand, it helps to increase revenue, estimated at around R$ 25 billion per year, according to calculations from the Independent Fiscal Institution (IFI) of the Senate.
On the other hand, there is a fear that the measure could reduce investor appetite and discourage the reinvestment of profits in the country.
According to economist Ricardo Amorim, the challenge is to balance tax fairness and competitiveness. “Taxing dividends makes sense in countries with fiscal stability and balanced burdens. In Brazil, the risk is to curb investments at a time when the country needs capital to grow,” he stated in a recent interview.
How To Prepare For The Changes
For those with businesses, investments, or variable income, this is a moment for tax planning. Accountants and consultants recommend anticipating profit distributions while under the current regime, reviewing partnership contracts, and reorganizing family holdings before the new rule takes effect.
Among the most cited measures are:
- Anticipate dividends before the new law takes effect;
- Migrate to presumed or actual profit structures, depending on the size of the company;
- Evaluate international investments, which may become more attractive if the domestic rate increases;
- Review ownership interests, especially in family businesses, to avoid double taxation.
The accountant and tax expert Eduardo Moreira, from TaxPlan Consulting, summarizes: “Those who wait to act until after approval may pay dearly. Planning now is what separates those who will be affected from those who will benefit from the new rules.”
International Comparison
The change brings Brazil closer to models adopted in developed economies. In the United States, for example, qualified dividends are taxed between 15% and 20%.
In the United Kingdom, taxation is progressive and can reach 39.35% for higher earnings. Meanwhile, Germany has a fixed rate of 26.375% on distributed profits.
Even with the new rate of 10%, Brazil would still rank among countries with the mildest taxation on dividends, which, according to the government, maintains the country competitive without losing revenue.
Broader Reform In Sight
The proposal is part of a larger strategy by the Ministry of Finance to simplify the tax system, aligning the Income Tax with the consumption reform (VAT), approved in 2023 and in the regulation phase.
The goal is for the two fronts—income and consumption—to be integrated, creating a more predictable fiscal environment for businesses and citizens.
According to the secretary of the Federal Revenue, Robinson Barreirinhas, the focus is on ensuring equity: “The current system heavily taxes consumption and lightly taxes income. We want to reverse this logic, making those who earn more contribute proportionally more.”
A New Cycle Of Fiscal Adjustments
With the country facing a primary deficit exceeding R$ 80 billion and public debt that has already surpassed R$ 7.8 trillion, the income tax reform emerges as an essential piece in the government’s fiscal rebalancing strategy.
The expectation is that the text will reach Congress by the first quarter of 2026, with voting expected in the second semester.
Meanwhile, investors and entrepreneurs remain vigilant. Taxation on profits and dividends promises to be one of the hottest topics of next year—and may redefine how capital circulates in Brazil.
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