Starting January 2026, dividend payments in Brazil will undergo significant changes. Whether the partners reside in Brazil or abroad, profit distribution will be subject to withholding income tax in several scenarios.
Individual Partners Residing in Brazil For individuals in Brazil, monthly distributions exceeding BRL 50,000 are no longer fully tax-exempt. In such cases, companies must withhold 10% Income Tax at the source.
Foreign Partners Distributions to partners living overseas (both individuals and companies) are also subject to withholding tax at a general rate of 10%. The company must withhold this tax in Brazil and remit it within the applicable deadlines.
Deadlines and Taxable Events The tax payment deadline depends on the recipient’s residence:
- Brazil Residents: By the last business day of the second ten-day period of the following month.
- Non-Residents: On the very same day the taxable event occurs. The tax liability is triggered whenever the profit is paid or credited to the partner, meaning the timing of formal approval and availability is crucial.
Accumulated Profits from Previous Years Profits accumulated up to December 31, 2025, can remain exempt if they are paid by 2028. However, formal approval recorded in meeting minutes must be registered by January 31, 2026. Without this documentation, these profits will be taxed under the new rules.
If you have accumulated profits or plan significant distributions in 2026, ORGATEC is specialized in accounting for foreign-owned companies and can assist with your tax strategy.