Last 25th, the Minister of Economy Paulo Guedes submitted to the House of Representatives Bill 2,337, which reforms the income tax legislation for individuals and companies. The new rules, if approved, should be observed as of January 1, 2022.
The lawyers at Barcellos Tucunduva are following the progress of the Bill and, as soon as the proposals are approved, they will be able to advise their Clients on issues that may affect them.
Below is a summary of the main points of the said Bill.
- Interest on own capital: will no longer be deductible for Corporate Income Tax (IRPJ) and Social Contribution on Net Profits (CSLL) purposes.
- Distribution of profits and dividends: will be subject to Withholding Income Tax (IRRF) at a rate of 20%; if the beneficiary is resident in a country or dependency with favored taxation ("tax haven") or subject to a "privileged tax regime", the IRRF rate will be 30%. In the event of distribution of profits or dividends by way of delivery of assets or rights, these must be valued at market value for IRRF purposes.
- Profits earned in Brazil by legal entities headquartered abroad: will be subject to IRRF at the rate of 20% on the closing date of the period for verification of the IRPJ by the Brazilian branch, agency or legal entity of representation of the legal entity headquartered abroad.
- Disguised distribution of profits: will be presumed in the cases of loan and debt forgiveness to "connected persons".
- Profits earned abroad by individuals: if generated by subsidiaries located in tax havens or subject to privileged tax regimes, they will be subject to Individual Income Tax (IRPF) - monthly advance payment of the annual tax - on the dates of the balance sheets in which they were calculated.
- IRPJ rates: 12.5% in 2022 and 10% from January 2023, without prejudice to the additional 10%.
- Calculation periods of the IRPJ and CSLL: will become quarterly - end of annual calculations with monthly advances.
- Obligatoriness to ascertain the taxable income: legal entities which have earned, in the calendar year prior to the ascertainment year, revenues with royalties, rents, purchase and sale of own real estate or with the exploitation of copyrights or image rights, name, trademark or, provided that the said revenues have exceeded 50% of the total gross revenue earned.
- Goodwillwill not be deductible if contemplated in acquisitions of equity interests occurred after December 31, 2021
- Equity returns: must be carried out at market value.
- Payment of capital to a legal entity or other entities abroad: must be carried out in the market.
- SilentPartnerships - SCP: obliged to adopt the IRPJ and CSLL determination regime adopted by the ostensive partner.
- Indirect capital gain: capital gain earned on the indirect disposal of assets in Brazil will be taxed if the value of the assets is equal to or higher than 50% of the market value of the legal entity or non-incorporated entity, or if the market value of the interest in the assets exceeds US$ 100,000,000.00.
- Investment funds: "quota eater" rule applicable in November of each year, at a rate of 15%;
- Investment funds - closed condominiums: quota eater rule applicable in November of each year; the income verified on January 1, 2022 will be subject to IRRF (15%), which must be paid until May 31, 2022 - possibility of reducing the rate to 10% if the payment of IRRF is anticipated.
- InvestmentFunds in Participations - FIP: the resources obtained by FIPs qualified as investment entities by the Brazilian Securities and Exchange Commission (CVM) will be considered, for purposes of taxation (IRRF) of the quota holders, as having been distributed to them. FIPs not qualified as investment entities will have their accumulated income taxed at a 15% rate until January 1, 2022 - possibility of reducing the rate to 10% if the IRRF is paid in advance.
- Real Estate Investment Funds - FII: the income distributed to the quota holders will now be subject to IRRF at the rate of 15%.
- Income from fixed and variable income financial investments: quarterly calculation of IRRF at the rate of 15%, maintaining the exemption for gains on the stock exchange up to R$ 20,000.00.
- IRPF monthly progressive table: calculation basis up to R$ 2,500.00: exempt; from R$ 2,501.00 to R$ 3,200.00: 7.5%; from R$ 3,201.00 to R$ 4,250.00: 15%; from R$ 4,251.00 to R$ 5,300.00: 22.5%; and above R$ 5,300.00: 27.5%.
- Real estate owned by individuals: may be updated (update taxed at a rate of 4%) if located in Brazil and acquired and declared by individuals resident in the country, with resources of lawful origin, until 31 December 2020.
