Bill No. 1,087/25: Impact on the Taxation of Dividends

The Brazilian Federal Senate approved on Wednesday (November 6, 2025) Bill No. 1,087/25 originating from the Chamber of Deputies, now pending only Presidential Sanction, which should occur in the coming days.

In summary, the Bill to be enacted into law:

• exempts taxpayers with income up to R$ 5,000 from paying personal income tax (IRPF),

• creates a reduction in IRPF for taxpayers who receive between R$ 5,000 and R$ 7,350.00 (seven thousand, three hundred and fifty reais),

• reestablishes , from 2026, the incidence of income tax (withholding), at a rate of 10%, on the payment of profits and dividends by legal entities to individuals residing in Brazil, when the amount paid exceeds R$ 50,000 .

→ In the case of profits and dividends accrued up to the year 2025, with distribution approved by December 31, 2025, and payments made by December 31, 2028, in accordance with the originally approved conditions and provided that civil and corporate law is respected, they will remain exempt.

• It established a minimum personal income tax (IRPFM) for individuals who receive annual incomes above R$ 600,000.

→ These earnings consider all income received in the calendar year; however, the following may be deducted:

 

⇒ Capital gains, except for: net gain (transactions on the stock exchange or in the organized over-the-counter market).

⇒ income received cumulatively (taxed exclusively at source, without the option for annual adjustment),

⇒ donation as an advance on inheritance or legal share,

⇒ interest and savings yield,

⇒ Income from securities and other financial instruments, such as: LCI, LCA, LIG, LCD, CRI, CRA, etc.

⇒ compensation received for work-related accidents or material and moral damages, including bodily harm, excluding lost profits,

⇒ incentivized debentures (article 2 of Law 12.431/11) and funds that invest at least 85% in this asset,

⇒ FII and FIAGRO income with traded shares and at least 100 shareholders,

⇒ retirement or disability benefits due to accidents and certain illnesses, and disability pensions due to illnesses.

⇒ Income from securities and other financial instruments that are exempt or subject to a zero tax rate, with the exception of income from shares and other corporate participations,

⇒ tax-exempt portion related to rural activity,

⇒ profits and dividends from results determined up to 2025, if the distribution is approved by December 31, 2025, and if the payment occurs between 2026 and 2028, in accordance with the approval act and civil and corporate law.

→ Income tax rates will be progressive starting from income above R$ 600,000, with a maximum rate of 10% on income equal to or greater than R$ 1.2 million. See the table below with whole numbers to get an idea of ​​the rates:

Income       | Tax Rate
Up to R$ 600,000 | 0%
R$ 650,000 | 0.83%
R$ 700,000 | 1.67%
R$ 750,000 | 2.50%
R$ 800,000 | 3.33%
R$ 850,000 | 4.17%
R$ 900,000 | 5.0%
R$ 950,000 | 5.83%
R$ 1,000,000 | 6.67%
R$ 1,050,000 | 7.50%
R$ 1,100,000 | 8.33%
R$ 1,150,000 | 9.17%
R$ 1,200,000 | 10.00%

→ The amount determined in the IRPFM calculation may be further deducted:

 

⇒ of the amount of personal income tax (IRPF) due in the Annual Adjustment Declaration (DAA);

⇒ the income tax withheld at source (IRRF) levied on income included in the calculation base for the minimum tax rate;

⇒ Income tax on income earned abroad according to Law 14.754/23,

⇒ the tax definitively paid relating to income included in the calculation base for the minimum amount of personal income tax and not considered in the previous items; and

⇒ A reduction is applied to dividends paid to individuals to avoid potential double taxation on profits. The idea is that the sum of the tax paid by the company (IRPJ/CSLL) and the tax paid by the shareholder (profit distribution) does not exceed a certain limit. If the total tax burden on profit (both company and individual) exceeds the theoretical maximum rate (34%, 40%, or 45%, as applicable), a “discount” (the reduction) will be granted to bring the tax back within that limit.

• It established a 10% tax on dividends paid abroad to both individuals and legal entities.

→ Exceptions:

 

⇒ profits and dividends from results determined up to 2025, if the distribution is approved by December 31, 2025, and if payment occurs between 2026 and 2028, in accordance with the approval act and civil and corporate law,

⇒ foreign governments with reciprocity,

⇒ sovereign wealth funds, and

⇒ entities that administer social security benefits, such as retirement and pensions.

→ A tax credit is foreseen when the sum of the effective corporate income tax (IRPJ) and social contribution on net profit (CSLL) rates of the paying company, plus the 10% surcharge, results in a higher tax rate than the applicable nominal rate.