Tamy Tanzilli's Interview by the French Chamber

THE TAXATION OF PROFITS AND DIVIDENDS DISTRIBUTED TO RESIDENT INDIVIDUALS WILL FOLLOW THE FOLLOWING RULES:

Taxation exclusively within the scope of the Minimum IRPF (Individual Income Tax) - focusing on high incomes:

Imposition of a Withholding Income Tax (IRFonte) at a rate of 10% on monthly distributions exceeding R$ 50 thousand ;

Requirement for an adjustment to the Annual Adjustment Declaration, considering:

• The sum of annual income exceeding R$ 600 thousand or R$ 1.2 million ;
• The minimum IRPF in the Annual Adjustment must exclude capital gains, accumulated income, and donations/inheritances ;
• The minimum IRPF will vary from 1% to 10%, depending on the income bracket ;
• The following can be deducted from the minimum IRPF: the IRPF due in the Annual Adjustment Declaration, the IRFonte withheld during the period (on income subject to minimum IRPF), and the definitive IRPF (also on amounts taxable by the minimum IRPF).

For dividends: Integration with the effective corporate income tax burden (IRPJ/CSLL), with the application of reducers if the minimum IRPF rate combined with IRPJ/CSLL exceeds 34%, 40%, or 45%, depending on the company type.

THE TAXATION OF PROFITS AND DIVIDENDS DISTRIBUTED TO NON-RESIDENTS WILL FOLLOW THESE RULES:

Taxation by IRFonte at 10 % at the moment of payment, credit, remittance, delivery, or employment.

Integration with the company's effective IRPJ/CSLL burden: Should the sum of the company's effective IRPJ/CSLL rates plus the IRFonte exceed the sum of the nominal IRPJ/CSLL rates (34 %, 40 %, or 45 %), a credit right will be granted within 360 days from the end of each fiscal year.

The credit must be equivalent to the difference between the effective IRPJ/CSLL rate, plus the 10 % IRFonte, and the nominal IRPJ/CSLL rate (34 %, 40 %, or 45 %, depending on the company's activity).

POINTS OF ATTENTION

• Taxation of results accrued until December 31, 2025: Maintenance of the current exemption, provided that their distribution was approved until December 31, 2025, and payment occurs under the terms originally stipulated in the approval act.
• Regulation of the credit right for non-resident investors.
• Capital increase with profits and dividends and maintenance of taxation.
• Impacts related to operating profit (SUDAM/SUDENE), Lei do Bem (Goodwill Law), PAT, incentivized depreciation, goodwill amortization, tax losses, interest on equity, and others. goodwill, prejuízos fiscais, juros sobre capital próprio e outros.
• Amendments to Bill 1.087 will be subject to a new bill, offering opportunities for adjustments and improvements to the tax regime established for dividends.

A set of new rules that promise to simplify the relationship of foreigners and Brazilians living abroad was implemented in Brazil as of January 1, 2025.

The Central Bank of Brazil and the Securities and Exchange Commission of Brazil (CVM) published Joint Resolution No. 13/2024, which significantly modernizes the well-known Non-Resident Account (CND). This initiative seeks to make the business and investment environment more accessible and aligned with international practices.

The CND, at its core, is a bank account in Brazilian reais (BRL) intended for individuals or companies that do not have tax residency in Brazil. It functions as a channel to move funds, invest, and hold assets in the country of origin or of interest, even while living abroad. The innovations introduced by the new Resolution mark a shift toward administrative simplification.

Historically, operating a CND was surrounded by complexities, requiring, for example, a legal representative in Brazil for various operations and the execution of simultaneous and mandatory foreign-exchange procedures. Registration in the RDE-Portfolio system, previously mandatory with the Central Bank of Brazil (Bacen), also added layers of complexity. With the new regulation, the good news is that much of this bureaucracy will be eliminated. The elimination of the requirement for simultaneous FX operations, for instance, reduces costs and speeds up transactions for investments in the capital markets. Likewise, the requirement to register with RDE-Portfolio has been removed.

This modernization paves the way for the CND to become a much more flexible instrument. From now on, funds deposited may be invested directly in a variety of securities and other financial assets in the Brazilian market. Individuals, in certain scenarios and within certain limits, may even be exempted from the need to appoint a legal representative in the country. The goal is clear: to facilitate investment and wealth management without the heavy administrative burden of the past. This flexibility is also vital for those who change their tax residency, as it allows them to maintain investments in Brazil without being required to sell them or close positions.

However, it is crucial to understand that, although more streamlined, the new regime maintains certain important restrictions. It will still be prohibited to transfer investments or securities of non-residents in ways that are not expressly provided for in the regulations of the Central Bank of Brazil or the CVM. In addition, Joint Resolution 13 now expressly prohibits receiving, paying, and other financial movements in accounts held abroad from the CND, with specific exceptions for transactions related to forward, futures, and options contracts on agricultural products, provided they are contracted in Brazil by non-residents and in compliance with the applicable regulations. Compliance with strict Know Your Customer (KYC) and Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) standards remains a non-negotiable priority.