The Committee on Economic Affairs is currently analyzing the draft law that removes the current exemption from income tax on profits and dividends distributed by legal persons. The text provides for the application of a 15% rate on financial results paid, remitted or delivered by legal entities, taxed based on actual profits, assumed or arbitrated, to other legal entities or individuals residing in Brazil or abroad. This measure would resume a tax interrupted in 1996, which was created in 1926.
According to the IRS (Internal Revenue Service), in 2017 profits and dividends were distributed in the amount of R$ 280.54 billion / US$ 66.21 billion. With the new tax, and considering a tax evasion around 27%, the collection would rise to $ 54.3 billion /12.82 billion dollars, considering the number of taxpayers by the range of contribution and tax-exempt profits and dividends.
The return of income tax revenues is a significant change in Brazilian tax legislation and will have a major impact on the business sector.
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