Highlights from the Tax area

Changes in Income Tax presented by the Federal Government on 06/25/2021

The Federal Government's main proposals in IR encompass changes to what is owed by (i) Individuals; (ii) Legal Entities; and (iii) when making financial investments. It is still necessary to analyze the text of the bill presented, however, it is already possible to make some considerations based on what was presented.

Not owed by Individuals:

– Update to the tax table;

– Declaration based on the discount simplified (of 20%) will be restricted to people who receive up to R$40,000.00 per year;

– Allows the updating of property values with the payment of a 5% rate (currently, when selling and capital gains, the rates vary between 15% and 22.5%). There is already a project on this approved by the Federal Senate and, currently, in the Chamber of Deputies (PL 458/2021);

– End of the exemption for distributed profits and dividends, with the stipulation of a 20% rate. Provides a monthly exemption of R$ 20,000.00 per month for micro and small businesses.

Not owed by Legal Entities:

– The general tax rate will be 12.5% in 2022 and 10% from 2023 onwards. With the additional maintained at 10%, the rate will therefore be 22.5% and 20% in the respective years;

– Payments to partners and directors made with company shares can no longer be considered as expenses;

– End of the possibility of deducting interest on equity from the calculation of profit;

– Institutions of new rules for calculating capital gains on the sale of equity interests, with the prevention of deductions on the sale of equity interests and changes in what was named for indirect disposals of assets in Brazil by companies abroad”.

– Calculation only quarterly, there is no longer an annual option, with the possibility of using 100% of the loss from one quarter in the following three;

– Indication that there will be greater harmony between the bases of IR and CSLL.

Not due when making financial investments:

– Stock exchange operations will now be calculated quarterly, with a rate of 15% for all markets and compensations with negative results may occur “including day-trade and shares of funds traded on an exchange”;

– Single rate of 15% for fixed income assets, closed-end and open-ended funds (with the end of the come-quotas) and for real estate investment funds (end of the exemption).