BRAZIL Law and Practice Contributed by: Júlio de Oliveira, Stephanie Makin, Gabriel Lacerda and Carlos Augusto Cruz, Machado Associados
4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes Distribution of dividends will be subject to 10% WHT from 2026 onwards if the amount of dividends exceeds BRL50,000 (approximately USD9,000) monthly and is distributed to individuals in Brazil or non-resident beneficiaries. In general, royalties and interest paid by Brazilian residents to non-resident companies are subject to WHT at a rate of 15%. If the non-resident company is a resident of a tax haven, a higher tax rate of 25% is applicable. With regard to interest, certain specific cases involving investment funds may be subject to a zero rate. Tax authorities in Brazil have shown themselves to be determined to collect WHT on the import of services. Local legislation has a broad concept of technical ser - vices – considering any service provided through the use of specific knowledge or that involves adminis - trative assistance or consultancy, irrespective of any transfer of technology, to be technical in nature – and the tax authorities’ interpretation is that WHT is due regardless of the place where the services are pro - vided. Tax authorities also seek to frame the import of services as royalties for treaty purposes. Most recent treaties have specific provisions for technical services that generally allow Brazil to charge WHT on amounts paid by Brazilian residents. In addition, a contribution for the intervention in the economic domain ( contribuição de intervenção no domínio econômico – CIDE) is also due, at a rate of 10%, from Brazilian residents on royalties and com - pensation for technical services paid to non-resident companies. CIDE is borne by the Brazilian resident (it is not a WHT). 4.2 Key Treaty Jurisdictions for Inbound Investment Considering that dividends were previously exempt in Brazil and that the double tax treaties signed by Brazil allow the taxation of capital gains, there was generally no reason for foreign investors to use spe - cific tax treaty countries to make investments in Brazil. However, with the recent implementation of a 10%
are some situations in which the effective corporate rate could be lower than the individual rate. In view of this situation, if the Brazilian tax authorities understand that a company has been incorporated with the sole purpose of allowing the individual to earn income at a lower tax rate with little to no substance (eg, offices and employees), Brazilian tax authorities may challenge the existence of the company and tax the income as if it had been earned by the individual. 3.3 Restrictions on Retention of Earnings by Closely Held Corporations As of 2026, the distribution of dividends to individual shareholders and non-resident beneficiaries will be subject to 10% WHT. However, Brazil has not set out rules preventing closely held corporations from accu - mulating earnings for investment purposes, especially considering that the distribution of dividends to com - panies will remain exempt from WHT. 3.4 Taxation of Individuals on Shares in Closely Held Corporations Distribution of dividends to individuals will be subject to 10% WHT from 2026. If an individual sells their shares in a Brazilian closely held corporation, the posi - tive difference between the sale price and the acquisi - tion cost will be taxed as capital gains and therefore subject to progressive rates of 15% to 22.5%. If the beneficiary of the capital gain is domiciled in a tax haven, a 25% WHT applies, regardless of the amount of the capital gain. 3.5 Taxation of Individuals on Shares in Public Corporations Distribution of dividends to individuals will be subject to 10% WHT from 2026. The gain on the sale of shares by Brazilian individuals in publicly traded corporations is subject to taxation at a rate of 15% as a rule. How - ever, gains in day trade operations are subject to a tax rate of 20%. The gains on the sale of shares in publicly traded corporations by non-residents are, in principle, tax exempt. If the non-resident investor is located in a tax haven, the gains will be taxed according to the rules applicable to investors resident in Brazil.
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