BRAZIL Trends and Developments Contributed by: Ralph Melles Sticca, Passos e Sticca Advogados Associados
at the request of a party or the Public Prosecutor’s Office, disregard the legal entity so that the effects of certain obligations may be extended to the private assets of managers or shareholders who have directly or indirectly benefited. In other words, a legal entity offers “standard” asset protection in Brazil, according to the corporate law in force, but much like the factory armour of a motor vehicle, it is only useful if employed properly, with transparency, fairness, compliance and accountability – a bulletproof vehicle is of no use if the driver travels the streets with the windows wide open. Taxes, always an issue Tax directly affects corporate governance of Brazilian companies: a large proportion of corporate restructur - ings and M&A transactions are driven – or at the very least, impacted – by high corporate taxation, namely 34% on capital gains by adding corporate income tax ( Imposto de Renda da Pessoa Jurídica – IRPJ) and the Social Contribution on Net Profit ( Contribuição Social sobre o Lucro Líquido – CSLL). At the end of 2025, Brazil also adopted (Law No 15,270) an additional 10% income tax on the payment of dividends to individuals (above BRL50,000 per month) and on high incomes (above BRL600,000 per year), which triggered several corporate and estate- planning strategies aimed at avoiding an increase in the tax burden on share capital invested by sharehold - ers in financing companies. On the other hand, Brazil also faces high indirect taxation on consumption, which recently underwent reform (Complementary Laws No 214/2025 and No 227/2026), inspired by the value-added tax (VAT) mod - els around the world. The intention is to replace: • two social contributions on gross income (PIS/ Pasep and COFINS); • the federal Tax on Industrialised Goods (IPI); • the state Tax on Goods and Services (ICMS); and • the municipal Tax on Services (ISS),
with three new taxes: • a Contribution on Goods and Services ( Con- tribuição sobre Bens e Serviços – CBS); • a Tax on Goods and Services ( Imposto sobre Bens e Serviços – IBS); and • a brand-new “excise tax”. The aim of this tax reform is the simplification and neutrality of Brazilian taxation on consumption, but it has generated considerable uncertainty for com - panies due to the transition period (until 2033), dur - ing which both systems will co-exist, and the lack of clarity regarding the rates that will apply once fully implemented, considering that Brazil has 5,569 cities spread over 26 states and the Federal District – each with its own applicable tax rates. Final Remarks Brazil remains one of the world’s largest economies, with abundant water and natural resources, a clean energy matrix, and innovative technology in relevant industries and sectors. If the necessary structural reforms are carried out by the legislative branch; if the fiscal policy and control of public spending are improved by the executive branch; and if legal certain - ty is ensured to citizens and investors, both domestic and foreign, by the judiciary; Brazil has the potential to attract more public funding and private investments and to become the most sustainable economy on the planet.
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