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Brazil Withdraws Proposal To Tax Shareholder Distributions

by Mike Godfrey, Tax-News.com, Washington

21 August 2015


Brazilian Senator Gleisi Hoffmann has withdrawn her proposal to tax certain corporate distributions to shareholders.

The Senator had previously proposed gradually phasing out the "interest on own capital" system (Juros sobre capital próprio (JSCP)), whereby companies can distribute profits to their shareholders and shift the tax burden to them through interest-type payments, which may also be deductible as an expense to reduce the company's income tax liability. This option currently offers beneficial tax treatment for companies vis-a-vis dividend distributions.

However, Hoffmann has now said that the "environment" in Brazil is not conducive to implementing the proposal. She acknowledged that the opposition Brazilian Democratic Movement Party (PMDB) had opposed the plan.

Hoffmann also retracted a proposal to reduce tax credits for concentrated syrup used in the production of soft drinks at the Manaus Free Zone. She did not say whether there had been a change to her proposal to increase the CSLL social contribution tax on financial institutions to 23 percent, with a lower rate of 17 percent for credit unions.

TAGS: environment | tax | economics | interest | fiscal policy | banking | financial services | capital markets | tax credits | Brazil | tax reform | trade | free trade zone | services

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