What Is the Brazil Withholding Tax on Dividends?

A key aspect of Brazil’s corporate tax system is that there is currently no withholding tax on dividend distributions. This applies to payments made to both Brazilian residents and non-resident investors, making the country an outlier among major global economies. The system has nuances concerning alternative methods for remunerating shareholders, which exist alongside the tax-exempt dividend framework.

The Current Dividend Tax Exemption

The 0% tax rate on dividends paid by Brazilian companies has been a feature of the country’s tax landscape since 1996. This policy was enacted to prevent the double taxation of corporate profits, since earnings are already subject to corporate income tax and social contributions at the company level. This approach was also intended to simplify tax administration and attract foreign investment. The exemption is comprehensive, covering distributions to individuals and corporations, whether they are residents of Brazil or foreign investors.

Interest on Net Equity (JCP) as an Alternative

Beyond dividends, Brazilian companies have a unique mechanism for distributing profits known as Interest on Net Equity, or “Juros sobre Capital Próprio” (JCP). JCP is a notional interest payment that companies can make to their shareholders, calculated based on specific net equity accounts and applying a government-regulated long-term interest rate. This form of remuneration is treated differently from dividends for tax purposes.

Unlike dividends, which are paid from after-tax profits, JCP payments are considered a financial expense and can be deducted from the company’s corporate income tax base, thereby lowering its overall tax liability. This benefit is subject to limits; the deductible amount cannot exceed the greater of 50% of the current year’s net income or 50% of retained earnings and profit reserves from prior years.

When paid to a non-resident investor, JCP is subject to a standard 15% withholding tax at the source. The tax treatment becomes more stringent if the non-resident beneficiary is located in a jurisdiction that Brazil defines as a “tax haven” or a privileged tax regime. In such cases, the withholding tax rate on JCP increases to 25%.

The Role of Tax Treaties

The existence of Double Taxation Agreements (DTAs) between Brazil and other countries is a consideration for JCP payments. While tax treaties are irrelevant for standard dividends due to the 0% domestic withholding rate, they can directly impact the tax liability on JCP. Many of Brazil’s tax treaties may provide for a lower withholding tax rate on interest payments than the standard 15% domestic rate.

Because JCP is often characterized as interest for treaty purposes, a non-resident investor from a treaty partner country may be able to claim a reduced withholding tax rate. For example, the treaty with Japan allows for a 12.5% rate on JCP. It is important to consult the specific DTA in place between Brazil and the investor’s country of residence to determine the exact applicable rate and the conditions for accessing it.

Proposed Changes to Dividend Taxation

The Brazilian government has been discussing tax reforms for shareholder remuneration. A recent proposal, Bill No. 1,087/25 introduced in March 2025, is the reintroduction of a withholding tax on previously exempt dividends. Under this proposal, a flat 10% withholding tax would be levied on dividends paid to non-resident individuals and entities.

For individuals residing in Brazil, the bill suggests a 10% withholding tax, but only on monthly dividend payments that exceed BRL 50,000. While past reform discussions have considered altering the JCP system, the current bill maintains its status as a deductible expense for companies. It is important to recognize that these are proposals and have not yet been enacted into law; they must still pass through the legislative process in Brazil’s National Congress before taking effect.