Chamber reduces the new tax rate on dividends from 20% to 15%

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By 319 votes to 140, the plenary of the Chamber decided to reduce the rate previously approved for the taxation of profits and dividends, from 20% to 15%. The change was made this Thursday, 2, during the voting of highlights to income tax reform, which are suggestions for changing the basic text, approved on Wednesday night, 1st.

The highlight was presented by Republicans and defended by central and government parties, after a new agreement between the benches. The rapporteur, deputy Celso Sabino (PSDB-PA), made an appeal for lawmakers to keep the tax on dividends at 20%, but the majority of deputies preferred to reduce the rate.

The leader of the government in the Chamber, Ricardo Barros (PP-PR), assured the deputies that the government has committed itself not to veto, in the sanction, the device that creates taxation on dividends. “If there is a veto for legal allegations, we will make an agreement to overturn the veto later,” he guaranteed, on Wednesday, and reinforced the understanding on Thursday.

The reform of the Income Tax, which creates the tax on dividends, was approved after an agreement between the president of the Chamber, Arthur Lira (PP-AL), and deputies who were still resistant to the proposal. The score was 398 votes in favour, 77 against and five abstentions.

The plenary continues voting on the highlights of the reform. After passing through the Chamber, the bill needs to be evaluated by the Senate before going to President Jair Bolsonaro’s approval.

Changes

The text provides, among other changes, a reduction in corporate income tax and the creation of a tax on dividends. The IRPJ, currently 25%, will drop to 18%. The initial proposal of the rapporteur, Celso Sabino (PSDB-PA), was to reduce the collection to 12.5%, but deputies pointed out that the loss of state tax revenue would be very large.

In return for the cuts made to the companies, a 20% charge will be created on the distribution of dividends. Micro and small companies of Simples and presumed profit, with sales of up to 4.8 million reais, will be exempt from payment. One of the highlights that will be voted on intends to reduce the tax on dividends to 15%.

Another measure included in the text to compensate for the loss of revenue from the cut in the IRPJ was the reduction of tax benefits, such as exemption from income tax on housing assistance for public agents, reduction to zero of rates for certain chemical and pharmaceutical products and presumed credit to producers and drug importers.

The tax benefit for ships and aircraft was maintained in the latest version of the text. “In fact, the gain that would be obtained from these repeals would be negligible for the proposal, while it could bring negative consequences to regions highly dependent on waterway transport”, says the opinion.

Before the vote, Sabino removed from the text all restrictions previously made to the simplified statement income tax of individuals. The government’s initial idea was to allow the simplified declaration only for people with an income of up to 40 thousand reais.

“We set a maximum amount of R$ 10,563.60 to be used for the aforementioned discount, considering that it is the amount that guarantees that no citizen will pay more income tax than what is currently charged”, says the opinion.

Sabino also decided to keep the end of the Interest on Equity (JCP), a mechanism that large companies use to remunerate shareholders, deducting the expense from the tax.

The text also expands the income tax exemption range for individuals, which will go from 1,903.98 reais to 2,500 reais. Those who earn up to this amount will not need to pay income tax. This point has not changed over recent discussions.