Brazil’s new income tax rules are on today’s congressional agenda (August 17)

RIO DE JANEIRO, BRAZIL – The changes in Income Tax regulations are on the Chamber of Deputies Plenary’s agenda this Tuesday. The bill represents the second stage of the tax reform (Executive Bill 2337/21).

The bill changes the tax legislation with measures such as the adjustment of the exemption range, the imposition of tax on profits and dividends distributed by companies to shareholders, the lowering of corporate income tax and the elimination of some sectorial corporate tax benefits.

All measures would be effective as of January 1, 2022, under the constitutional principle that changes in taxes can only take effect the year after they are enacted.

According to the rapporteur, deputy Celso Sabino, the exemption floor for personal income tax will be raised from R$1,903.98 (US$362) to R$2,500 per month, a 31.3% correction.

Profits and dividends distributed by companies to individuals or legal entities will be taxed at source at 20%, including for those domiciled abroad and in relation to any type of equity interest.

Investment funds will pay a tax 5.88% on what is distributed to investors.

To compensate for the reintroduction of the tax on distribution of profits and dividends, which business does not support, the bill lowers the corporate income tax (IRPJ) rate from 15% to 6.5% as of 2022. The goal is to encourage companies to use the difference for productive investments.

As for the Social Contribution on Net Profits (CSLL), a disguised corporate income tax, Sabino proposes a reduction of up to 1.5 percentage points in the calculations, an amount equivalent to the increase in revenue resulting from the reduction in COFINS (Social Contribution) tax waivers planned for 2022.

The reductions mentioned refer to several provisions with exemptions that he proposes to repeal. The estimate should be included in the 2022 budget bill.

Executive positions

Also on the agenda is Provisional Measure 1042/21, which reshapes the structure of commissioned positions and upper management functions within the Executive branch, independent agencies, and foundations.

The text changes commissioned positions in the Management and Advisory group (DAS) into Executive Commissioned Positions (CCE). These positions can be held either by permanent civil servants or by anyone who meets the general requirements for access under free appointment.

The Executive Commissioned Positions created by the Provisional Measure will be held exclusively by government employees of any agency or entity, in states, the Federal District, and in municipalities.

The Plenary session is scheduled to begin at 3 PM.

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