Introduction
Under Brazil’s Lei 15.270/2025, significant changes apply as of January 2026 regarding IRRF (withholding income tax) on profits and dividends distributed by legal entities. This measure affects both residents and non-residents. Entities must update their practices to avoid non-compliance risk and penalties. (gov.br)
Key Changes: What’s New
- Any payment of profits or dividends by a legal entity to a resident individual that exceeds R$ 50,000 in a single month must now be subject to a 10% withholding on the entire distributed amount. (gov.br)
- Distributions to non-residents are also subject to withholding regardless of amount. (gov.br)
- Payers (legal entities) must report these transactions through the EFD-Reinf, specifically using event type R-4010 – Payment to Beneficiary Pessoa Física. (gov.br)
Practical Compliance Guide for Entities
1. Monitor distributions each month:
- Track cumulative distributions to the same individual–resident, to see if they exceed R$ 50,000. If so, the whole amount is taxable.
2. Withhold correctly:
- Apply 10% IRRF on dividends when threshold exceeded. No deductions allowed from the base. (gov.br)
- For non-residents, the tax applies from first realisation. Check whether any treaty applies.
3. Reporting obligations:
- Use EFD-Reinf to report monthly distributions. Event R-4010 must capture gross and taxable amounts. Failure to report may lead to penalties. (gov.br)
4. Key dates & grandfather clauses:
- Distributions of profits or dividends from results up to the year-calendar of 2025, or approved by 31 Dec 2025, and paid under original terms may avoid immediate withholding under certain conditions until 2028. (gov.br)
Example
Suppose Empresa Alpha Ltda., a Brazilian corp, distributes R$ 60,000 in dividends to João (resident individual) in August 2026. Since this amount exceeds R$ 50,000 in that month from the same entity, Alpha must withhold 10% on the full R$ 60,000, i.e. R$ 6,000, and remit it to the Receita Federal. João receives the net amount of R$ 54,000. Report this in EFD-Reinf event R-4010.
Consequences of Non-Compliance
- Penalties and interest for failure to withhold or report.
- Potential liability on the legal entity for unpaid tax.
- Risk of audit and reputational harm.
Action Plan for Businesses
- Review internal dividend payout procedures.
- Update finance and accounting systems to flag distributions exceeding threshold.
- Train staff or outsourced accountants on the new withholding and reporting rules.
- Consider tax treaty implications for non-residents.
Conclusion
The 2026 changes to IRRF on dividends and profits represent a key piece of Brazil’s effort to make tax treatment of high income more progressive and ensure tax captures these flows. Compliance requires attention to thresholds, rigorous record-keeping, and timely reporting. The cost of non-compliance, financial and legal, is too high to ignore.