WHT 10% on dividends.
The end of the 1996 exemption.

What changed in 2026

Before (until 12/31/2025):

• Dividends paid to individual and corporate shareholders were exempt
• JCP (Interest on Net Equity) was taxed at 15% IRRF
• Brazil had singular treatment worldwide — one of the few jurisdictions with a full dividend exemption

After (01/01/2026):

• Dividends paid to non-residents are subject to 10% IRRF
• Dividends paid to Brazilian residents (individuals and companies) remain exempt (the law keeps this)
• JCP to non-residents continues at 15% IRRF (a similar burden but with different characteristics)

Impact on the combined effective rate

A Brazilian multinational distributing dividends to a parent company abroad:

• Before: ETR ~34% (IRPJ/CSLL in Brazil) + 0% (dividend exemption) = 34%
• After: ETR ~34% + 10% WHT = ~41% effective

Repatriation of profits becomes ~7 percentage points more expensive.

Double-taxation treaties — a partial exception

Brazil maintains 35 double-taxation treaties with various countries. These treaties can reduce the specific WHT rate on dividends — in some cases to 0% subject to requirements.

Reduced rates in typical treaties

• Netherlands — 0% subject to requirements (significant participation, active holdings)
• Austria — 0% or a reduced rate
• Spain — 0% for participations > 25%
• Luxembourg — reduced rate subject to requirements
• United States — no treaty exists, full 10% rate applies
• Italy, France, Germany — rates varying by participation

Limit on benefits (LOB)

Post-BEPS, modern treaties require real substance from the intermediate holding. It is not enough to create a formal entity in a treaty jurisdiction — it requires real operations, a local team, and decisions made in the jurisdiction. Paper holdings are disregarded.

Mitigation strategies

1. Anticipate distribution (Jan/2025-Dec/2025 — window now closed)

A window for companies with retained earnings still in 2025, before the Law took effect. Companies that distributed in 2025 under the old exemption regime avoided the 10% WHT. For 2026, this window is closed.

2. Reinvest in Brazil

Instead of distributing, reapply profits in the Brazilian company (it becomes a capital increase, with no WHT). A strategy for growing companies that need working capital.

3. JCP (Interest on Net Equity) instead of dividends

JCP remains taxed at 15% IRRF (vs 10% WHT on dividends). But JCP is deductible from the IRPJ/CSLL base of the paying company (a 34% saving). The net calculation can be favorable depending on the case. Law 14,789/2024 changed several JCP rules — a specific analysis is recommended.

4. Structure via a favorable treaty

An intermediate holding in a treaty jurisdiction (Netherlands, Austria, Spain) can reduce the effective rate. But it requires real substance — a team, an office, decisions. The maintenance cost (EUR 50k-150k/year) must offset the saving.

5. Capitalization via an intercompany loan

Instead of a profit distribution, interest paid to non-residents has its own tax regime (15% IRRF, deductible at the paying company). Subject to thin-capitalization and Transfer Pricing rules.

Interaction with OECD Pillar Two

For multinationals with global revenue > EUR 750M, there is a complex interaction between the 10% WHT and Pillar Two:

• WHT paid at source is a covered tax under Pillar Two
• It raises the Brazilian ETR computed for Pillar Two
• It reduces the top-up tax due in the parent company’s jurisdiction

In some scenarios, the 10% WHT can “absorb” partially or fully the top-up that would go to the parent — the total tax may be similar before and after, only with a different collecting jurisdiction.

A specific analysis is required — consolidated ETR modeling considering all of the group’s jurisdictions.