Brazil 2026 Tax Changes: Dividend Tax, JCP Cut, New CNPJ Rules

In 2025, the Brazilian government submitted Bill 1087/2025 to Congress, proposing profound changes to the country's Individual Income Tax (IRPF) system. One of the most impactful provisions is the creation of a 10% withholding tax on dividends paid by companies to resident individuals and to non-residents (foreign individuals or entities, regardless of the amount). If approved, the new rules are set to take effect on January 1, 2026.

For resident individuals, the tax will apply when a company pays more than BRL 50,000 per month in dividends to a single shareholder. Below this threshold, distributions remain exempt, preserving relief for small investors and micro-entrepreneurs. Today, Brazil operates with a system where dividends are exempt at the individual level, under the principle that profits were already taxed at the corporate level. Bill 1087/2025 introduces a "minimum taxation mechanism", ensuring that high-income individuals receiving large amounts of dividends will contribute more to the personal income tax base.

To avoid double taxation, the proposal includes a "reduction mechanism": if the combined burden of corporate income tax (IRPJ + CSLL) plus the new dividend tax exceeds a certain threshold, an adjustment may apply.

The bill is not limited to dividends. It also:

Bill 1087/2025 marks a turning point in Brazil's approach to income taxation. By taxing dividends above BRL 50,000 per month at a 10% rate, the proposal aims to make the system more progressive and equitable. While controversy remains around its economic effects, one thing is clear: businesses, investors, and advisors must begin preparing now for one of the most significant shifts in Brazilian tax policy in decades.

In our previous Newsletter, we were informing about these 2 hikes in withholding taxes on JCP and GGR. But in Brazil, one should always expect last minute change.

In a surprising turn just weeks before its planned start, Brazil's Congress has halted the implementation of the new 20% withholding tax on Interest on Equity (Juros sobre Capital Próprio – JCP), which was scheduled to take effect on January 1, 2026. The measure, originally part of Provisional Measure No. 1.303/2025, would have increased the current 15% rate applied to JCP payments made to shareholders.

The change was designed to align the taxation of JCP with other passive income and to simplify the treatment of financial returns under Brazil's ongoing tax reform. However, as the measure was not approved by Congress before the legal deadline in early October, it automatically expired — meaning the existing 15% withholding rate remains in force indefinitely.

The same provisional measure slated to raise Brazil's GGR tax for gaming operators from 12 % to 18 % expired in October along with the JCP withholding reform, so the proposed increase will not take effect. The cancellation means the 12 % rate remains in place for now.

The overall bill's lapse thus preserved both the JCP withholding rate at 15 % and the gaming tax at 12 %. Tax practitioners now expect the government to revisit the topic in a future bill, but any new proposal will likely require renewed congressional support and advance notice to taxpayers.

As year-end approaches, Brazilian companies must define their 2026 corporate tax regime — either Lucro Real (actual profit) or Lucro Presumido (presumed profit) — based on their 2026 budget and revenue projections. This annual decision is strategic: it directly affects tax burden, compliance costs, and cash flow throughout the year.

Although Brazil's tax reform will start taking effect in July 2026, it does not alter the criteria for choosing between these two profit-taxation regimes in 2026. Companies should therefore make their choice under the current rules, evaluating margins, costs, and deductible expenses.

Brazil's macroeconomic outlook for 2025–2026 remains stable but demanding for employers. Inflation is projected at around 5.7% in 2025, while the federal minimum wage is expected to rise by approximately 7.5%, from R$ 1,518 to R$ 1,631 in January 2026. This real increase, above inflation, reflects the government's policy to preserve purchasing power and support consumption.

For companies, this means a higher payroll burden: the base hourly rate will rise from roughly R$ 6.90 to R$ 7.45, before including benefits and taxes. However, for financial advisory and professional services firms, the true cost of labour is expected to grow well above 7.5%, driven by wage inflation for skilled professionals, rising compliance complexity, and increased workloads linked to Brazil's tax reform starting in Jan 2026. The labour picture remains tight: the national unemployment rate dipped to 5.8% in the second quarter of 2025, the lowest on record. As a result, consulting and accounting firms will face strong upward pressure on their cost base — a factor that should be anticipated in 2026 budgeting and client-pricing strategies.

Beginning in January 2026, Brazil will implement a significant modernization of its corporate taxpayer registry system (CNPJ – Cadastro Nacional da Pessoa Jurídica). The current CNPJ, a 14-digit numeric code used to uniquely identify legal entities, will be gradually replaced by a new alphanumeric format. This change forms part of a broader digital transformation agenda led by the Receita Federal (Brazilian Federal Revenue Service), aiming to increase flexibility, reduce fraud risks, and expand the system's capacity to accommodate the growing number of registered entities. With more than 50 million entities already registered, the purely numeric 14-digit format is approaching its practical limit. The introduction of letters ensures that Brazil can generate a vastly larger set of unique identifiers for decades to come.

The Receita Federal has confirmed that the new structure will combine numbers and letters, still keeping a fixed-length sequence to ensure consistency across systems. From 2026 onwards, all newly created companies will automatically receive an alphanumeric CNPJ. Existing companies will retain their numeric CNPJs, but a dual-system transition is expected, with gradual migration toward the new format. Digital certificates, invoices (NF-e), SPED reports, and tax filings will be adapted to accept the new identifiers.

The introduction of the alphanumeric CNPJ in 2026 represents one of the most important structural changes in Brazil's corporate tax administration in decades. While it will require significant adaptation from businesses and service providers, the shift is expected to modernize the country's registry system, expand its capacity, and strengthen its digital security.