Brazil Reintroduces a 10% Tax on Dividends

For nearly three decades, the standard playbook for foreign investors was simple: repatriate funds via tax-free dividends. This exemption has been a cornerstone of Brazilian corporate structuring, allowing investors to remit profits abroad without triggering local taxes. But that advantage ends soon.

Beginning January 1, 2026, Law 15.270/2025 reinstates a 10% withholding tax on dividends paid to non-resident shareholders of Brazilian companies. The new rule applies broadly. Any profits or dividends paid, credited, delivered, employed, or remitted abroad will be taxed at a flat rate of 10%.

Fortunately, the law provides for some exceptions. For foreign-owned companies, the most critical exception is time-sensitive. Profits accrued through December 31, 2025, are exempt from the new law if the shareholders formally approve the distribution by a corporate resolution before year-end.

Two permanent exemptions also apply, although most companies won’t be able to take advantage of them. First, no withholding tax is due on profits sent to foreign governments that offer reciprocity. Second, foreign entities whose main activity is administering social security benefits, such as retirement or pension funds, are similarly exempt.

Finally, the law introduces a tax credit mechanism designed to cap the total tax burden for non-resident shareholders at Brazil’s standard corporate tax rate (generally 34%). However, the formula is technical, and additional regulations are still pending.

With the year-end deadline quickly approaching, companies cannot afford to wait. Reviewing dividend policies and corporate structures now is essential. The window to secure tax-free distributions on 2025 profits is closing fast.