Brazil’s 10% tax on dividends paid abroad: what foreign parents need to know

For thirty years, a Brazilian subsidiary could send its profits to the foreign parent without any income tax on the dividend itself. That ended on January 1, 2026. Dividends paid to shareholders abroad now carry a 10% withholding tax, and the guidance the Federal Revenue issued during 2026 shows that the practical details matter as much as the rate. Here is what has changed, what the transition rules protect, and what a foreign group should review before its next distribution.

What the law says

Law 15,270/2025 amended article 10 of Law 9,249/1995, the provision that had exempted dividends since 1996. Under the new paragraph 4, profits or dividends that are paid, credited, delivered, employed or remitted abroad are subject to withholding income tax (IRRF) at 10%. The law took effect on January 1, 2026.

Three points from the Federal Revenue’s official Q&A on the law deserve attention from foreign shareholders:

• There is no minimum amount. For Brazilian resident individuals, the new withholding only applies above R$50,000 per month from the same company. That threshold does not apply to non-residents: any dividend paid abroad is taxed (question 22).
• The rate is the same in low-tax jurisdictions. Many payments to countries that do not tax income, or tax it at less than 17%, face a higher withholding in Brazil. For dividends, the Q&A confirms that the rate is also 10% (question 17).
• The tax is due on the payment date. The withholding must be paid on the date of the payment, credit, delivery, employment or remittance (question 18).

Who is exempt, and the 2025 transition rule

The law excludes from the withholding dividends paid to foreign governments (with reciprocity), sovereign wealth funds, and foreign entities whose main activity is managing pension and retirement benefits, under the conditions it sets. For these beneficiaries the exclusion applies regardless of the year in which the profit was earned.

For everyone else, the relief is a transition rule. Profits are not taxed if three conditions are met at the same time:

1. they come from results determined up to calendar year 2025;
2. their distribution was approved by December 31, 2025, by the competent corporate body; and
3. they are paid, credited, employed or delivered on the terms originally set in that approval, by 2028 at the latest.

The Q&A is strict about the second condition. In a corporation (S.A.), the approval must come, as a rule, from the shareholders’ meeting: a management proposal is not enough. Groups that approved a 2025 distribution with a payment schedule running into 2026, 2027 or 2028 should check that each installment is paid exactly as approved. Changing the terms can put the exemption at risk.

The trap: capitalizing profits is also taxed

A common way to avoid paying dividends has been to keep profits in the company and convert them into share capital. The Q&A treats this as an “employment” of the profits, one of the events that trigger the tax. From 2026:

• profits up to 2025 that were capitalized under a resolution approved by December 31, 2025, are not taxed;
• profits up to 2025 that are only capitalized from 2026 onwards are taxed at 10% at the time of capitalization; and
• profits from 2026 onwards are taxed at 10% when capitalized, even if they stay in the capital for more than five years.

There is a partial offset. The amount capitalized and attributed to the non-resident can be added to the acquisition cost of its investment. That will reduce a future capital gain if the shares are sold or the capital is returned. It does not remove the tax at the time of capitalization.

How the subsidiary pays and reports the tax

In August 2026, the Federal Revenue published operational guidance on paying this withholding. For payments to non-residents, the key points are:

• The Brazilian company paying the dividend is responsible for withholding, reporting and paying the tax.
• The payment is reported monthly in EFD-Reinf, the electronic filing for withholding taxes.
• The tax is remitted on the federal tax payment form (DARF) under revenue code 1841-02, the variation for non-residents. Code 1841-01 is used for residents.
• The due date for non-residents is the same day as the taxable event. The DARF must be generated in the Federal Revenue’s Sicalc system, with the event date matching the one reported in EFD-Reinf and DCTFWeb.

In practice, this means the remittance and the tax payment have to be planned together. Treasury, the foreign exchange bank and the accounting team need to agree on the date before the money leaves the country.

Dividends or interest on equity?

Brazil has a second way to pay shareholders: interest on net equity (juros sobre capital próprio, or JCP). Within legal limits, it is deductible for Lucro Real companies, which is why many groups use it. The withholding on JCP was also raised from 2026: Complementary Law 224/2025 increased the rate from 15% to 17.5%, effective January 1, 2026 (Law 9,249/1995, article 9, paragraph 2).

The choice between dividends, JCP or a mix now depends on numbers: the subsidiary’s tax regime and effective tax rate, the 10% on dividends against the 17.5% on JCP, the corporate tax saved by the JCP deduction, and how the parent’s country taxes each type of income. There is no general answer. It is a calculation that should be redone for each distribution.

A possible credit, still depending on regulation

The law also created a mechanism for non-resident shareholders (Law 9,249/1995, article 10-A). If the subsidiary’s effective tax rate on its profits plus the 10% withholding exceeds the combined nominal rates of corporate income tax (IRPJ) and the Social Contribution on Net Income (CSLL), the non-resident may opt to claim a credit for the excess. The law leaves the form of the option and the claim to regulation by the Executive, with a 360-day window per year. Before relying on this credit in a repatriation plan, check whether the regulation is in force and how the claim is made.

What the foreign parent should review now

• Distribution calendar. Map every distribution approved in 2025 and confirm that payments follow the approved terms and end by 2028.
• Capitalization plans. Any plan to convert profits into capital now has a tax cost at the time of conversion.
• Dividend or JCP mix. Rerun the comparison at the new rates of 10% and 17.5%.
• Tax treaty and home-country credit. Check the treaty between Brazil and the parent’s country, if there is one, and whether the parent can credit the Brazilian 10% at home. Otherwise the tax becomes a final cost to the group.
• Payment routine. Make sure the subsidiary can issue the DARF on the same day as the remittance and report it correctly in EFD-Reinf.
• Central Bank records. Dividend remittances are also capital movements. Keep the foreign direct investment registration up to date. Our guide on how to set up a subsidiary in Brazil explains the SCE-IED reporting thresholds.

How Solidy can help

Solidy already serves subsidiaries of multinational companies in Brazil. Our consultants can review your distribution history and transition position, model dividends against JCP at the new rates, and set up the monthly withholding and reporting routine so that remittances go out on time and in compliance. Talk to our consultants.