Getting Cash Out of Brazil: Dividends, JCP, Capital Reduction, Loans and Fees

Once a Brazilian subsidiary generates cash, the next question from headquarters is how to bring it home. Brazil has no general restriction on remittances, but each route has its own tax cost, corporate formalities and Central Bank reporting, and 2026 changed several of the numbers: dividends paid abroad are now subject to withholding tax, the rate on interest on net equity went up, and the old limits on deducting royalties have gone. This guide compares the five main ways to move cash from a Brazilian subsidiary to its foreign parent.

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The five routes at a glance

Rates are higher, generally 25%, when the recipient is in a jurisdiction Brazil classifies as a tax haven, and tax treaties may change some outcomes.

1. Dividends

Since January 1, 2026, profits and dividends paid, credited or remitted abroad are subject to 10% withholding tax (Law 9,249/1995, article 10, paragraph 4, introduced by Law 15,270/2025). Profits for years up to 2025 whose distribution was approved by December 31, 2025 are outside the new tax if paid on the terms originally approved. Foreign governments (with reciprocity), sovereign wealth funds and foreign pension entities are exempt.

The same law created a credit mechanism for cases where the subsidiary’s effective corporate tax rate plus the 10% exceeds the nominal combined rate of corporate income tax and CSLL (34% for most companies). Its use depends on regulation. The detail is in our guide to Brazil’s 10% tax on dividends paid abroad.

Dividends require approved financial statements and actual profits. Distributions not backed by profits can be clawed back from the quotaholders (see annual corporate compliance for a Brazilian Ltda).

2. Interest on net equity (JCP)

JCP is a Brazilian hybrid: a payment to shareholders calculated as interest on the company’s equity, deductible for corporate income tax and CSLL under Lucro Real. The deduction is limited to the long-term interest rate (TJLP) applied to specific equity accounts, and the JCP paid cannot exceed half of the profit of the period or of accumulated profits and profit reserves. Since 2024, the equity base has been narrowed to paid-in capital, certain reserves, treasury shares and accumulated profits or losses.

Since January 2026, the withholding tax on JCP is 17.5%, up from 15% (Complementary Law 224/2025). With dividends now taxed at 10%, the advantage of JCP is smaller than it used to be: the corporate tax saved (up to 34% of the JCP) has to be weighed against the higher withholding and against how the parent’s country treats the income.

3. Capital reduction

A limited liability company (Ltda) can reduce its capital when it is excessive in relation to its business, returning part of the quota value to the quotaholders (Civil Code, articles 1,082 and 1,084). Unsecured creditors with existing claims may oppose the reduction within 90 days of the publication of the resolution; the reduction becomes effective only after that period without opposition, or once the debt is paid or deposited, and then it is registered with the Commercial Registry.

The company may return assets at book value or at market value; if it uses market value, the difference is a taxable gain for the Brazilian company (Law 9,249/1995, article 22). Returning capital at its registered cost does not create income for the parent. The foreign exchange for the return of a direct investment is at a zero IOF rate, and the operation must be reflected in the Central Bank’s SCE-IED register (see SCE-IED foreign direct investment reporting).

Capital reduction is useful when the subsidiary has more capital than it needs, for example after a project ends, but the creditor period means it cannot be used for quick cash.

4. Repaying intercompany loans

When the parent funds the subsidiary with a loan rather than capital, repayments of principal are not income and carry no withholding tax. Interest is subject to withholding tax and must follow the arm’s length principle under the transfer pricing law. For the subsidiary, interest deductions are also limited by thin capitalization rules: generally, debt with a related party that holds an interest in the company cannot exceed twice that party’s share of equity (Law 12,249/2010, articles 24 and 25).

Foreign loans are registered in the Central Bank’s SCE-Crédito system, above its thresholds, and the foreign exchange on loan inflows and outflows is generally at a zero IOF rate, except for short-term loans. A loan structure needs to be decided when funding goes in, because it determines how cash can come out (see intercompany transactions in Brazil).

5. Service fees and royalties

Charges for real services or rights provided by the group, such as management services, IT, software licenses or trademarks, are deductible for the subsidiary under the transfer pricing rules. Since 2024, Law 14,596/2023 removed the old fixed percentage limits on deducting royalties and technical assistance paid to related parties; deductibility now depends on transfer pricing, with an anti-hybrid rule that blocks deductions creating double non-taxation.

The cost is in the taxes on each payment: withholding income tax (generally 25% on services, 15% on technical services and royalties that are also subject to CIDE), CIDE at 10% where applicable, PIS and Cofins on imports (until replaced by the CBS in 2027), municipal ISS and IOF on the foreign exchange. The combined burden can exceed that of a dividend, so service charges should reflect real services, not be used as a substitute for distributions. See paying services and royalties abroad from Brazil.

Choosing the mix

There is no single best route. A practical approach for a profitable subsidiary under Lucro Real often combines:

• arm’s length charges for services actually provided by the group, documented;
• JCP up to the point where the corporate tax saving outweighs the 17.5% withholding and the parent’s home-country tax;
• dividends for the balance, after the annual approval of accounts;
• capital reductions or loan repayments when the structure allows it.

The calculation depends on the subsidiary’s tax regime and effective tax rate, the parent’s home-country rules, any applicable tax treaty and the group’s cash needs. It should be modeled with real numbers each year.

How Solidy can help

Solidy already serves subsidiaries of multinational companies in Brazil. Our tax and finance teams model the distribution mix each year, prepare the corporate resolutions, calculate and pay the withholding taxes and coordinate the foreign exchange and Central Bank records for each remittance. See our tax advisory service or explore our CFO as a Service.