Brazil taxed dividends. Its companies found another pipe

For almost 30 years, Brazil was one of the few large economies that did not tax dividends. From 1 January 2026 it does. Law 15,270, published in late November, imposes 10 per cent withholding on dividends above R$50,000 a month paid by one company to one person, alongside a new minimum income tax for those earning more than R$1.2mn a year.

The companies that pay Brazil’s richest shareholders had five weeks’ notice. They used it.

The December dash

Profits earned in 2025 could still be paid tax-free, provided the payout was approved in time. Vale, Itaú Unibanco and WEG were among the groups that announced extraordinary distributions. XP estimated that up to R$84bn could be approved before the deadline.

The deadline itself moved. Business confederations argued that a law published on 26 November left no time to hold the necessary meetings. On 26 December Justice Nunes Marques of the Supreme Court extended it to 31 January. The payments themselves can run until 2028.

The result was a record year for shareholders, and a strange first half of 2026.

The switch

According to the consultancy Elos Ayta, companies listed on the B3 exchange paid out R$126.7bn in the first six months of this year. That was 28 per cent less than the record R$176bn in the same period of 2025, which is what you would expect after companies had brought payouts forward.

The more interesting number is the mix. Of this year’s total, R$68.9bn came as juros sobre capital próprio, interest on equity, and R$57.0bn as dividends. It is the first time interest on equity has overtaken dividends in a half-year.

Interest on equity is a peculiarly Brazilian device. It lets a company pay shareholders a notional interest charge on their capital, which the company can deduct from its taxable profit. Shareholders already paid tax on it.

The new law raised that rate from 15 per cent to 17.5 per cent, but did not remove the company’s deduction.

Who gains

For a wealthy shareholder, the arithmetic now varies by pipe. A large dividend attracts 10 per cent. Interest on equity attracts 17.5 per cent, but costs the company less, which in theory leaves more for shareholders overall. Companies are choosing the combination that suits their largest owners.

Interest on equity’s share of payouts has risen steadily, from about a quarter in 2021 and 2022 to 35 per cent in 2024 and 2025. This year it jumped to 54 per cent.

The government expects the new minimum tax and the dividend withholding to raise about R$34bn a year. It is aimed squarely at the families who hold controlling stakes in Brazil’s large listed companies. Those families are, for now, still being paid, through a pipe that was already there.

Sources

• Investidor10: interest on equity overtakes dividends in the first half of 2026 (Elos Ayta data)
• Forbes Brasil: companies race to beat the new dividend tax (December 2025)
• Supreme Federal Court: deadline for approving tax-free dividends extended to 31 January 2026
• Chamber of Deputies: bill taxing dividends above R$50,000 a month approved
• Finance ministry: questions and answers on the minimum tax on high incomes

Cover image: Fulviusbsas, Wikimedia Commons, CC BY-SA 4.0. Cropped.