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Brazil mulls tax on shareholder dividends, closed-end funds to balance 2024 budget – sources

By Marcela Ayres and Bernardo Caram

BRASILIA (Reuters) – Brazil’s government is considering changes to closed-end fund taxes and shareholder payouts to boost revenue in next year’s budget Three senior economic officials with direct knowledge of the matter said.

The government said on Tuesday that a comprehensive income tax reform would only be proposed after the Senate passed a GST reform already approved by the House of Commons

however, requested anonymity for the discussion Sources in the internal review said the finance ministry is now aiming to terminate key revenue-boosting measures for early adoption to eliminate Brazil’s primary budget deficit to zero.

These measures include a new model for taxation of closed-end funds, changes to the state tax benefit Federal Income Tax (CSLL) and the end of the “interest on equity” (JCP) payment, which allows companies Deduction of shareholder compensation from tax liability.

The government sees the measures as crucial to boosting revenue and complying with new fiscal rules for next year’s annual budget, which must be presented to lawmakers by the end of August.

The Treasury declined to comment.

More complex structural reforms involving income tax exemptions, taxation of profits and dividends and payroll tax cuts will be proposed after excise tax reform is approved by the Senate, sources said.

“When the budget bill is sent, the revenue measures to achieve the target must also be sent, some of which are already in the proposal,” one source said. “Our thinking is that this will be discussed in the second half of the year.”

Closed-end funds only tax gains when they are distributed to investors, thus offering benefits to wealthier Brazilians investment opportunities. Successive governments have tried, unsuccessfully, to change the rule and remove “interest on equity” payments to shareholders that companies use to reduce taxable income.



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