Brazil PL 1087/2025
Executive summary
PL 1.087/2025 would reintroduce a 10% withholding tax on dividends paid to non‑residents and impose a 10% monthly withholding on large profit distributions to residents above BRL 50,000, while also cutting personal income tax for lower earners (exempt up to BRL 5,000/month) [1]. The Senate approved the bill unanimously on November 5, 2025 and it is expected to become law imminently; commentators warn the dividend WHT could make Brazil’s tax on repatriated profits among the world’s highest for many multinationals [2].
1. What PL 1.087/2025 actually does: headline measures
The bill combines redistributionary personal income tax changes with corporate‑repatriation measures: it reduces or eliminates IRPF (personal income tax) for lower incomes — zero for monthly pay up to BRL 5,000 and discounts up to BRL 7,000 — and creates withholding at source on profit distributions. Distributions over BRL 50,000 to the same Brazilian resident in a month face a 10% IRPF withholding; distributions to nonresidents face a 10% dividend withholding tax (WHT) [1]. PwC and law‑firm summaries describe these as core components of PL 1.087/2025 [2] [1].
2. Why defenders say it’s redistribution, not corporate punishment
Government and supporting advisers frame the package as progressive: by exempting low incomes from IRPF and concentrating taxation on large, concentrated profit distributions, the bill aims to lower the tax burden on poorer households while raising revenue from capital owners. Trench Rossi Watanabe summarizes the targeted IRPF relief and the new minimum effective tax approach for high earners embedded in the bill [1]. Available sources do not mention the government’s own stated fiscal revenue projections for the measure beyond those structural descriptions (not found in current reporting).
3. Why business groups and advisers warn of big economic impacts
International accounting and tax advisers caution the dividend WHT will materially raise the tax on fully repatriated profits for many foreign investors because Brazil has a limited tax‑treaty network and existing treaties may not exempt the new levy. PwC warns that for most FDI and many multinationals, the combined effect could make Brazil’s tax on repatriated profits “the highest in the world” and prompt firms to revisit capital structures, refinancing and value chains [2]. These are forward‑looking industry assessments, not empirical ex post studies [2].
4. Political trajectory and timing: rapid passage and imminent enactment
The bill was presented March 18, 2025 and was fast‑tracked; the Federal Senate approved PL 1.087/2025 unanimously on November 5, 2025, and commentators expect it to be enacted into law soon [1] [2]. Trench Rossi Watanabe notes the government invoked urgency in Congress, a mechanism that limits the ordinary legislative timetable [1].
5. Macro context that matters for interpretation
Brazil’s economy in 2025 is described by international institutions and markets as slowing modestly: the Finance Ministry trimmed 2025 growth to 2.2% and inflation forecasts shifted, while IMF and OECD reporting point to moderation and tighter monetary policy. Those macro conditions, plus recent fiscal debates and market sensitivity to policy, shape how investors interpret a new dividend levy [3] [4] [5]. The OECD and IMF reports show Brazil operating under higher interest rates and a fragile investment outlook, which amplifies concerns about any measure that raises the cost of foreign capital [5] [4].
6. Competing viewpoints and the limits of current reporting
Available sources present two main frames: (a) a social‑redistributive reform lowering IRPF for lower incomes while capturing profits from capital [1]; (b) a business risk raising repatriation costs and potentially discouraging FDI, with advisers urging structural responses [2]. Sources do not provide detailed empirical estimates of revenue, the macroeconomic impact over time, or judicial/treaty litigation scenarios that might follow — those projections are not in current reporting (not found in current reporting).
7. What to watch next — triggers for market and legal reaction
Near‑term triggers include final presidential signature or veto, administrative rules explaining withholding mechanics, and whether Brazil negotiates treaty changes or clarifying guidance that limits double taxation claims. Firms will monitor implementation dates (the WHT is described as effective from January 1, 2026 in PwC’s summary) and whether Brazil offers credits or refunds where effective tax burdens exceed nominal entity rates [2] [1].
8. Bottom line for readers and stakeholders
PL 1.087/2025 is a hybrid fiscal package that cuts IRPF for lower incomes while introducing a 10% dividend withholding and a 10% monthly withholding on large resident payouts, measures that lawyers and major advisory firms say will force multinational and domestic restructuring decisions and could raise Brazil’s effective tax on repatriated profits significantly [1] [2]. The law’s full economic consequences remain to be quantified in public reporting and will depend on administrative guidance, treaty interactions, and corporate responses (not found in current reporting).