• Service: Tax, International Corporate Tax
  • Type: KPMG information
  • Date: 3/27/2013

Tax News: Dividend distributions – Potential taxation on distributions based on profits not previously taxed at the level of the companies 

The Brazilian accounting rules (New BRGAAP) were aligned with IFRS in 2008. Subsequently, in 2009, the Transitory Tax Regime (“RTT”) was introduced with the purpose of regulating the computation of the tax obligations in view of such new accounting environment. In summary, the RTT defined that, solely for tax purposes, companies would have to book their revenues, costs and expenses in accordance with the existing accounting rules prior to the conversion to IFRS (Old BRGAAP). Consequently, companies can eventually experience the situation where the accounting income calculated under the New BRGAAP (aligned with IFRS) can be higher or lower than the accounting income for tax purposes (Old BRGAAP).

Since the basis for the payment of dividends is the accounting net income calculated under the New BRGAAP, and also considering that dividend payments are tax exempted in Brazil, the Federal Revenue Service (RFB) has formally asked the Office of Attorney-General of the National Treasury (“PGFN”) whether the tax exemption on dividends would still apply in case the accounting net income under the New BRGAAP was higher than the net income under the Old BRGAAP. RFB has been concerned with the possible situation where the excess of net income under the New BRGAAP in relation to the net income under the Old BRGAAP could give rise to a dividend distribution that would not be taxable in Brazil, neither as net income, nor as dividend. In this sense, RFB argued that the exemption provided by the tax legislation on dividend distributions would rely on the principle that such dividend would have originated from net profits that would have been subject to taxation.


In this context, the Office of Attorney-General of the National Treasury (“PGFN”) issued a formal opinion (“Parecer / PGFN / CAT 202/2013”) in the sense that the tax exemption provided by Law 9,249/95 should apply to dividend distributions based on net income calculated under the Old BRGAAP. Therefore, dividend distributions originated from an excess of net income as per the New BRGAAP in relation to the net income under the Old BRGAAP would be subject to taxation.


The above certainly constitutes an important and controversial understanding, and companies should assess their previous and current policy as to dividend distributions in order to evaluate the existence of a possible tax exposure and the best course of action to manage this matter. KPMG will continue to monitor the development of this subject and can provide the adequate assistance to such companies in the said assessment and in the development of the best tax strategy.


For more information, please contact a tax professional with KPMG in Brazil:


International Corporate Tax | M&A Tax


São Paulo

Cecílio Schiguematu, +55 11 2183-3106,

Marcus Vinícius Gonçalves, +55 11 2183-3126,

Marienne Coutinho, +55 11 2183-3182,

Ericson Amaral, +55 11 2183-3375,

Murilo Mello, +55 11 2183-3261,

Adriano Ponciano, +55 11 2183-3259,

Marcus Oliveira, +55 11 2183-3277,

Rio de Janeiro

Roberto Haddad
, +55 21 3515-9469,
Julio C. de Cepeda
, +55 21 3515-9133,


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