Withholding Income Tax on profits and dividends: why the challenge is not just calculating the tax

Law No. 15,270/2025 introduced Withholding Income Tax on profits and dividends paid by legal entities to individuals, effective as of January 2026. When the amount paid to a beneficiary during the month exceeds BRL 50,000, the portion exceeding this threshold is subject to a 10% withholding tax. The company making the payment is responsible for calculating, withholding, and paying this tax.

What the Brazilian Federal Revenue Service detailed in August

The guidance issued on August 6, 2026, sets out the operational procedures for this payment. Payments must be reported through EFD-Reinf, the ancillary tax obligation through which the company reports this type of payment to the tax authorities, using event R-4010 and revenue code 1841-01 for resident beneficiaries and 1841-02 for nonresident beneficiaries. This information is automatically transferred to DCTFWeb, the system that consolidates the company’s taxes and generates the DARF, the document used to pay the tax. For residents, the deadline is the last business day of the second ten day period of the month following the distribution. For nonresidents, payment must be made on the same day as the distribution.

Why this is not just a tax matter

Calculating the tax is one step in a longer chain. Everything begins with the resolution approving the distribution of profits, which must be linked to the beneficiary’s registration information: CPF, tax residency, and the amount already paid to that person during the month. From there, the finance department executes the payment, the tax department calculates and withholds the tax, and the information is submitted through EFD-Reinf within the deadline. If one of these links fails, the effect becomes visible during reconciliation: the proof of payment, the tax paid, and the information reported must match. This consistency is what supports the company during a tax inspection, an audit, or a due diligence process.

How to keep this process working

In practice, this requires up to date beneficiary records, monthly tracking of the accumulated amount paid to each individual, and a reconciliation process involving the corporate, finance, and tax departments, as well as the team responsible for submitting EFD-Reinf. The sooner these areas communicate with one another, the lower the risk of calculation errors, late payments, or inconsistencies between records.

How VBR supports this compliance process

VBR supports this process from both sides: through financial outsourcing, which handles payments and tax calculations as part of daily operations, and through auditing, which verifies whether the information remains consistent afterward. This content is for informational purposes. The application of the rule to your company’s specific circumstances should be assessed with technical support. Contact VBR’s team to review this process.