Law No. 15,270/2025, published on November 26, 2025, introduces significant changes to dividend taxation and to the global income regime applicable to individuals in Brazil. The new rules take effect in January 2026 and are expected to directly impact companies, investors, and structures involving Brazil–U.S. relations, making it necessary to reassess corporate structures, profit distribution strategies, and repatriation mechanisms.
I – Withholding Tax on Dividends Paid Abroad
• Dividends paid to individuals or legal entities domiciled abroad will be subject to a 10% Withholding Income Tax (IRRF) on the amount effectively distributed (with no limitation).
• Profits generated up to December 31, 2025 remain exempt, provided that their distribution is approved by that date.
• Foreign beneficiaries may request a tax credit if the total taxation (including Corporate Income Tax – IRPJ, Social Contribution on Net Profit – CSLL, plus the 10% withholding) exceeds 34%.
Point of Attention: In structures involving the U.S., it is essential to assess compatibility with foreign tax credit rules, which do not always allow full utilization of the credit granted under Brazilian law.
II – Monthly and Annual High-Income Taxation in Brazil
• Monthly dividends exceeding R$ 50,000 paid by a legal entity to the same Brazilian resident individual will be subject to a 10% withholding tax, which may be offset in the Annual Income Tax Return. The offset will follow the specific progressivity of the Minimum Tax regime, whose maximum rate reaches 10% and does not apply the traditional IRPF progressive table (7.5% to 27.5%).
• A minimum tax rate of up to 10% will apply to annual income earned by Brazilian resident individuals exceeding R$ 600,000 (Minimum Taxation).
Point of Attention: The regime creates differentiated treatment between residents and nonresidents. While nonresidents face a definitive tax, residents may have a lower effective burden depending on their global income reported in the Annual Return.
III – Impacts on U.S. Tax Residents
• Dividends paid by Brazilian companies are treated as foreign source income in the U.S.
• As a rule, Brazilian withholding tax may be used as a foreign tax credit, depending on:
→ the nature of the income
→ IRS limitations
→ timing alignment of income recognition between Brazil and the U.S.
Point of Attention: In many situations, part of the Brazilian tax may become a nonrecoverable cost, especially when there is a timing mismatch between profit recognition and dividend distribution.
IV – Structures Most Affected
IV.a – Structures Using Check-the-Box (Disregarded / Partnership)
Brazilian entities treated as disregarded entities or partnerships for U.S. tax purposes may face a more complex environment under the new regime.
In these models:
• Profit is recognized and taxed at the level of the U.S.-domiciled partners (individuals or entities) at the time the Brazilian company generates it, allowing the use of credits related to IRPJ and CSLL paid in Brazil.
• The new 10% withholding tax applies only upon distribution, potentially creating a timing mismatch.
Points of Attention:
- Risk of foreign tax credit disallowance when distribution occurs in a different tax year from the profit recognition year.
- Increase in excess credits (nonusable credits), reducing global tax efficiency.
IV.b – U.S. Corporation Structures Using Section 245A (Dividend Received Deduction – DRD)
Under the previous regime, the combination of dividend exemption in Brazil and the application of the DRD in the United States — which also ensured full exemption at the U.S. C-Corp level — effectively resulted in zero tax cost for profit repatriation to the U.S.
Under Law No. 15,270/2025:
• The 10% Brazilian withholding tax becomes a definitive cost, as the DRD does not allow the C-Corp to use foreign tax credits.
• The main advantage of this structure, tax-free repatriation, no longer exists.
Points of Attention:
- Brazilian subsidiaries of groups with U.S. holding companies become particularly exposed to the new 10% cost.
- Need to reassess U.S. vehicles used to consolidate Brazilian operations.
- Potential migration to hybrid structures, depending on the corporate profile and cash flow.
- Review of dividend distribution policies, especially in groups with significant cash generation in Brazil.
V – Recommendation
Companies and investors should review their international tax planning structures, evaluating impacts on repatriation, intercompany flows, income recognition, and foreign tax credit utilization to ensure compliance and preserve tax efficiency in light of the changes introduced by Law No. 15,270/2025.
Written by Adriana Lemos, Team Leader of the Tax Planning and Research Team at Drummond Advisors