Changes Introduced by the New Legislation
Supplementary Law (Lei Complementar – LC) No. 224/2025 was enacted on December 26, 2025, with the primary objective of restricting and establishing criteria for the granting of tax, financial, and credit incentives at the federal level. The law also amends provisions of the Fiscal Responsibility Law (LC 101/2000) and other related regulations. The main changes introduced include:
• Reduction of tax incentives: The law limits tax benefits and redefines the criteria for their granting, aiming to increase transparency and rationalize tax expenditures. The reduction will be implemented cumulatively, as follows:
- Exemption and zero rate: application of a rate corresponding to 10% of the standard tax system rate;
- Reduced rate: application of a rate corresponding to the sum of 90% of the reduced rate and 10% of the standard tax system rate;
- Reduction of the tax base: application of 90% of the tax base reduction provided for in the specific legislation governing the benefit;
- Financial or tax credits, including presumed or deemed credits: utilization limited to 90% of the original credit amount, with the unused portion canceled;
- Reduction of tax due: application of 90% of the tax reduction provided for in the specific legislation governing the benefit;
- Optional special or preferential tax regimes in which taxes are levied as a percentage of gross revenue: a 10% increase in the percentage applied to gross revenue.
• Presumed Profit Regime (Lucro Presumido): Companies with annual gross revenue between BRL 5 million and BRL 78 million are directly affected, with a 10% increase in the presumed profit percentages. The proportional limit will be observed for each assessment period within the year, allowing adjustments in subsequent periods.
• Interest on Equity (Juros sobre Capital Próprio – JCP): The withholding income tax rate on JCP was increased from 15% to 17.5%.
• Betting sector and payment institutions: The law establishes joint and several liability of third parties for the collection of taxes levied on fixed-odds betting activities.
Next Steps
LC 224/2025 may conflict with constitutional tax principles by treating the Presumed Profit Regime as a tax benefit rather than as a consolidated method of tax assessment. It is understood that the law may open the door to widespread litigation, as companies will face an increased tax burden due to this reclassification.
Affected companies will need to reassess their tax strategies, particularly whether it remains advantageous to opt for the Actual Profit Regime (Lucro Real) instead of the Presumed Profit Regime. Drummond Advisors is available to assist with assessing and planning for the tax impacts on your business.
Written by Hanna Lauar, Senior Associate at Drummond Advisors