Repatriation of Capitals after

Doing business in Brazil



Dividends are withholding income tax free regardless if paid to a tax treaty country or tax haven jurisdiction or not. The Brazilian Central Bank shall allow distribution to the non-resident shareholder to the extent that the foreign investment was properly registered in the Bacen RDE-IED system. Notwithstanding, corporate law allows Brazilian companies to distribute interim dividends, i.e., anticipation of year-ended dividend capacity, as long as the company’s articles of incorporation have a specific provision authorizing the payment of interim dividend and the company is in a sufficient dividend capacity (retained earnings) upon the interim dividend distribution.

As established by Law 12,973/2014, from calendar year 2015 onwards, dividends shall be determined based on the IRFS accounting standards.

Capital reduction

There are generally no major limitations established by Brazilian legislation on the amount of capital that can be reduced or repatriated. It is possible to reduce capital against accumulated losses, as well as to repatriate capital, but in such case, the capital repatriation is limited to existing accumulated losses. In any case, the Brazilian company should follow certain legal procedures, such as: mandatory publication of the minute of meetings that deliberate the capital reduction, provide the debt clearance certificate by the Brazilian social security institute (INSS) specifically for this purpose and debt clearance certificates.

In addition, ninety (90) days shall be given to third parties to oppose the reduction by a Brazilian company in the form of a Limitada (LLC). After the 90-day period, the minutes of the meeting and the respective amendment to the Brazilian company’s article of incorporation shall be filed with the State Board of Trade. For corporations (S.As) a 60-day period applies.

The capital repatriation should be not be subject to Brazilian withholding capital gain tax to the extent it does not exceed the foreign paid-in capital registered with the Brazilian Central Bank in foreign currency, proportionally to the amount repatriate. Otherwise, the exceeding amount should be subject to a progressive rate of 15% -22,5% withholding capital gain tax (25% in case of residents of low tax jurisdictions).


In general, outbound interest payments or credits, whichever taxable event occurs first, are subject to a 15% withholding income tax (25% in case of residents of tax haven jurisdictions). The term “credit” for withholding income tax triggering purposes shall be construed as to when the outbound interest payable becomes legally claimable (e.g. maturity) under the terms and conditions of the respective loan agreement.

Debt infusions into Brazilian companies are generally used to finance the working capital, as well as to stripe out income or to cash out trapped cash when the Brazilian company is not in a dividend capacity.

Interest on net equity

Under the Brazilian tax law, a Brazilian company is generally allowed to make interest on equity payments to their quota holders (legal entities or individuals) based on the application of the public long-term interest rate TJLP to the Brazilian company’s net equity, but limited to 50% of the retained earning account plus profit reserves or 50% of current P&L before corporate income taxes.

The interest on equity distributions are deductible for corporate income taxes purposes, provided the limitations above are observed, but subject to a 15% withholding income tax (25% in case of beneficiaries resident in a low tax jurisdictions).

In general, the tax arbitrage on interest on equity distribution should be 19%, i.e., 34% corporate income tax saving minus a 15% withholding income tax.

Royalties and technical services/technical assistance

Royalty and technical assistance payments to non-residents are generally subject to a 15% withholding tax. The rate is increased to 25% if the recipient is resident in a jurisdiction that is deemed to be a low tax jurisdiction. Other withholding and indirect taxes may apply to royalty payments. INPI registration applies when technology is transferred.

Reductions and exemption of withholding income tax may apply to payments abroad related to technical services and technical assistance, in the context of a double tax treaty.

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