Brazil to vote on tax reform next week, corporate profit changes seen

BRASILIA (Reuters) -Brazil’s lower house of Congress is expected to vote on tax reform next week, with the bill likely be amended to exclude certain small companies’ profit and dividend taxes, senior lawmakers steering the process said on Wednesday.

Voting on the stage of the bill aimed at simplifying and lowering personal, income taxes and levies on corporate profits will take place when Congress returns from recess next week, Speaker Arthur Lira told GloboNews.

Speaking in Brasilia, deputy Celso Sabino, the bill’s sponsor in the lower house, said small firms registered with the “Simples” tax regime will likely be exempt from paying tax on profits and dividends.

He also added that there was a “strong possibility” the 20,000 reais ($3,883) monthly threshold above which companies must pay a 20% tax on dividends could be reduced. The economy ministry proposed this threshold and rate only last month.

But Sabino diverged from past economy ministry statements by saying the income tax for corporations could fall sharply to 2.5%, which he said would inject some 100 billion reais into the economy.

Economy Minister Paulo Guedes said earlier this month that the tax on corporate profits could be reduced five to 10 percentage points. Brazil’s corporate profit tax rate currently stands at 15%, with profits in excess of 20,000 reais a month ($4,000) being taxed at an additional 10% rate.

Sabino said he will meet with representatives of city mayors and state governors in the coming days to discuss the proposals, and to insert “triggers” in the bill to ensure local authorities do not suffer financial losses with the reforms.

“We are very close to a text that is ready to be voted on,” Sabino said after a meeting with Guedes.

Brazil’s government last month unveiled proposals to reduce income tax for up to 30 million workers, cut corporate profit tax, and increase levies on financial market gains. Brazil’s tax regime is widely seen as one of the most complex in the world.

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