Elimination of the tax benefit on Interest on Own Capital
Por HLB Brasil
On August 28, 2023, the National Congress forwarded Bill No. 4,258/2023, which proposes the prohibition of interest paid or credited as remuneration for own capital in the calculation of Real Profit (IRPJ) and the base of calculation of the Social Contribution on Net Profit (CSLL).
Interest on Own Capital (JCP) was established by Article 9 of Law No. 9,249, dated December 26, 1995 (Law 9,249/1995), and is exclusively intended for the shareholders of the company, like dividends, and is exempt at the shareholder level. Currently, remuneration through JCP is considered a financial expense and, therefore, is deductible in the calculation of Income Tax and Social Contribution.
The calculation of JCP is carried out by applying the Long-Term Interest Rate (TJLP) to the net equity of the company. The legislation allows the deduction of JCP up to the higher value between two alternatives related to the balance sheet:
1. 50% of the profit for the year; and
2. 50% of the balance of accumulated profits and profit reserves.
In summary, the deductibility of JCP is linked to the existence of profits - the higher the profits, the greater the possibility of deduction.
If the Bill is approved, starting from January 2024, the distribution of JCP will be subject to taxation. Therefore, we suggest evaluating the intention to distribute JCP until the end of 2023, avoiding unnecessary taxation.
We emphasize the importance of correctly calculating the values to be distributed and respecting deduction limits. Our direct tax team is ready to assist you.
Contact us and find out how we can help!