Author name: LBM Advogados

The Federal Senate has approved and sent to presidential sanction Bill No. 1,087/2025, which promotes a broad reformulation of the Individual Income Tax (IRPF). Check out the main changes in the calculation and collection of the tax: ► Taxpayers earning more than BRL 7,350 per month or BRL 88,200 per year will not benefit from any reduction in the tax due. ► The taxation does not apply to profits and dividends earned up to the 2025 calendar year and whose distribution is approved by December 31, 2025. ► The IRPFM will be calculated based on all income received in the calendar year, including income taxed exclusively or definitively, and income exempt or subject to zero or reduced rates, with some deductions allowed, including: ► If the sum of the effective IRPFM rates for individual and the IRPJ and CSLL rates for legal entities exceeds the nominal rates of these taxes (34% for companies in general), an IRPFM tax reduction will be granted. The reform of the IRPF legislation, proposed by the Federal Government, was justified by the objectives of increasing the progressivity of the tax system and reducing inequalities, with a mechanism that seeks to compensate for any losses in revenue resulting from the expansion of the exemption. With the sanction of the Presidency of the Republic, the new rules will come into force on January 1, 2026. The tax team at LBM Advogados is available to answer any questions on the subject.

The expiration of MP 1,303 came as a sad surprise for the Brazilian Federal Government and a temporary relief to Brazilian investors, including those with assets abroad, as well as to the financial technology and online gambling sectors. With the rejection of the MP, the following key points remain in place: In addition to the political impact, the MP’s defeat also affects the economy and financial markets. Other measures aimed at reducing the current fiscal deficit are now under greater pressure to be approved, including the proposal to tax dividends, and potential changes to the taxation of IOF and IPI via decree.

Complementary Law No. 216 introduced significant innovations to Brazil’s export promotion policy, creating incentive mechanisms for micro and small exporting companies and aligning fiscal and customs incentives with the increasing importance of services associated with goods exports. The key features of Complementary Law 216/2025 are as follows: Targeted at micro and small enterprises (MSEs), the Acredita Exportação Program ensures the refund of tax credits on export transactions through Reintegra. The program aims to include MSEs in the system of fiscal and customs incentives for exports, thereby expanding the national export base. Complementary Law 216/2025 established the Drawback-Services regime, allowing the inclusion of services directly linked to the export of goods produced with imported inputs or acquired domestically with tax suspension or exemption. Covered services include transportation, warehousing, brokerage, and logistics. The new regime is regulated by Joint Ordinance SECEX/RFB No. 3/2025 and SECEX Ordinance No. 418/2025, and has been in force since their publication. Complementary Law 216/2025 also expanded the Special Customs Regime for Industrial Warehousing under Automated Control (RECOF) to include services related to the production process and the export of manufactured goods. The new regime will take effect on January 1st, 2026. The extension of the special customs regimes of Drawback and RECOF to services has the potential to reduce the indirect tax burden on exports, enhance the competitiveness of Brazilian companies in the international market, and align Brazil with best global practices in foreign trade, particularly in sectors where logistics and related services account for a significant share of export costs. The Customs Law team at LBM Advogados is available to provide guidance and assess the impact of Complementary Law No. 216/2025 on your company’s operations.

On July 30th, the President of the United States issued an executive order imposing an additional 40% tariff on imports of certain products from Brazil. These tariffs will be applied in addition to existing duties, including the 10% tariff introduced earlier this year. The executive order exempts products subject to tariffs under Section 232 of the Trade Act (including aluminum and steel), and those listed in Annex I, covering more than seven hundred items. While the official justification refers to a trade balance deficit, the measure appears to be influenced by political motivations and tariff asymmetries, reinforcing the strategic use of trade barriers in U.S. foreign policy. A few days earlier, on July 15th, an investigation was initiated under Section 301 of the Trade Act. This provision allows the Office of the United States Trade Representative (USTR) to examine practices deemed harmful to U.S. commerce or discriminatory against American companies, potentially leading to the imposition of unilateral trade sanctions. The investigation stands out for the breadth and heterogeneity of the topics covered. In addition to goods, it encompasses digital trade, the Pix instant payment system, intellectual property, ethanol, anti-corruption legislation, and environmental policies. Unlike the World Trade Organization (WTO) dispute settlement system, the Section 301 procedures are unilateral and domestic. The US has used this method in the past, including against Brazil. A public hearing is scheduled for early September, where representatives from affected sectors will gather. The investigative process may take up to a year, and its findings will guide the next phase of U.S. trade policy toward Brazil. If the USTR’s final report is unfavorable to Brazil, new sanctions could be imposed. These might include additional tariffs on Brazilian products, restrictions on Brazilian imports, the suspension of trade benefits, and even limitations on access to U.S. services. Although the announced tariffs apply only to goods, broader measures cannot be ruled out, which could affect specific sectors such as financial services related to Pix, which have already faced resistance from U.S. credit card operators. Currently, Brazilian exporters are advised to review their contracts with American clients to mitigate potential impacts arising from the current situation. LBM Advogados will continue to closely monitor developments in this scenario and their impacts on Brazilian foreign trade. LBM Advogados will continue to closely monitor developments in this scenario and their impacts on Brazilian foreign trade.

Published on June 11, 2025, COSIT Ruling No. 85/2025 deals with the tax treatment of amounts paid as compensation for time off and concludes that they are remunerative nature and, therefore, subject to withholding income tax, social security contribution, RAT contribution, and contributions to third parties. According to the understanding expressed in the Ruling, the payment of these amounts constitutes additional remuneration for work performed on days that were initially intended as paid time off, regardless of whether the payment is made in multiples, such as in the case of the need for operational continuity (as occurs with the double shifts), or on a one-time basis, such as for employer-mandated training. Although this interpretation is controversial and contrary to consistent decisions of the Superior Court of Justice (STJ) recognizing the indemnity nature of these amounts, the COSIT Ruling is has a binding effect on the consultant and within the scope of the Brazilian Federal Revenue Service (RFB). Given this scenario, each company should review its policy on the payment and taxation of “indemnified time off”, assessing possible tax risks and the need for adjustments to its payroll.

In the judgment of Case No. 16539.720010/2019-45, the 1st Panel of the 1st Chamber of the 2nd Section of the Administrative Council of Tax Appeals (CARF) decided that the amounts paid by as retention or permanence bonuses do not constitute remuneration and, therefore, should not form the calculation basis for social security contributions. The case analyzed involved credits and payments made by a financial institution as a retention bonus, aimed at encouraging certain employees to stay on during a critical time marked by episodes that negatively affected the company’s image.                 According to the judgment, for the retention bonus not to be considered part of the contribution salary, it must be specified in an ancillary clause to the employment contract, which stipulates a minimum duration for the employment relationship. In addition, it must be applied on an ad hoc basis in specific cases, such as the imminent loss of a strategic employee or, as in this case, the need to preserve employees in the face of extraordinary and unexpected situations. The matter is controversial and has been decided by CARF on a case-by-case basis. In Ruling No. 9202-010.457, of April 24, 2022, the 2nd Panel of the Superior Council of Tax Appeals (CSRF) also ruled out the levying of contributions on the premise that the bonus does not have a remunerative nature since it does not derive from the provision of services by the individual, but rather from a mere obligation to do – to remain linked to the company for the agreed time. There are, however, recent rulings that recognize the remunerative nature of retention bonuses and, consequently, the levying of contributions, as can be seen in Ruling no. 2102-003.445, of 06.09.2024, of the 2nd Panel of the 1st Chamber of the 2nd Section.