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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.

In a unanimous decision handed down in Cases 10340.720664/2023-96 and 10340.720335/2022-64, the 1st Panel of the 1st Chamber of the 3rd Section of the Administrative Tax Appeals Council (CARF) recognized the extension of the effects of a final and unappealable court decision obtained by the company’s headquarters to its branches, ruling out the triggering of Excise Tax (IPI) on the resale of imported goods. In the case at hand, the headquarters, as the importer, obtained a court decision granting it the right not to pay IPI on resale operations following importation. The operations consisted of remitting the goods to its distribution center, which was responsible for distributing the products to the chain’s retail establishments nationwide. The tax authorities argued that the distribution center should pay the IPI on outbound remittances to the branches because it is treated as an industrial establishment under Article 9, II, of Decree No. 7,212/2010 and also because they understood that the effects of the decision obtained by the headquarters would not automatically extend to the other establishments of the same legal entity. CARF dismissed the tax assessment as unfounded, under the terms of the Reporting Councilor’s vote, according to which, as branches without legal autonomy, it is legitimate for the headquarters to challenge the tax assessment concerning its secondary establishments, as decided by the Superior Court of Justice (STJ). The Reporting Councilor further concluded that the transaction in question did not constitute a resale to third parties but rather a mere internal transfer of goods between establishments of the same legal entity. Although this is a lower court ruling, it holds significant importance for CARF regarding the tax treatment of IPI in transactions involving distribution centers and subsidiary retail establishments.

STF declares 25% Income Tax on Retirement Payments to Non-Resident Unconstitutional The Brazilian Supreme Federal Court (STF) has ruled that the 25% income tax withheld at source on retirement and pension payments made to individuals residing abroad is unconstitutional. The decision was issued in Extraordinary Appeal (ARE) 132749, under the General Repercussion system (Theme 1174). The withholding obligation was based on Article 7 of Law 9,779/99, which equates pension and retirement income remitted abroad with income from labor or services for tax purposes. According to the majority opinion, led by Justice Dias Toffoli, merely residing outside Brazil does not reflect greater economic capacity and therefore cannot justify a higher tax burden compared to retirees residing in Brazil. The case in question involved a retiree living in Portugal who received the equivalent of Brazil’s minimum wage yet was still subject to the 25% withholding tax. The STF found the tax rule unconstitutional for violating the constitutional principles of progressivity, equality, non-confiscation, and the obligation to protect the elderly. While the decision takes effect from its publication and has binding authority, it does not prevent the future enactment of legislation that differentiates tax treatment between residents and non-residents—so long as such differentiation respects constitutional principles of ability to pay and proportionality. In this context, Bill 1418/2007, which proposes a differentiated income tax treatment for non-resident individuals, remains under discussion in the Chamber of Deputies, though it has been inactive since 2021. If you have questions about how this ruling may affect your tax obligations or planning, our tax law team is available to assist. Contact us at tributario@lbm-legal.com.br

In a unanimous decision issued in AgReg in RE 1.439.539/RS, the First Panel of the Brazilian Supreme Federal Court (STF) ruled out the requirement of Income Tax in a case involving the donation of assets by an individual as an advance inheritance. The tax had been levied on the capital gain corresponding to the difference between the acquisition cost and the value assigned to the assets at the time of donation. However, Justice Flávio Dino, reporting the case, emphasized two key points that led the Court to reject the tax: (i) no increase in the donor’s net worth occurs in a donation, as the donor’s total assets are reduced by the gift; and (ii) the donation is already subject to Estate and Gift Tax (ITCMD) at the state level, meaning that applying federal income tax would constitute unconstitutional double taxation on the same event. While this STF decision does not have binding effect for all courts, it sets an important judicial precedent that can be used to challenge similar tax assessments. It provides greater legal certainty for individuals who wish to donate assets at market value as part of an inheritance plan, particularly in cases involving family asset planning and succession strategies. If you have questions about how this STF decision may impact your donation strategy, inheritance planning, or tax obligations, our tax law team is ready to help. Reach out to us at tributario@lbm-legal.com.br.

If you’re required to submit your 2025 Brazilian Income Tax Return (DIRPF), stay alert: the deadline to file is May 30, 2025. The obligation applies to individuals who, during the 2024 calendar year, fall under any of the criteria outlined in the Normative Instruction RFB 2255/2025. Who Must File the DIRPF 2025? What Do You Need to Prepare Your Income Tax Return? To avoid errors and delays in filing your DIRPF, make sure to gather the proper documentation. Check out the main documents: Pre-Filled Income Tax Return The Brazilian Federal Revenue offers a pre-filled income tax return, with data from previous declarations, “carnê-leão”, and third-party reports. For the 2025 filing, the pre-filled return was released on April 1st. Income Tax Return for Legal Entities Also Due May 30 If you are responsible for a corporate tax return, the 2025 deadline for legal entities is also May 30. Our tax team is ready to support you with the preparation and submission of your DIRPF 2025, ensuring compliance with ancillary obligations and helping you avoid tax penalties. 📧 Contact us at tributario@lbm-legal.com.br to schedule your consultation.