A snapshot of the main developments and updates from the past month in tax and wealth matters. We have selected the topics we consider most relevant to business-owning families, without intending to provide an exhaustive review of the period.
Brazilian Federal Revenue Service Clarifies Procedures for Withholding Income Tax on Dividend and Profit Distributions
The Brazilian Federal Revenue Service (RFB) has clarified the procedures for reporting and paying withholding income tax (IRRF) applicable to dividend and profit distributions. Such amounts must be reported through the EFD-Reinf system, under event R-4010, and the corresponding IRRF must be paid using codes 1841-01 for beneficiaries resident in Brazil and 1841-02 for non-residents.
As a reminder, the 10% IRRF rate applies when the same legal entity pays or credits more than BRL 50,000 in profits and dividends to the same individual resident in Brazil in a given month. The tax is calculated on the total amount distributed. Where the recipient is a non-resident, IRRF applies to any amount distributed.
TRF4 Rules Against the Uniform 10% Withholding Rate on Dividends
On August 5, 2026, the Federal Regional Court of the 4th Region (TRF4), in Interlocutory Appeal No. 5026333-41.2026.4.04.0000/RS, partially granted interim relief to prevent the uniform application of the 10% IRRF rate to profit and dividend distributions.
The decision, issued by Federal Appellate Judge Leandro Paulsen, determined that, for monthly payments ranging from BRL 50,000 to BRL 100,000, withholding should be calculated proportionally to the projected annual tax liability, in accordance with the principle of progressive taxation..
The decision did not entirely eliminate the monthly withholding requirement, but determined that the amount withheld should be adjusted to reflect the effective tax burden expected upon the annual tax assessment, thereby preventing the 10% withholding from resulting in taxation exceeding the amount ultimately due. The measure is preliminary in nature and may be reconsidered during the proceedings.
São Paulo State Treasury Reaffirms Position on the Tax Basis for Donations of Equity Interests as “Market Value”
The São Paulo State Treasury (SEFAZ/SP), through Tax Consultation Response No. 33,625, dated August 12, 2026, reaffirmed its position that the inheritance and gift tax (ITCMD) applicable to the donation of equity interests in privately held companies must be calculated based on the market value of the interest.Although book value may be accepted, its use requires the company's assets and liabilities to be adjusted to market value, together with the addition of the market value of its goodwill. This position is not new. However, it has now been expressly grounded on Article 154 of Supplementary Law No. 227/2026 (LC 227).
Brazilian courts in the State of São Paulo, however, have been rejecting this position and, in most cases, have recognized that the accounting book value may be used as the basis for calculating ITCMD.There have also been decisions issued in 2026, subsequent to the enactment of LC 227 but prior to its entry into force for purposes of determining the ITCMD tax basis, which is scheduled for January 2027.
Brazilian Federal Revenue Service Clarifies Capital Gains Calculation for Jointly Owned Assets
In Tax Consultation Ruling COSIT No. 161, issued in August 2026, the Brazilian Federal Revenue Service established that, upon the sale of an asset jointly owned by spouses subject to the partial or universal community property regimes, the capital gain must be calculated based on the asset's total value, treating it as a single pool of assets. Only after this calculation should the capital gain be allocated between the spouses, with 50% attributed to each, for income tax purposes.
Rio de Janeiro Court Issues Ruling on ITCMD Applicable to Gifts of Assets Held Abroad
In an interim decision issued in Case No. 0807488-76.2025.8.19.0006, the 2nd Civil Court of the District of Barra do Piraí, in the State of Rio de Janeiro, ordered the State, for the time being, to refrain from assessing ITCMD on a USD 600,000 gift made by a father to his daughter, even though both are residents of the State, because the funds are held in a bank account in the United States. The court held that the fact that the assets are located abroad creates an international element which, at this preliminary stage, prevents the State from imposing the tax in the absence of the federal supplementary legislation required by the Brazilian Constitution.
The decision relied, on a preliminary basis, on the Brazilian Supreme Court's ruling under Theme 825, according to which the assessment of ITCMD in situations involving assets or rights located abroad requires prior federal supplementary legislation. Until further ruling, the State is also barred from taking collection measures or registering the alleged tax debt as outstanding public debt.
ITCMD Should Not Be a Prerequisite for the Execution of Probate Deeds
The Brazilian National Council of Justice (CNJ), in Proceedings for Administrative Review No. 0008622-24.2025.2.00.0000, amended CNJ Resolution No. 35/2007 to establish that the execution of public deeds for probate and partition of estates does not require proof of prior payment of inheritance tax (ITCMD). The amendment allows the deed to be executed regardless of whether the tax has been paid in advance, without eliminating the heirs' underlying tax obligation.