The end of the year for accountants promises to be busier than when a personal income tax return is filed. December will not only be the eve of the tax reform coming into effect, but it will also be the month in which many companies will close their balance sheets in the off-season to prevent their major partners from paying the minimum tax on profits earned until 2025.
In the case of public limited companies, it may be necessary to actually pay these amounts, send funds abroad in the case of non-resident shareholders or carry out capitalization operations with these resources.
“Accountants are under pressure like never before,” says Gabriel Paranagua, partner in the tax practice at Felsberg Advogados. “It seems like the time has come to file income tax returns.”
The first step for companies is to update their systems so that it will be possible to properly withhold income tax on salaries and profits from January onwards, according to the new law approved by President Lula last Wednesday (26), says Valdir Amorim, Technical and Legal Coordinator at IOB Consulting.
“A lot of people will have doubts and will consult the HR department of companies to understand these calculations. Developers have to deliver payroll software. This will also impact accounting offices,” says Amorim.
However, the more complex issue is mobilizing to pay dividends without minimum taxes. To do this, public limited companies must hold meetings and approve the balance sheet and profit allocation by the 31st day. For limited companies, a shareholders’ meeting must be called. In both cases, the minutes must be registered with the Commercial Council to avoid challenging the decisions taken, according to the IOB specialist.
This scenario could still change if a draft in process is approved in the Senate and these deliberations are postponed until April next year. It is also necessary to wait for the Federal Revenue Service to regulate the new legislation, which has raised many doubts.
“It is mandatory to have regulations,” says Cristina Camara, tax partner at SiqueiraCastro Advogados. It cites as examples the deadline for determining the payment of dividends as well as uncertainty about how the exemption rule for foreigners will be applied. “There are so many issues that the risk of making mistakes is very high.”
Tax professionals are also dealing at the end of the year with uncertainty about tax reform rules. Next year, the only change is requiring companies to issue invoices in a new format.
The government has already launched the test environment so that taxpayers and administrative and accounting service providers can check whether everything is in order.
Not everyone is ready for change, says Mauricio Cattaneo, managing director and country head of management services firm TMF Group in Brazil. Therefore, it expects increased demand at the end of the year to make these adjustments, which may lead to a shortage of human resources.
“Most companies are not prepared or have underestimated the impact of the reform,” says Cattaneo, referring to the changes planned for 2026. “As far as 2027 (when taxes start), most don’t even think about it.”
An IOB survey conducted from May to July this year showed that 58% of accounting professionals consulted were not yet prepared for the changes brought about by tax reform.
A Thomson Reuters survey of large companies found that only 35% of these companies are in advanced stages of preparation. Another 35% are in the initial stage, while the remaining 30% report being at an intermediate level of planning.
The main challenge at this time is to adjust tax systems so that it is possible to comply with tax reform obligations from January 5, says Douglas Farah, partner at AG Capital Group.
“This is what businesses should have been doing a few months ago, and those who have not done so yet face a major challenge and should focus on that now until the turn of the year.”