New investor relations rule makes companies declare dividends; See list

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Since the beginning of October, when the government’s project was approved in Congress to exempt anyone earning up to R$5,000 from income tax – an election promise from President Lula whose tax exemption will be offset by a new minimum tax on high income that will also be applied to dividends – at least 12 companies have already announced the distribution of large tranches of their profits to shareholders this year.

If the announcement is made by the end of December, these dividends will be paid according to the current rule, that is, without the risk of being taxed at the minimum. See below the list of companies that announced dividends in recent weeks:

• Itau: 23.4 billion Brazilian reals
• Yes: 15.3 billion Brazilian reals
• Itaussa: 8.7 billion Brazilian reals
• Wig: 6.6 billion Brazilian reals
• Welcome: 1.9 billion Brazilian reals
• Bypass: 1.1 billion Brazilian reals
• Marcopolo: 879 million Brazilian reals
• Volcabras: 623 billion Brazilian reals
• fluorescent: 490 million Brazilian reals
• San Carlos: 406 million Brazilian reals
• Azas: 180 billion Brazilian reals
• Tag: 100 million Brazilian reals

Last week, Axia Energia (formerly Eletrobras) announced that it had declared a dividend on accumulated profits amounting to approximately R$40 billion, but has not yet specified the exact amount to be distributed. The company informed that shareholders will receive the proceeds through a new class of preferred shares (PNC), in line with B3’s proposed rollover to Novo Mercado.

The rise has reached such a point that consulting and auditing companies and law firms have already begun to compare the last period of the year with the days before the declaration of income tax by legal entities. Teams work overtime and work weekends to help companies make the most financially beneficial decisions.

• Ask your questions: When will the income tax exemption of up to R $ 5,000 come into effect? Will dividends be taxed?

The decision to offer or not distribute dividends depends on the financial circumstances of each company. Taxes are already prompting some to consider taking out loans to reward shareholders soon.

— The new law requires companies to announce and approve dividends before the end of the year. This poses challenges. Hermano Barbosa, a tax specialist and partner at BMA Advogados, explained that many companies have profit reserves because they decided to keep part of their profits. — There is an incitement to the behavior of advertising the maximum possible profits in 2025.

The reform of the internal revenue policy framework, approved by President Luiz Inacio Lula da Silva last week, included dividends on taxable income – the main way companies pass on profits to partners and shareholders, who are exempt from these charges.

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This is due to the minimum income rate on high incomes, which was created as a way to compensate for the overall exemption for those earning up to R$5,000 per month and the tax reduction on earnings up to R$7,350 per month. The minimum price, charged to those who earn from R $ 50,000 per month, will reach earnings.

Collection of fees will begin on January 1, but there is an exception, which prompts companies to wait. Profits declared until December 31 of this year will remain exempt, as is the case today. It can be repaid between 2026 and 2028. Today, they are issued within a period of up to 120 days after the end of the fiscal year, with payment within 60 days.

There is a lot of protest from companies. The Senate is already discussing amending the new rule, using the bill (PL) that increases taxes on betting and fintech, to extend the exemption period. If the amendment is made, dividends related to profits through 2025 and declared by April 30, 2026 will remain exempt.

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– The year is over. Companies have to deal with another new development in a short time. It is a month of celebrations, there are companies having mass holidays, others are in layoffs (with employment contracts suspended) due to Trump’s tariffs, and the start of the consumption tax reform, starting in January, said Eduardo Viana, managing partner of Moreira Auditores Independentes.

According to him, “everyone is angry” because these decisions require bringing the accountant, auditor, lawyers and compliance field to the table.

-We work hard, we even work on weekends. Major consulting firms no longer offer holidays at this time, but they are in high demand, as is the case during income tax declaration times.

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Following this move, the market is already seeing that at the end of the year there will be greater pressure on the exchange rate, due to profits being sent abroad – to ensure the exemption until December 31, profit remittances outside the country tend to be offered, accumulating higher amounts than usual.

– Most of the factors that usually give a “slingshot” to the exchange rate occur during this period – said Mauricio Ony, Director of Macroeconomic Strategy for Latin America at Rabobank.

In December 2024, remittances totaled US$8.4 billion, contributing to volatility that pushed the dollar to R$6.18 a year ago. These transfers are expected to reach $10 billion next December, according to estimates compiled by Bloomberg.

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Thais Zara, chief economist at consulting firm 4intelligence, believes that there are elements that help facilitate movement:

— An interest rate of 15% per annum can attract foreign investors. We see the central bank learning compared to last year, with greater preparedness.

Carlos Sequeira, head of the research team at BTG Pactual, highlighted that the impact of conversions is not the same for all companies:

— The effect is greater when the controller is out of the country. For most Brazilian companies, the dividends stay here. The effect on the exchange rate tends to be local rather than generalized.

Experts warn that the strategy adopted by each company in the process of exempting the distribution of profits through dividends must be taken into account on a case-by-case basis. In a best-case scenario, a well-designed plan can generate greater demand and increase the value of a company’s shares, they say. At worst, this could jeopardize cash flow or even encourage “investment flight” from the country.

“Not all companies have cash available to pay these dividends” – Alexandro de Jesus, tax partner at EY

For example, last Friday, WEG announced that it would distribute a dividend of R$1.43 billion, to be paid on the 12th. In parallel, it is also proposed to distribute 5.2 billion Brazilian reais to shareholders from the company’s profit reserve, to be paid between 2026 and 2028, which will be evaluated at a meeting scheduled for the 19th. Yesterday, the group’s shares rose by 2.10% to 45.18 Brazilian reais.

The electric motor company from Santa Catarina publishes a dividend before the end of 2025, which resets the income tax rate that will be applied to these values ​​from 2026 onwards, and uses the possibility of staggering the payment of the next part of the dividend reserve over three years. However, this last item is one of the main targets of criticism.

Alexandro De Jesus, Tax Partner at EY, highlighted that there is a conflict between the new rule and another rule currently in place:

Taxation of dividends requires strategies from companies from a tax point of view, but generates discussions among companies. The Companies Law stipulates that dividends, once approved, are distributed within 60 days and within the same base year. The new law (on Investor Relations) specifies the payment of dividends declared by the end of 2025 to individuals until 2028. For investors not resident in the country, it does not stipulate this requirement – Jesus said, citing open issues related to the recovery of credits held by Investor Relations and collected at the source by investors located abroad.

Another sensitive point is to carefully analyze each company’s cash position, which works best after the end of the financial year.

– Not all companies have cash available to pay these dividends. Many people discuss how to write in capital letters. Others seek debt. But with the current interest rate, getting credit could be more expensive than paying income tax – Jesus warned. – If there is a cancellation of companies’ capital, they will lose their financial strength. There may be less international investment coming.

“Every company already calculates the results monthly. Between December 10 and 15, they already have the November results. It is a much smaller problem than people say” – Paulo Henrique Bigas, Professor at Ibmec-RJ

Paulo Henrique Bigas, professor of accounting at Ibmec-RJ, reduces the problem of calculating profits before closing the results of the current year:

— Now, generating profits is a one-month problem. Every company actually calculates the results monthly. Between December 10 and 15, you already have your November results. It’s a much smaller problem than people say.

For him, the alternative to expecting dividends is to use profit reserves to capitalize the company, conserving resources. It’s a movement that will impact not only independent professionals, Pêgas highlights, but also mid-range entrepreneurs with businesses in areas like engineering, public service franchises and others.

— The cheapest thing you can do is take advantage of the accumulated profits. Then, if you want to distribute this value, you have to make a capital reduction.

EY’s Jesus warns that there is no guarantee that this capital reduction will be exempted from distributing amounts accumulated before the new rule takes effect.

— There is another concern: More than 95% of the country’s businesses are small and medium-sized enterprises. And more than half of them are not audited – thinks Eduardo Viana, managing partner of Moreira Auditors Independence.