Disguised distribution of profits: a lame rabbit out of the hat? | Fio da Meada

It is true that the income exemption of up to R$5,000.00 will not solve the problem of social inequality. In fact, although it increases the financial availability of resources for an average group, it does not benefit the lower classes, as they do not pay income tax.

But it is also true that it is a possible step among the infinity of possible and necessary steps to move towards a a less unequal society. Regarding why inequality itself is a problem, I recommend reading the book “The Level: Why a More Equal Society is Better for Everyone.” by Richard Wilkinson.

Finally, it must be emphasized that a morally correct and in my opinion necessary measure – correcting the absurdly unequal treatment between the top and the broader base of the pyramid – may be motivated by populist ends, approved in the wake of PEC shieldingand generate a law that seems fragmented, inconsistent in certain aspects, and which does not dare to resolve other imbalances in the Personal Income Tax – IRPF.

Within the framework of the real law scenario, it is time to carry out the tax planning necessary and appropriate. The first was the distribution of profits as quickly as possible accompanied by a review of investments. Another, put on the table, would be to refocus the maximum amount of (personal) expenses in the legal entity.

This old trick out of a hat may no longer give the expected results according to the Federal Revenue Service. Technological systems for data exchange would allow much more sophisticated control of “necessary expenditure”, including taking into account data collected within IBS and CBS, whose legislation sought to “shut down” the allocation of personal expenditure to corporate entities.

Looks like this rabbit might come out of the hat a little lame.

Or is Revenue too optimistic about its technological miracles?