Dividend Tax Exemption May Encourage “Pejotization”, Revenue Secretary Says

The Secretary of Revenue, José Tostes. Photo: Edu Andrade / Ascom / ME.

The inclusion of a growing number of companies among those which will be entitled to the tax exemption on profits and dividends in the text of the income tax reform runs the risk of stimulating the so-called “pejotization,” said the Special Secretary of Federal Revenue. , José Tostes Neto, this Wednesday (18).

The practice is to set up companies for the sole purpose of collecting less tax than would be levied on personal income, and is mainly used by independent professionals, such as doctors and lawyers.

By proposing the return of taxation of profits and dividends after 25 years of exemption, the government has suggested a tax rate of 20% with an exemption cap of R $ 20,000 per month for micro and small partner companies.

In the successive versions of his deputy, the deputy Celso Sabino (PSDB-PA), rapporteur of the file, expanded the list of companies that will be exempt from tax, which now includes all those that opt ​​for the Simple Nacional and the calculation by the alleged profit they have annual sales of up to 4.8 million reais.

“The exemption of profits and dividends in Brazil since 1995 is one of those factors that encourages and encourages pejotization, as it is also an important tax advantage, when using this strategy,” Tostes said. during a panel at the 22nd annual Santander conference.

“Now that we are proposing to reinstate the taxation of profits and dividends, one outcome we can expect is that this benefit will be reduced. […] Considering this, in fact, we must be very careful and cautious in these differentiated treatments, especially with derogation.

“If these exemptions are significantly broadened, there are risks of encouraging pejotization,” he said. “Now we all know that the best from a technical point of view is not always what is possible from a political point of view. And this is certainly also taken into account in the discussions that are taking place around the project. of law. “

After being postponed last week, the income tax reform bill would be voted on on Tuesday (17), but was once again taken off the agenda at PSOL’s request for membership of the government base. One of the critical points of the text is precisely the taxation of profits and dividends.

Guiding the judiciary in voting for the postponement, Planalto chief Ricardo Barros (PP-PR) said a group of lawmakers want the tax to be levied at the 10% rate during the one-year period . , which would serve as a transition until the effective rate of 20% comes into effect.

Sabino, who has indicated he will present a fifth draft of his report until the vote, due next week, has been faced with a busy agenda of discussing the project with different caucuses and economic segments. After attending the Santander conference with Tostes, the MP was part of the House Finance and Taxation Committee and met the House Speaker, Arthur Lira (PP-AL).

In the afternoon, he will meet with representatives of the National Mining Agency (ANM), the National Front of Mayors (FNP), and associations of the aviation sector, autonomous agents, the market financial, among others.

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