The proposal sent by the Federal Government significantly changes these situations:
End of JSCP Deductibility: Interest on Equity was created with the clear objective of incentivizing business activity, as it allowed companies to compensate their partners for invested capital and treat such compensation as a deductible expense from the IRPJ and CSLL calculation bases, subject to the TJLP (long-term interest rate) limit on equity. Its creation occurred at the same time that profits and dividends were made tax-exempt. Based on Bill 2337, JSCP will only be deductible from the bases of the company that pays it until December 31, 2021. However, the rule for taxation of JSCP at source at a rate of 15% has not changed, so this type of compensation can still be compounded with dividends (subject to the 20% rate).
End of Future Profitability Premiums: Future profitability premiums have always been a controversial topic in Brazil. This isn’t due to a lack of legal provision, but rather to respect from the Federal Revenue Service, which sought to identify and fine as many taxpayers as possible who took advantage of a legitimate tax deduction. If the bill is approved as it stands, any premiums will no longer be deductible.
Deductibility of Amortization of Intangible Assets: The bill also proposes establishing a 20-year term (1/240th of a monthly percentage) for the amortization of intangible assets. This could increase companies’ tax burden, depending on the nature of the intangible asset, such as software or applications, which may become obsolete much sooner.
