Interest on shareholders ‘ equity: A tool for saving the tax and the changes to the law 14.789/23
Interest on shareholders ‘ equity the following as an effective strategy for the economy, a tax on the taxable Income for the year, even after the restrictions of the law, 14.789/23, which was limited to its elements.
The interest on CAPITAL, Interest on Capital, as a tool for strategic planning, the tax is available at the companies in the brazilian tax by your taxable income. Unlike in the case of cash dividends, which do not affect the basis for the calculation of the corporate income TAX and the social contribution on net income, of the amounts paid by way of interest on CAPITAL are deducted from the corporate tax base, which may result in fiscal savings significantly.
It is a mechanism that, when properly structured, can substantially reduce the tax burden of the business, while at the same time that it pays to its members.
With the entry into force of this law, 14.789/23, after 2024, have implemented new rules and regulations that have an impact on the tax deduction for the expenditure of CAPITAL, generating impact in its application, requiring, therefore, a greater attention to the taxpayers in order to avoid legal implications.
In this sense, the present article is to present the best of the interest on the capital and major changes.
1. Concept of limits and deductible CAPITAL:
The community process (JCP) that correspond to one of the many forms of return on the capital invested by the partners, the interest paid or credited to the legal entity, the individual, to the shareholders or to the shareholders, in consideration of the shareholders ‘ equity.
When you distribute to the partners, the amount will become an expense is deductible on the basis of the calculation of the corporate income TAX and the social contribution on net income, in the basis of the taxable Income for the year, this deduction is limited by law 14.789/23.
They are referred to the two boundaries of the fact that, being applied in all cases, whichever is greater. The limits are:
(i) 50% of the retained earnings and revenue reserves; or
(ii) 50% of the net profit for the year prior to the recognition of its own CAPITAL, and the social contribution on net income.
The rate of income tax of at least 15% of the amount received by members, individuals must be taken into account, but such a tax is often offset by the savings of auditors of the company, you can get up to 34% of the value of the deductible, whereas, the corporate income TAX (15%), and the additional corporate income TAX (10%), and TAXES (9%).
1.1. personal:
The members of the receiving community process (JCP) will be subject to the payment of income tax – Tax deducted at Source at the rate of 15% of the amount received. There are a burden to be borne by the individual, when the effect of the distribution of interest on CAPITAL.
In light of this, it is crucial to carry out a preliminary analysis on the profit realized on the distribution, there is a view that, although all the partners will be taxed on the global economy (business + partner) can to be a positive one.
This operation may result in a lower net-of-a 19% relative to the distribution of dividends to shareholders, which, though free, to a person, they are not tax deductible for the corporation subject to the tax in full by 34%.
1.2. the legal Person
On the receipt of the interest on CAPITAL, for a legal entity in Brazil, it is not intended as a value consists of the revenue, and suffers from lump-sum taxation (IRPJ, CSLL, PIS, and COFINS), making it ineffective in this scenario.
1.3. Residents in the outdoors
The distribution of the JCPJ to natural persons and legal entities residing abroad, there is a need for a risk assessment concerning the treaties and the tax applied in the context of the scan, as it is a mechanism for distributing the profits, only in Brazil, which may have an interpretation as distinct from other countries.
1.4. economic Efficiency compared to the dividend
Although it is the CAPITAL enseje tax at source, to a partner natural person, as opposed to dividends (currently free), the fact that the company that makes it an alternative to the process is the most advantageous. On a net basis, the economy, the tax can reach up to 19% in relation to the distribution via dividends are fully taxable at the entity, without any of the tax benefits.
2.&vaginal bleeding, Changes in legislation after 2024
With the entry into force of this law, 14.789/23, is the rule of the community process (JCP) has undergone significant changes since January 1, 2024. The changes introduced by the new legislation that have a direct impact on the manner of calculation of interest on CAPITAL, thereby reducing the scope of the basis of the calculation is limited to the tax benefits provided by the companies optantes by the taxable Income for the year.
The main changes with respect to the reset of the accounts that make up stockholders ‘ equity, for the purpose of calculation of interest on CAPITAL. After 2024, it will only be deemed to be for the following items:
(i) the paid-up capital stock;
(ii) the reserve capital from the capital gain on the issuance of the shares;
(c) revenue reserves (other than those arising from tax incentives); and
(iv) the profit or loss, earnings, and treasury stock are included in the new legislation.
In this way, they are to be excluded from the basis of the reserves, arising from, out of grants, investments, and other incentives that were previously used to zoom in on the basis of the calculation.
Another point that is relevant with respect to the seal of changes in equity and the artificial in the calculation of interest on CAPITAL, that is, it considers only the increases in equity is effectively added to the capital stock of the company. This measure aims to avoid operations that swelled artificially on the basis of the calculation of the benefit, and without any consideration of actual monetary operation is performed as a form of tax planning, aggressive, aimed at raising the deductible expense of the community process (JCP).
The methodology for the application of the interest rate that is used, it remains in the short-term investments – it is the Rate of Interest on Long-Term, which is applied pro rata portion of the die, that is to say, in proportion to the number of days in the period as the basis for the calculation.
These changes, by restricting the possibilities of a deduction, has an impact on the effectiveness of a community process (JCP) as a tool for tax planning. The internal Revenue service, including, but he has published a manual for the guidance returned to taxpayers, with the objective to standardize the procedures, as well as to mitigate the risk of a claim arising from misinterpretations of the new times.
Conclusion and considerations
In practical terms, the changes will promote a reduction in the deductibility of the interest on CAPITAL, and, as a consequence, an increase in the burden of paying the tax, effective as of the company making the payment. The new law requires, therefore, a review of the strategies, taxation and more attention is given to the accounting standards used in the calculation of the benefit.
In spite of the limitations, as amended by the law 14.789/23), the distribution of profits by way of a community process (JCP) is an alternative to the tax advantage for businesses optantes by the rules of the taxable Income for the year, by providing material reduction in the taxable income of the corporation, especially when it is compared with the distribution of a dividend, which has the character of a deductible.
Even with the recent limited to, interest on CAPITAL, it remains one of the most effective tools for saving tax for businesses in the basis of the taxable income for the year. Their proper use can significantly reduce the cost of capital and optimize the distribution of the results.
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