Government publishes Bill to extinguish JSCP from 2024.
The Bill provides that from January 1, 2024, the deduction of interest paid or credited as remuneration on equity (JSCP) will be prohibited in calculating real profit and the calculation basis of Social Contribution on Profit Net – CSLL.
The provisions of this Bill do not prevent the deduction of interest calculated from the real profit and the CSLL calculation base for the calendar year 2023, even if paid or credited in the calendar year 2024, being prohibited for other prospective years your deduction.
Created after the Real Plan, the JCP is an instrument used by large companies to remunerate shareholders. It allows the distribution of profits to be classified as an expense – and thus deducted from Income Tax.
When justifying the measure, the government states that “more than 25 years after its introduction, there is no evidence that the adoption of Interest on Equity – JCP reduces debt and increases investments. In reality, it was found that the institute does not influence either quantitatively or qualitatively in shaping the debt structure of Brazilian companies”.
“It appears that Interest on Own Capital – JCP proves to be inefficient in directing the choice of financing through own capital to the detriment of third-party capital. However, it appears that they have been used for the exclusive purpose of reducing the tax burden, especially due to the existing combination between the deduction of expenses by the legal entity and the taxation of the individual on the related income, at a reduced rate. (taxation in the form of Income Tax Withheld at Source – IRRF at the rate of 15%)”, states the text.
According to federal revenue data, between 2016 and 2020, around 2.8 million individuals received the JCP, representing less than 2% of the Brazilian population. “Regarding the income range of beneficiaries, data extracted from the Annual Personal Income Tax Adjustment Declarations for the 2021 financial year (calendar year 2020) show that taxpayers who receive more than R$ 240 thousand of total annual income represent 31.3% of those who declared having received Interest on Equity – JCP, but obtained 96.6% of the value of JCP received by individuals”.
See the Bill in full: https://www.planalto.gov.br/CCIVIL_03/Projetos/PL/2023/msg430-agosto2023.htm
