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Interest on equity (JCP) in Brazil

Last verified: 2026-10-25

Juros sobre capital próprio (JCP) let a Brazilian company pay shareholders a deductible return on equity, capped at the long term rate TJLP applied to specified equity accounts. The deduction saves up to 34% IRPJ and CSLL for a typical company, while the shareholder suffers withholding that rose from 15% to 17.5% on 1 January 2026. Payment requires profits or retained earnings of at least twice the JCP amount.

The rule

1. A company on actual profit may deduct interest paid or credited to shareholders as remuneration of equity, calculated on specified equity accounts and limited to the daily pro rata variation of the TJLP.Law 9,249/1995, art. 9, caput, 1995-12-26 official text

2. JCP may only be paid or credited if current profits before the JCP deduction, or retained earnings and profit reserves, are at least twice the JCP amount.Law 9,249/1995, as amended by Law 9,430/1996, art. 9, para. 1, 1996-12-27 official text

3. JCP is subject to withholding income tax at 17.5% on payment or credit.Law 9,249/1995, as amended by LC 224/2025, art. 9, para. 2, 2025-12-26 official text

4. The 17.5% rate applies from 1 January 2026; LC 224 art. 8 is not among the provisions deferred by art. 14, item I.Complementary Law 224/2025, arts. 8 and 14, item III, 2025-12-26 official text

5. Only these equity accounts count: paid in capital, specified capital reserves, profit reserves other than the tax incentive reserve, treasury shares and accumulated losses. Equity increases from transactions between dependent parties without an actual inflow of assets are excluded.Law 9,249/1995, as amended by Law 14,789/2023, art. 9, paras. 8 and 8-A, 2023 official text

6. JCP paid may be imputed to the mandatory minimum dividend under the Corporations Law.Law 9,249/1995, art. 9, para. 7, 1995-12-26 official text

7. For a beneficiary taxed on actual profit the withholding is an advance of its own tax; for individuals and other beneficiaries it is final.Law 9,249/1995, art. 9, para. 3, 1995-12-26 official text

Worked example

Eligible equity of BRL 50,000,000 and a TJLP of 9.29% a year (the rate published by the BCB for October to December 2026, used here as if it applied all year). Maximum JCP: BRL 4,645,000 (about USD 922,048). If deductible in full, the company saves 34% IRPJ and CSLL, BRL 1,579,300 (about USD 313,496). The shareholder suffers 17.5% withholding, BRL 812,875 (about USD 161,358). Profits or retained earnings must be at least BRL 9,290,000 to pay this amount. USD at the BCB PTAX selling rate of 23 October 2026, BRL 5.0377 per USD.

Step by step

Confirm the company is on actual profit; presumed profit companies get no deduction benefit.
Compute the eligible equity base using only the accounts in art. 9, para. 8 and remove intragroup equity movements without asset inflow (para. 8-A).
Apply the daily pro rata TJLP published by the BCB for each quarter.
Test the twice profits limit before approving the payment.
Withhold 17.5% at payment or credit, and check any treaty limit on interest for foreign shareholders.

Common traps

Using the old 15% rate in 2026 models.
Including revaluation, equity valuation adjustments or incentive reserves in the base.
Comparing JCP only against the 10% dividend withholding: the right comparison includes the 34% corporate deduction on the company side.
Missing the twice profits test, which turns the deduction into a disallowed expense.

Sources

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