The Federal Court of São Paulo granted an injunction to suspend the taxation of dividends distributed to the partners of a company in the scenography industry. The decision removes the application of part of the recent law that put an end to the exemption on profit distribution after almost 30 years.
Law No. 15,270/25, which came into force in January this year, now determines that the company that pays its partners profits and dividends in amounts exceeding R$50,000 per month or R$600,000 per year must withhold Personal Income Tax (IRPF) at a rate of 10%. Judge Cristiane Farias Rodrigues dos Santos, from the 9th Federal Civil Court of São Paulo, ruled out what this section establishes. This, in practice, benefits the partners.
The judge understood that the device substantially increased the tax burden, without respecting the predictability expected by the taxpayer, understanding that the taxation of the distribution should be gradual. With this, he understands that there is a violation of the constitutional principles of progressivity, tax capacity and equality.
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This argument was used by the company Jardim Elétrico Produções in the writ of mandamus filed. In it, the taxpayer argues that the Personal Income Tax must observe the taxpayer’s economic capacity and the progressiveness criteria must be structured, along the lines of what is established by articles 145 and 153 of the Federal Constitution.
Carlos Eduardo Orsolon, partner at Demarest Advogados, explains that the IRRF is a type of anticipation of the tax owed by the recipient of the payment. The legislation “obliges the source paying some income to already apply a tax withholding, but which is not owed by the company; this tax is owed by the beneficiary of the income”, he says.
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In this sense, Ana Lucia Marra, partner at Sanmahe Advogados, explains that “when you authorize the company not to withhold, you are removing taxation from the partner, because the partner receives the full amount”. The decision, therefore, removed the partner’s (advanced) source taxation, but did not remove the partner’s full taxation, he explains.
In practice, this means that the partner will have 100% of the dividends available to invest and make a profit, explains Orsolon. This would not happen if the partner received the net amount after the retention made by the company.
For Mary Elbe Queiroz, partner at Queiroz Advogados, income is already taxed in legal entities at a high rate, and further taxation on the same amount in individuals will result in confiscation, that is, loss of assets in favor of the State.
