09 October 2025

Brazilian Government allows proposed tax changes affecting Interest on Net Equity, financial investments, betting operations and fintechs to expire

  • On 8 October 2025, the Brazilian Chamber of Deputies failed to vote on Provisional Measure No. 1,303/2025 before its expiration, resulting in the loss of proposed tax changes.
  • The withholding tax on Interest on Net Equity will remain at 15% and the Social Contribution on Net Profits (CSLL) rate for fintechs will stay at 9%, maintaining the combined corporate tax rate at 34%.
  • Financial investments, including virtual assets, will continue to be taxed under the existing regressive rates of 22.5% to 15%, rather than the proposed flat rate of 18%.
  • Entities in affected sectors should remain vigilant regarding future tax reform proposals, as the government is likely to pursue alternative measures to address the fiscal deficit, including potential changes to dividend taxation.
 

Executive summary

On 8 October 2025, the Brazilian Chamber of Deputies failed to vote on Provisional Measure No. 1,303/2025 (the PM) before its expiration deadline. As a result, the PM lost its validity and will not be converted into law. This outcome represents significant setback for the federal government's fiscal agenda, which sought to increase tax revenues through changes to the taxation of Interest on Net Equity (INE), fintechs, betting operations and financial investments.

The expiration of the PM means that none of the proposed tax changes below will be enacted:

  • Withholding tax on INE will remain at 15%, not the proposed 18%.
  • The Social Contribution on Net Profits (CSLL) rate for fintechs will remain at 9%, rather than increasing to 15%; therefore, the combined corporate income taxation will remain at 34% instead of the proposed 40%.
  • Financial investments, including virtual assets, will continue to be taxed under the current regime (regressive rates of 22.5% to 15%), rather than at a flat 18%.
  • Online betting operations will not be subject to the proposed regularization regime or the 18% increased taxation from the current 12%.
  • Exemptions for agribusiness and real estate securities (e.g., LCA, LCI, CRI, CRA and LCD)1 remain intact, as the PM's attempt to revoke them was not approved.

Background and current situation

Originally published on 11 June 2025, the PM became effective immediately upon publication, with most provisions scheduled to take effect in January 2026. (For details, see EY Global Tax Alert, Brazilian Government announces substantial tax changes affecting Interest on Net Equity, financial investments, betting operations and IOF regulations, dated 12 June 2025.)

The PM required final approval by both legislative houses by 8 October 2025. Although a joint committee narrowly approved the text on 7 October, on 8 October the Chamber of Deputies removed it from the voting agenda. As a result, the PM expired without being voted on in time.

Implications and next steps

No immediate replacement for the PM has been announced. However, it is important to note that other tax increase proposals remain under consideration, most notably a 10% withholding tax on dividends, which is now likely under increased pressure for approval following the expiration of the PM.

Stakeholders should continue to monitor legislative developments closely, especially any new initiatives that may reintroduce similar tax measures. The government remains committed to addressing the fiscal deficit, and further tax reform efforts are expected.

* * * * * * * * * *

Endnote

1 These acronyms refer to various securities: LCA refers to Agribusiness Credit Letters; LCI refers to Agribusiness Credit Letters; CRI is a Real Estate Receivables Certificate; CRA is an Agribusiness Receivables Certificate; and LCD is Development Credit Letter.

* * * * * * * * * *
Contact Information

For additional information concerning this Alert, please contact:

 EY Assessoria Empresarial Ltda, São Paulo

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young LLP (UK), Latin American Business Center, London

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

Document ID: 2025-2045