DIRPF 2025: Understand the Recent Legislative Changes

In this edition of Wealth Planning Insights, William Heuseler, Global Head of Wealth Planning, addresses the changes in the 2025 Individual Income Tax Return. With new legislation in effect, the topic receives special attention this year. Understand how these changes can impact your declaration and avoid surprises.

Main highlights:

• Deadlines and fines: The period for submitting the Individual Income Tax Return has already started and ends on May 30 at 11:59 PM, and failure to meet this deadline may result in fines.
• Mandatory declaration: All individuals residing in Brazil who, in 2024, met at least one of the requirements indicated in the current legislation are required to declare. Here, we highlight the receipt of taxable income exceeding R$ 33,888.00 and the receipt of income from capital applied abroad, in any amount.
• Declaration tools: The submission can be made through the Declaration Generator Program or the My Income Tax app. The pre-filled declaration option is already available, which imports data already known by the Revenue Service. The tool aims to facilitate the process, but it is crucial to review all information.
• Tax installment: The tax due can be paid in up to 8 installments, with the first installment due on May 30. Subsequent installments must be paid by the last business day of each month, adjusted by the Selic rate.
• New asset codes: This year's declaration introduces new codes in the "Assets and Rights" section, such as group 3, code 3, for holding companies, and group 7, code 99, for investment funds abroad.
• Taxation of foreign investments: Law 14,754 of 2023 establishes a new taxation system for income from financial investments and controlled entities abroad, with a fixed rate of 15%. This change means that income from foreign investments will be taxed separately from other income and capital gains.
• Taxation regime for controlled entities: The system will depend on the choice of the transparent or opaque regime, exercised in the declaration of the year following the entity's establishment. For transparent entities, the assets will be declared and taxed as if they were directly held by the individual. For opaque entities, the profit earned in the previous fiscal year will be taxed at a rate of 15%, regardless of distribution.
• Specific field in the declaration: Income from financial investments abroad and profits/dividends from controlled entities must be entered in a separate field.
• Credit for dividends receivable: It is necessary to include a new line in the declaration form regarding the credit for dividends receivable from the controlled entity. It is important to identify the year to which the respective credit refers because, for those who opted for the update at the 8% rate via Abex, there was previously a line for dividends receivable, related to profits generated until 2023.
• Distribution of updated dividends: The distribution of the credit for dividends receivable implies a proportional reduction in the cost of the "Assets and Rights" section. The positive exchange rate variation should, in principle, be included in the "Exempt and Non-Taxable Income" section. This is our current understanding, but we continue to monitor the topic in case of any additional statements from the Federal Revenue Service.
• Compensation of losses: Losses in financial investments made abroad by the individual are automatically compensated with gains from other assets. It is possible to offset the income tax on income/gains from foreign investments, provided there is a treaty, convention, or reciprocity of treatment between Brazil and the country where the income is paid.