PAYMENT OF INTEREST ON THE EQUITY AS A TAX SAVING MEASURE IN BRAZIL
Due to the high national tax burden, businesses feel the need to search for legal ways to save money on tax payments; this practice is known as tax planning. The company has the right to structure some deliberations that may reduce the tax burden. In this article we will discuss the payment of interest on the shareholder’s equity, a way to compensate shareholders by the capital invested in the business, which is deducted from the profit of company, and when the company is taxed under the “Lucro Real” regime, it allows them to reduce taxes.
The logic behind this artifice is basic: interest on the shareholder’s equity is characterized as a financial expense; thus, its payment reduces the company’s profit and enables the reduction of income tax (IRPJ) and social contribution on net income (CSLL), which may reach up to 34%, a lot greater than the 15% levied on the interest paid to the shareholders, when they are individuals. The right to deduct this expense is limited to half of the current year’s profit or half of the profit accumulated on past years, and the interest rate is the long-term interest rate (English version of Taxa de Juros de Longo Prazo – TJLP), calculated on the following owners’ equity accounts: capital, capital reserves, accumulated earnings, treasury stock and accumulated losses. According to Article 355 from the Decree 9.850/2018, the company must present profit in the current year or have accumulated profits for the payment to happen and, consequently, to take advantage of the tax reduction.
It is worth mentioning that this benefit may be obtained only by companies taxed by the “Lucro Real” regime, because the other ones, taxed by “Simples National” (an integrated system for payment of taxes and contributions) or “Lucro Presumido” regime don’t deduct the interest on the shareholder’s equity from their tax bases, despite they are also allowed to pay such interest, if they want to.