Share bonuses and the taxation of dividends: can we increase acquisition cost after PL 1,087/2025?

Bill 1.087/2025, unanimously approved by the National Congress, proposes a significant change to the Brazilian tax system by introducing a 10% Withholding Income Tax (IRRF) on the distribution of dividends to individuals or non-resident investors, modifying the exemption in force since 1996. In this new legislative scenario, a fundamental question arises that deserves caution: what will be the tax treatment of the capitalization of profits and its impact on the cost of acquiring shareholdings? Could we increase the cost?

Currently, from a business perspective, Income Tax is levied only on the profits of Brazilian entities (corporate level) and no additional tax is imposed on the distribution of such profits in the hands of shareholders or quotaholders, whether via actual distribution or employment, in favor of Brazilians or non-residents. That’s 30 years of exemption.

Furthermore, under the current rule, in the event of the incorporation of profits or profit reserves, the acquisition cost will be increased to the extent of the portion of the capitalized profit or reserve that corresponds to the partner or shareholder. This provision is laid down in paragraph 1 of article 10 of Law 9,249/95, which establishes the exemption of dividends arising from results as of January 1996.

The logic behind this rule – applicable mainly to individuals and foreign shareholders – is that if shareholders receive their share of profits free of taxation and subsequently capitalize it, they generate an increase in the acquisition cost of their investment. The same result is achieved by capitalizing retained earnings.

Let’s also remember the rules contained in article 3 caput and § 1 of Law 8,849/1994, which state that “increases in the capital of legal entities through the incorporation of profits or reserves will not be subject to income tax” (…) even if these profits “have not been subject to taxation”. Paragraph 2 then extends this exemption to shareholders, whether natural or legal persons, who are beneficiaries of the shares or quotas resulting from the increase in share capital. These rules, although created in a context where dividends were taxed before 1996, remain formally in force in the Brazilian legal system and make it clear that capitalization does not imply income tax at either the company or shareholder level.

Bill 1.087/2025 amends, among other things, article 10 of Law 9.249/95 to include the withholding of IRRF at 10% as an exception to the exemption of dividends, including when paid, credited, delivered, employed or remitted abroad. However, unlike other bills on the same subject, Bill 1.087/2025 does not regulate the capitalization of profits.

As paragraph 1 of article 10 of Law 9,249/95 is not amended by Bill 1,087/2025, the possibility of capitalizing profits with the consequent increase in the cost of acquisition remains in force. Likewise, the rule that clarifies the non-taxation of capital increases through the incorporation of profits or reserves will coexist.

The question that remains is therefore fundamental: does capitalization need to be taxed to make the increase in acquisition cost possible, or could there be capitalization without taxation? Can the acquisition cost be increased by the capitalized portion of the profit?

The capitalization of profits accumulated until 2025, carried out until 31 December 2025, along the lines set out in Bill 1.087/2025, would not be taxed and would generate an increase in the acquisition cost, maintaining the logic of the current exemption regime. There seems to be no doubt about this.

But as of 2026, in order for the cost to be recognized under the new tax regime, should the capitalization be treated as a taxable event, subject to the 10% rate despite the provisions of Law 8,849/94? Or would the increase in cost be an option, so that there could be capitalization without taxation, but without the corresponding increase in acquisition cost, preserving tax neutrality?

The absence of a specific rule on the capitalization of profits in Bill 1.087/2025 in the light of the tangle of sparse tax rules in force, even though they were issued at different legal moments, creates significant legal uncertainty. Taxpayers are left to evaluate the advantages and possible risks associated with the new tax regime for distributing dividends in the old Brazilian legislative context.