Brazil Plans Broader Tax Hike on Financial Investments, Credit Bonds

Brazil's government, led by Finance Minister Fernando Haddad, is advancing a series of fiscal reforms targeting investment income to increase tax revenue and promote fiscal stability. Key proposals include raising the income tax rate on interest on equity (JCP) payments to 20%, introducing a 17.5% flat income tax on financial investments to replace the current tiered system, and ending the income tax exemption on fixed-income securities such as agribusiness and real estate credit bills, which will be taxed at 5% starting in 2026. These measures aim to level the playing field in credit markets by eliminating preferential tax treatment that favored certain investment products, while also tightening taxation on foreign income and offshore holdings. The reforms have secured some congressional support but face resistance from powerful sectors such as the rural caucus, given the potential impact on agricultural financing tools. Overall, the government emphasizes that these changes will not raise taxes on wages or consumption but will increase fairness and predictability in Brazil's tax system.