The Interest on Equity (JCP) are a way of remunerating a company's partners and shareholders for the capital they have invested in the business. This instrument has existed in Brazilian legislation since the 1990s and has always been used as an alternative to traditional dividends. In 2026, the topic returned to the center of discussion because there were important changes in the way JCP is taxed, as part of a new Brazilian tax scenario.
For entrepreneurs and managers, it is essential to understand what Interest on Equity is, how it works and what will change in 2026 in relation to the Income tax at source. In the following topics, we will clearly explain the concept of JCP, the differences from dividends, the new tax rules, practical impacts and best practices for dealing with this change, always in accessible and didactic language.
In this article, we'll explain what Interest on Equity (JCP) is, why this mechanism came back into the spotlight in 2026 and what the changes were in the taxation of Income Tax at source.
What is Interest on Equity (JCP)?
In simple terms, Interest on Equity is a payment made by the company to its partners or shareholders as a kind of “return” for the equity they keep invested in the company. Instead of being a portion of profits distributed as dividends, JCP are accounted for as financial expense of the company, similar to the interest the company would pay on a loan.
A purpose of JCP is remunerating investors and shareholders in a tax-efficient way. This mechanism was created as compensation for the end of monetary restatement of balance sheets in the 1990s, allowing companies to reduce their tax burden somewhat by rewarding shareholders.
JCP x Dividends: JCP differ from dividends in several respects. While the distribution of dividends is exempt from income tax for those who receive them (a situation that prevailed for decades in Brazil, until the introduction of new taxation for higher dividends from 2026), JCP is subject to income tax. withholding income tax for the beneficiary.
Interest on Equity (JCP)
Interest on Equity generates tax savings for the company that pays it. This is because the amount distributed as JCP can be recorded as a deductible expense in accounting, reducing taxable profit. With a lower profit for tax purposes, the company ends up paying less Income Tax and Social Contribution, This makes JCP an efficient tax planning tool.
Dividends
Dividends, on the other hand, do not generate tax savings for the company. They are only distributed after the profit has been taxed, i.e. they do not reduce the legal entity's tax base. In practical terms, dividends directly benefit the shareholder, who receives these amounts without paying income tax until 2025, while JCP benefits the company by reducing its tax burden, even though the shareholder is subject to taxation on this income.
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What has changed: increased tax burden
From January 1st, 2026, The rate of Withholding Income Tax (IRRF) on JCP has risen. The government's “bite” on this income is bigger.
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Old rate: 15%
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New rate: 17.5% (according to Complementary Law no. 224/2025).
Impact on your pocket (Practical Example)
For every R$ 100,000.00 declared in JCP, look at the difference in the amount that actually reaches the investor:
| Period | Gross Value | Tax (IRRF) | Net Value (on account) |
| Until 2025 | R$ 100,000 | R$ 15.000 (15%) | R$ 85,000 |
| From 2026 | R$ 100,000 | R$ 17.500 (17,5%) | R$ 82,500 |
Summary: The investor receives 2.5% less of net value compared to the previous regime.
Pay attention to tax time: Payment vs. Credit
A critical point for the company's cash flow: the tax must be paid whichever comes first: the payment cash or book credit.
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What is “Credit”? As soon as the company records in its accounts that it owes that amount to the partner (even if the money has not yet left the company's account), the tax becomes due.
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Implication: If the meeting approves the JCP today to be paid in six months' time, the IRRF of 17.5% must be paid now (usually by the end of the month following registration).
Management and Governance Checklist
To avoid fines and Internal Revenue Service, consider these three pillars:
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Individualization: Accounting must identify exactly how much each partner has to receive.
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Principle of Competence: The JCP must refer to the profit for the current year or existing reserves. It is not permitted to “backdate” to deduct amounts from previous years without a legal basis.
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Legal formalization: It is essential to record the decision in Minutes of Members' or Board Meetings. Without a signed paper, the tax deduction may be invalidated in an inspection.
How withholding income tax on JCP works for different beneficiaries
IRRF taxation on interest on capital can have different effects depending on who the recipient of this interest is. Although the rate is the same (17.5% in 2026), the treatment of withholding tax varies according to the nature of the recipient and their tax regime:
Quick Guide: Who pays for what?
| Who receives JCP | The tax of 17.5% is... | Simple explanation |
| You (Individual) | Definitive | You receive the “clean” amount. What's left in the bank is left. You don't have to pay anything else or ask for a refund. |
| Large Companies (Real Profit) | Anticipation | It's like a down payment. The company owes 34% in total tax, deducts the 17.5% it has already paid and pays the rest. |
| Medium-sized companies (Presumed Profit) | Anticipation | It works as a credit to write off the tax that the company would have to pay on its other income. |
| Churches and NGOs (Immune) | Exempt | If they prove they are immune, they receive the full amount (100%), without any discount. |
Detailing the scenarios
1. For You (Individual)
There's no stress. When the money lands in your brokerage or bank account, the Lion has already bitten off his share. On your annual tax return, you just let them know that you've received it, but you won't pay a penny more for it.
2. For Companies (Real and Presumed Profit)
Here JCP is treated as recipe.
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The company receives the amount and accounts for it as a gain.
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The 17.5% retained in the bank acts as a “tax voucher”.
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When calculating the company's total tax (which is usually higher, around 34%), it uses this “voucher” to pay less. In the end, JCP is taxed like any other company profit.
3. For Immune Entities (e.g. Charities)
These organizations have a “free pass” from the Constitution. They don't have to pay income tax. Therefore, if they submit the correct paperwork, the company paying the JCP cannot deduct the 17.5%. They receive the full amount.
For ordinary investors, JCP is simple: the tax is paid at source and that's the end of it. For companies, JCP is just another piece in the accounting puzzle, where the tax withheld serves as a credit for the future.
Tax outsourcing
The strategic solution for companies
Practical impacts for companies
The great brilliance of the JCP has always been the fiscal economy. For the company, JCP counts as an expense, which reduces taxable income and consequently makes it pay less tax (IRPJ and CSLL).
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Before: The partner paid 15% in tax.
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Now (2026): The member pays 17.5%.
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The Impact: The government is now taking a bigger bite out of this transaction. The “advantage” of using JCP instead of other forms of payment has diminished. The company saves money, but the shareholder gets less.
New Battle: JCP vs. Dividends (2026 rule)
The big news for 2026 is that dividends (which were always exempt) can now also be taxed.
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Dividends in 2026: If you receive more than R$ 50 thousand a month of a company, what exceeds this amount pays 10% tax.
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The Dilemma: * If you use Dividends, The partner pays 10% (on what exceeds the limit), but the company gets no discount on its tax.
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If you use JCP, The partner pays 17.5%, but the company saves a lot on its taxes (it no longer pays the 34% of IRPJ/CSLL on that amount).
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Conclusion: For large companies, JCP usually wins the fight because the savings made by the company (34%) offset the higher tax paid by the shareholder (17.5%).
For small and medium-sized businesses: beware!
If the distribution of profits is lower (below R$ 50,000 per month per shareholder), the dividend is still totally exempt. In this case, paying JCP could be a “shot in the foot”: you would be paying 17.5% in tax unnecessarily, since you could hand over the money as a dividend without paying any income tax.
The problem of “boleto antecipado” (cash flow)
JCP has a logistical trap. When the company announces that it is going to pay JCP (the so-called “credit”), it already has to pay the 17.5% to the government almost immediately.
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The risk: The company may have to take money out of its cash flow to pay the tax in January, even if it doesn't intend to hand the money over to the partner until December. With the higher tax rate (17.5%), this forced “loan” to the government has become heavier.
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Summary of the strategy in 2026:
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Giant Companies: JCP continues to be an excellent tool for reducing the total tax bill of the “group” (company + shareholders).
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Smaller companies: The exempt dividend is still king.
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Planning: You can no longer do it “automatically”. You have to calculate whether the company's tax discount covers the increase in the partner's tax.
Frequently asked questions about JCP in 2026
1 - Will JCP end in 2026?
No. Interest on Equity continues to exist and being allowed as normal. What has changed is the form of taxation: as of 2026, the income tax withheld at source on JCP has increased (17.5%). Therefore, companies can still declare and pay JCP to shareholders, respecting the current rules, but now they must withhold 17.5% of IR at source.
2 - Does the new rate apply to all companies?
Yes, the 17.5% IRRF rate applies to any JCP payment made by Brazilian companies, regardless of the size or tax regime of the paying company. The important thing is the date of payment or credit: if it occurs after January 1, 2026, the rate of 17.5% applies. It's worth remembering that not all companies can or usually pay JCP, as only those that have profits and follow the tax regime that allows deduction (usually companies in the Real Profit, as there is no such possibility in Simples Nacional) use this resource. However, if JCP is paid, the company must apply the new rate and pay the corresponding tax.
3 - Is JCP still better than dividends in 2026?
It depends on the context. For the company, paying JCP can be advantageous because it reduces tax on profits (saving up to 34% on the amount distributed). For the shareholder, however, receiving dividends may be more interesting if they don't exceed the exemption limit of the new taxation (i.e. if dividends are below R$ 50,000 per month per company, they remain exempt). At amounts above this limit, dividends are subject to IRRF 10%, while JCP is subject to 17.5%. So, if the partner is going to receive very high amounts, dividends tend to incur less personal tax. Looking at the whole picture (company + partner), JCP can still result in less total tax in many cases, as the savings in the company can offset the higher taxation on the individual. In short, there is no single answer. You need to simulate the two options according to the specific case to see which strategy yields the best net result.
4 - When should the tax on JCP be paid?
Income tax withheld on JCP must be paid by the company on month following the payment or credit of the JCP, by the due date set by law (usually the 20th of the following month, or the immediately preceding business day if the deadline falls on a weekend or holiday). For example, if the company credited JCP to shareholders on March 15, 2026, it must pay the IRRF of 17.5% by the legal deadline in April 2026. It is crucial not to miss this deadline in order to avoid fines and interest. Payment is made by means of a DARF, using the specific revenue code for IRRF on JCP, in accordance with the IRS guidelines.
5 - Do immune companies pay income tax on interest on capital?Companies immune from income tax (such as certain religious institutions, charitable organizations for social and educational assistance, political parties, among others, as defined by the constitution) are not subject to to IR on any income that is covered by immunity. This includes any JCP they may receive. In practice, if an immune entity receives JCP, it should not be subject to withholding tax. To do this, it must provide proof of its immune status to the source of payment, so that the company paying the JCP does not withhold. If the withholding is undue, the immune entity can request a refund of the amount withheld. Therefore, respecting the formal procedures, immune entities receive JCP without paying IR on these values.
Conclusion
The changes in the taxation of Interest on Equity from 2026 reinforce the importance of entrepreneurs and managers being well informed and adapting their businesses quickly to the new tax scenario.
JCP remains a useful tool for tax planning and shareholder remuneration, but its relative advantages have been reduced by the increase in tax at source. More than ever, it is necessary to strategically evaluate how to distribute the company's results: understand the new rules, compare JCP versus dividend scenarios and ensure that any decision made is in line with the new rules. compliance with current legislation.
In addition, the need for planning and tax compliance has never been so obvious. Mistakes or ignorance can be costly, either in lost opportunities for legal tax savings or in penalties for non-compliance. Therefore, when implementing JCP policies in 2026 and beyond, it is worth investing time and resources to plan correctly and execute with accounting and legal precision.
Rely on the expert advice of CLM Controller Accounting to adapt to the new JCP rules in 2026, optimize your tax burden within the law and avoid unnecessary risks. Whether you need to clarify doubts, recalculate strategies or implement the changes in a practical way, our team is ready to help your company make informed and well-founded decisions. Contact us and strengthen your business with the support of those who understand the subject and value your company's success.
