São Paulo court waives dividend income tax for Jardim Elétrico Produções

A federal court in São Paulo has ruled in favor of Jardim Elétrico Produções, setting aside the 10% income tax withholding on dividends mandated by Law No. 15.270/2025. The 9th Federal Civil Court of São Paulo granted a preventive writ of mandamus, addressing arguments regarding the principles of contributive capacity, progressivity, and the prohibition of confiscation.

The ruling is specific to the case and does not serve as a general authorization for all companies to cease withholding; the decision remains subject to appeal.

Under Law No. 15.270/2025, which took effect in January 2026, a 10% income tax must be withheld at the source when a legal entity pays or credits more than R$ 50,000 in profits or dividends to the same individual resident in Brazil within a single month. The tax applies to the total distributed amount rather than just the portion exceeding the threshold. The law also establishes an annual taxation system for high-income individuals with annual earnings between R$ 600,000 and R$ 1.2 million.