Interest on Net Equity (JCP): Brazil's Tax-Efficient Alternative to Dividends
Short answer. Juros sobre Capital Próprio (JCP) — “interest on net equity” — is a uniquely Brazilian mechanism that lets a company deduct a payment to its shareholders from IRPJ/CSLL, while the shareholder pays a withholding that, from 2026, rose to 17.5% (up from 15%). With dividends also becoming taxable from 2026, JCP remains an interesting tool for returning value — but only for companies under Lucro Real.
What JCP is
JCP treats part of the return to shareholders as a notional interest on their equity. The company computes it by applying the TJLP (long-term interest rate) to defined net-equity accounts, within limits, and may deduct the amount from the IRPJ/CSLL base — unlike dividends, which are not deductible. The beneficiary is taxed at a 17.5% withholding (IRRF) from 2026. [Source: Lei 9.249/1995, art. 9 — Planalto; Lei Complementar 224/2025]
The net effect: value leaves the company having reduced ~34% of entity-level tax on the deducted amount, at the cost of the JCP withholding — a different arithmetic from paying dividends out of after-tax profit.
The Lucro Real condition
The deduction only benefits companies on Lucro Real (actual profit), which can subtract the JCP from taxable profit. Companies on Lucro Presumido do not get the same deduction benefit, so JCP is primarily a planning tool for Real-regime taxpayers. [Source: Lei 9.249/1995]
What changed in 2024 and 2026
Two recent laws reshaped JCP:
- Lei 14.789/2023 (effective 2024) narrowed the equity base used to compute JCP — for example, excluding certain reserves/equity-method amounts and treasury shares. The mechanism survives, but the deductible amount is generally smaller. [Source: Lei 14.789/2023 — Planalto]
- Lei Complementar 224/2025 (published December 2025) raised the JCP withholding from 15% to 17.5%, effective 1 January 2026 — for both individuals and companies. A beneficiary in a low-tax jurisdiction remains taxed at 25%. [Source: Lei Complementar 224/2025 — Planalto]
Why it still matters after the 2026 dividend tax
Historically, dividends were tax-free, so JCP’s withholding looked like a pure cost. Now that dividends carry a 10% withholding from 2026, the comparison is about the deduction: JCP is deductible at the company level (dividends are not), which can make the combined burden of a JCP distribution competitive despite its higher 17.5% headline withholding. The right mix of dividends and JCP is a modeling exercise per company. (For a foreign shareholder, the FX leg of a JCP remittance is currently at 0% IOF-câmbio.)
Practical takeaway
For a foreign-owned subsidiary on Lucro Real, JCP still deserves a place in the distribution plan: it trades a 17.5% withholding for a company-level deduction. Model JCP against dividends under the post-2026 rules — the 17.5% JCP withholding vs the 10% dividend withholding, weighed against JCP’s deductibility and its narrowed base — before deciding how to return profit.
FAQ
What is JCP in Brazil? A deductible, notional “interest on net equity” paid to shareholders — an alternative to dividends — taxed at 17.5% withholding from 2026.
What is the JCP withholding rate in 2026? 17.5%, raised from 15% by Lei Complementar 224/2025 effective 1 January 2026, for both individuals and companies. Beneficiaries in low-tax jurisdictions are taxed at 25%.
Who can benefit from JCP? Companies under Lucro Real, which can deduct the JCP from the IRPJ/CSLL base.
Is JCP better than dividends? It depends — JCP is deductible at the company level (dividends are not) but carries a 17.5% withholding vs 10% on dividends; model both under the post-2026 rules.
📚 Part of our pillar guide: Corporate Tax in Brazil — The Complete Guide for Foreign Companies.
Sources
Official sources reviewed for this brief: the law creating JCP and its deductibility (Lei 9.249/1995, art. 9), the 2023 law that narrowed the JCP calculation base (Lei 14.789/2023), and the 2025 law that raised the JCP withholding to 17.5% from 2026 (Lei Complementar 224/2025 — Planalto), read together with the 2026 dividend-taxation change (Lei 15.270/2025).