(MENAFN- The Rio Times) Brazil's Congress inched forward on a contentious tax overhaul after a joint committee approved Provisional Measure 1303 by a single vote.

The plan replaces today's tiered tax on financial returns with a flat 18 percent and sets the same 18 percent on“interest on equity” (JCP), a common way companies remunerate shareholders. It now faces rapid-fire votes in both chambers or it will expire.

The headline sounds simple-one rate to replace a patchwork-but the real story is how the government reworked its plan under political fire.

Rural and business caucuses forced the preservation of tax-free status for real-estate and farm credit notes (LCI/LCA), prized funding channels for housing and agribusiness.

A proposed hike on sports-betting operators was shelved; instead, the government will run a one-off regularization drive to collect past-due taxes from firms that operated before full regulation between 2019 and 2024, expected to raise about R$5 billion ($943 million).



To protect revenue without new consumer taxes, the measure tightens corporate tax offsets, requiring PIS/Cofins credits to match the company's own activity and be backed by real documents.

It also raises the CSLL levy on fintechs from 9 percent to 15 percent, with large fintechs moving to 20 percent-narrowing the gap with traditional banks. Crypto gains are pulled into the same unified investment-income regime.
Brazil's Tax Overhaul Seeks Balance
Why this matters abroad is straightforward: Brazil is trying to stabilize its budget ahead of a high-stakes election year while keeping credit channels to housing and farming intact.

The government estimates the revised package will raise a little over R$17 billion ($3.21 billion) in 2026-about R$3 billion ($566 million) less than first planned after concessions on LCIs/LCAs and betting.

For investors, the winners and losers shift: short-term savers likely pay less than today's top 22.5 percent rate; very long-term holders pay more than the current 15 percent; LCI/LCA remain tax-free.

Behind the scenes, this is the sequel to a shelved attempt to lift the IOF financial-operations tax-cut back by politics and court limits.

MP 1303 is the compromise: a cleaner, easier-to-explain system that still chases money left on the table. Whether it survives final votes will signal how far Brazil can go in funding its promises without choking investment.

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