Weak dividend tax hits Lula's fiscal test in Brazil

TL;DR

Brazil's new dividend tax raised 156.9 million reais in January-February, far below the 30 billion reais projected for 2026.
The tax must offset a 28 billion reais cost from expanding income tax exemptions to 5,000 reais monthly earnings, with no help from other measures until 2027.
Weak early revenue tests the fiscal balance of Lula's key policy ahead of his 2026 reelection bid.

The story at a glance

Brazil's new 10% dividend tax has brought in far less revenue than expected so far, according to unpublished tax data reviewed by Reuters. President Luiz Inacio Lula da Silva's government aimed for fiscal neutrality by using this tax to cover costs of wider income tax exemptions for lower earners. The report comes now because early 2026 data shows collections at under 1% of the full-year target, raising doubts just months before October's presidential election.[[1]](https://www.reuters.com/world/americas/weak-dividend-tax-revenue-puts-lulas-plan-test-brazil-2026-04-16/)[[2]](https://www.reuters.com/world/americas/weak-dividend-tax-revenue-puts-lulas-plan-test-brazil-2026-04-16)

Key points

Dividend tax started this year: 10% on domestic payments over 50,000 reais ($10,015) to individuals and on all remittances abroad.
January-February collections: 121.7 million reais domestic, 35.2 million reais overseas, for a total of 156.9 million reais.
2026 government forecast: 23.8 billion reais domestic, 6.2 billion abroad, totaling 30 billion reais.
Exemption expansion costs an estimated 28 billion reais in 2026; a planned minimum tax on high earners (up to 10% on income over 600,000 reais yearly) brings no revenue until 2027.
Central bank data shows $4.8 billion (25 billion reais) in dividends sent abroad in the first two months, mostly untaxed due to timing.
Tax authority notes uneven payments, with many firms distributing once or twice yearly based on prior-year results exempt from the levy.

Details and context

The tax reform is one of Lula's biggest policy bets to win middle-class support before the 2026 election. Firms accelerated payouts in 2025 to dodge the new rule, which may partly explain the slow start.

Government officials called early collections "disappointingly low," while the tax authority insists data is inconclusive this soon. Large companies often pay dividends tied to annual results, so full-year figures could still meet targets.[[1]](https://www.reuters.com/world/americas/weak-dividend-tax-revenue-puts-lulas-plan-test-brazil-2026-04-16/)

Key quotes

"Many companies had accelerated dividend distributions last year to avoid the new levy. Results are likely to fall short of projections for the entire year." – Marcos Cintra, former tax chief.[[1]](https://www.reuters.com/world/americas/weak-dividend-tax-revenue-puts-lulas-plan-test-brazil-2026-04-16/)

Why it matters

Weak dividend revenue threatens Brazil's fiscal targets and market confidence in the government's spending plans. Investors and businesses face higher uncertainty over tax offsets for popular exemptions, potentially delaying the 2026 rollout or forcing spending cuts. Watch full-year collections and any mid-2026 adjustments, though officials say projections still hold.