Interests on Own Capital: A Review of the Taxation Impact on Who Pays and on Who Receives

Abstract

With the publication of law 9.249/95 the use of interest on capital becomes an option for thecompensation of shareholders and stakeholders in the companies. Once this alternative ischosen, the company gains the rights to deduct the value of the JSCP as the basis forcalculating income tax and social contribution. This study demonstrates the impact results ofRevista Científica Hermes 7: 74-89, 2012this choice for the company and for the shareholders. The company will have a fiscal taxadvantage with the use of JSCP, as the tax base for income and social contribution is reducedafter the deduction of interest on capital as a financial expense. The shareholders, as naturalperson, will benefit because they will have a tax liability on the JSCP taxes hold, and still willreceive a larger portion of dividends because with the spending cuts the amount to bedistributed by the company increases. For the artificial person, this method may not be themost attractive one because the JSCP are considered financial revenue which results in highertaxation for the corporation.