If you own shares or ADRs of Brazilian banks such as Itaú (ADR: ITUB), Bradesco (ADR: BBD) or Banco do Brasil (ADR: BDORY), or of holding companies such as Itaúsa, you will see two kinds of payout in your statements: dividends and JCP, short for juros sobre capital próprio, usually translated as “interest on shareholders’ equity” or “interest on capital”. Both land in your account the same way and look alike, but they are not the same thing. They come from different places, they are taxed differently and, since 2026, new rules change how much of each one actually reaches the investor. Understanding the difference answers two practical questions: how much of the announced payout really ends up in your pocket, and why so many Brazilian companies prefer to pay JCP.
What a dividend is
A dividend is the simplest way to reward a shareholder. The company calculates its profit for the period, pays taxes on it and distributes part of what is left to its owners. It is profit that has already been taxed inside the company and leaves it as a share of the results.
Brazilian corporate law requires companies to pay a minimum dividend, usually 25% of adjusted net income, unless the bylaws set a different rule. Many companies, such as insurers and most banks, pay out far more than that.
What JCP is
Interest on shareholders’ equity is a Brazilian invention, created in 1995. The idea is to treat the money shareholders have left inside the company as if it were a loan from them to the company. If a business pays interest to whoever lends it money, why not also pay interest to those who invested in it as partners?
That is why JCP is not calculated on profit alone, but on the company’s shareholders’ equity: the capital invested by shareholders plus accumulated profits. The rate used is the TJLP, a long-term interest rate set by the Brazilian government. There is also a cap: JCP cannot exceed half of the period’s profit or half of accumulated profits.
In practice, for the shareholder, JCP works like a dividend. The difference lies in the taxes.
Why companies like JCP
The secret is an accounting detail. For the company, JCP counts as an expense, as if it were real interest. And an expense reduces the profit on which the company pays corporate income tax and social contribution.
A simplified example helps. For most Brazilian companies, corporate income tax and social contribution add up to 34% of profit. If a company pays R$ 100 in JCP, it saves about R$ 34 in those taxes. Banks pay a higher social contribution rate, so their savings are larger. With a dividend there is no such deduction: the company pays tax on all of its profit and only then distributes.
That is why banks and large companies usually pay JCP up to the legal limit and top up the rest with dividends. JCP can also count toward the mandatory minimum dividend.
How each one is taxed for investors in Brazil
This is where the difference weighs most for individual investors who live in Brazil.
JCP: tax withheld at source. JCP has income tax withheld before it reaches the investor’s account. Until 2025 the rate was 15%. Since January 1, 2026, under Complementary Law 224/2025, it is 17.5%. For individuals resident in Brazil, this tax is final: there is nothing left to settle on the annual tax return. Of every R$ 1.00 of gross JCP, R$ 0.825 arrives.
Dividends: exempt for most, with a new rule for large amounts. Dividends were exempt from income tax for almost 30 years. Since January 2026, Law 15,270/2025 created an exception: when the same company pays more than R$ 50,000 in profits and dividends to the same individual in the same month, it withholds 10% on the whole amount paid that month, not only on the part above the limit. For those who receive up to R$ 50,000 a month from each company, nothing changes. The same law also created a minimum tax for people with annual income above R$ 600,000, which includes dividends in the calculation.
For most individual investors in Brazil, the rule of thumb remains simple: dividends arrive in full; JCP arrives 17.5% smaller.
What changes for investors outside Brazil
If you live abroad and hold Brazilian shares or ADRs, the rules are different, and this is the part most English-language sources skip:
- Dividends are no longer tax-free when sent abroad. Since January 2026, Law 15,270/2025 subjects dividends paid or remitted to non-residents to a 10% withholding tax, regardless of the amount. The R$ 50,000 monthly threshold that protects residents does not apply. Tax treaties and a credit mechanism in the law may reduce the final burden in some cases.
- JCP is also taxed at source. The rate that applies to non-residents can depend on the investor’s country of residence and on tax treaties, so it is worth checking the exact figure with your broker or the depositary bank of your ADR.
- Look at the net amount on your statement. For ADR holders, the depositary bank converts the payout into U.S. dollars and deducts the Brazilian tax and its own fees before paying you. The number that matters is what actually arrives.
Whether part of the Brazilian tax can be offset against taxes in your own country depends on local rules. That is a question for a tax adviser where you live.
Examples from the portfolio
- Itaú, ITUB4 (ADR: ITUB). When the JCP tax rate rose, the bank raised its gross monthly JCP from R$ 0.015 to about R$ 0.0182 per share, precisely so that resident shareholders would keep receiving the same R$ 0.015 net. It is a good example that, with JCP, the number that matters is the net one.
- Bradesco, BBDC4 (ADR: BBD). In September 2026, the bank paid R$ 6.5 billion in JCP in advance. The amount per preferred share was R$ 0.644 gross and about R$ 0.531 net, after the 17.5% withheld.
- Itaúsa, ITSA4. As a holding company, Itaúsa receives JCP from the companies it owns and pays JCP to its own shareholders. Today it still pays two Brazilian federal taxes, PIS and Cofins, on the JCP it receives. That cost disappears in 2027 with Brazil’s tax reform.
Be careful when comparing dividend yields
The main stock data websites calculate dividend yield (how much a stock paid out over the last 12 months, divided by its current price) using gross payouts. For a company that pays almost everything as dividends, gross and net are the same. For a bank that pays a large share as JCP, the yield that actually reaches the investor is lower than the one displayed.
In practice: if a bank shows a dividend yield of 8% and half of its payouts come as JCP, the net yield for a Brazilian resident is close to 7.3%. For investors abroad, the 10% withholding on dividends lowers the net yield further. When comparing an insurer with a bank, or when applying the 6% minimum yield of the Brazilian investor Décio Bazin, it is worth doing this math.
Practical takeaways
This article is not a recommendation to buy or sell any stock mentioned, nor individual tax advice. Tax rules change often, and they differ for residents and non-residents; for concrete decisions, consult a tax professional. For income investors, three lessons stand out:
- Look at the net amount, not the gross one. With JCP, part of the payout stays with the Brazilian tax authority before the money arrives.
- Adjust the dividend yield of companies that pay a lot of JCP. Banks and holding companies tend to have a lower net yield than the one shown.
- Understand why the company chose JCP. For the company, it is a legal and efficient way to pay less tax. Part of that saving goes back to shareholders as larger payouts.
In the end, JCP and dividends are two roads to the same destination: the company’s profit reaching its owners. What changes is how much of that profit is left along the way.
By Rodrigo Gomes Flores — Dividendo Certo
This is the English version of an article originally published in Portuguese.
Sources:
- Econet Editora: “Novas regras do JCP: base de cálculo e IRRF em 2026” (in Portuguese): 17.5% JCP withholding rate under Complementary Law 224/2025, in force since January 1, 2026.
- CLM Controller: “Juros sobre capital próprio em 2026” (in Portuguese): final taxation for resident individuals and tax deductibility for companies.
- Status Invest: adjustment of Itaú’s monthly JCP (in Portuguese): net amount of R$ 0.015 maintained, gross raised to R$ 0.018182.
- Jornal Contábil: “Lei 15.270 define regras para taxação de lucros e dividendos a partir de 2026” (in Portuguese): 10% withholding above R$ 50,000 a month and minimum tax on incomes above R$ 600,000.
- Mayer Brown: “Enactment of Law No. 15,270/2025, which establishes dividend taxation”: 10% withholding on dividends remitted abroad.
- Trench Rossi Watanabe: “Brazil enacts Law 15,270/2025, which taxes dividends”: withholding on dividends paid to non-residents and the credit mechanism.
- Bradesco: Material Fact of July 29, 2026 on the capital increase and the advance JCP payment (gross and net amounts per share).
- Law 9,249/1995 (creation of JCP) and Law 6,404/1976 (mandatory minimum dividend).