Well, this post is dedicated to that foreign crew that is burning their brains trying to understand what is “juros sobre capital próprio”. It’s a Brazilian accountance term with apparently no equivalent abroad.
In 1995, Brazilian law-makers approved a law that allows company shareholders to charge the company an interest on the money they’ve put/kept in the company. We are talking here about interests on treasury stocks, retained earnings or capital reserves.
What is “Juros sobre capital próprio” or “JSCP”?
This interest is called “Juros sobre capital próprio (JSCP)”. Long story short: it is considered an expense and impacts the company’s fiscal income, reducing the income tax. It can make substantial difference in the company income taxes. The shareholder is not income taxed either. So, in the bottom line, it works as a dividend that reduces your income tax.
However, there are certain limits for that (you can’t charge your own company an interest of 50% a year for example and there are some income tax limits that you can reduce with this artifice). If you understand portuguese, this is a good article about the limits of deductibility of JSCP.
If you want me to translate it for you, comment below and when I see it I will do. 🙂
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