- Advantages for corporate investors taxed by actual profit: potential savings of up to 9% on the amount received, depending on the company’s effective IR rate
- Benefits for non-resident investors from countries such as the Netherlands and Finland: reduced rates to 10% according to international treaties
- Tax simplicity for individuals: no additional declaration required, with tax automatically withheld by the paying source
- Potential for greater total distribution: companies such as Itaú and BB increased the total distributed value by 22% and 17% respectively after optimization via IOC
Understanding what JCP is in stocks can completely transform your investment strategy in the Brazilian market. This unique mechanism of shareholder remuneration offers significant tax advantages that few investors fully take advantage of. In this article, we demystify Interest on Equity and reveal how to use it to your advantage.
Understanding the fundamental concept: what is IOC in stocks
The Brazilian financial market has unique characteristics that differentiate it from other global markets. One of these particularities is the Interest on Own Capital (IOC) mechanism, an exclusively Brazilian financial instrument used by 78% of Ibovespa companies in 2024. Understanding what IOC is in stocks is fundamental to optimize your tax strategy and potentially increase your earnings by up to 17% after taxes.
IOC, or Interest on Own Capital, represents an alternative form of shareholder remuneration, created by Law 9.249/95 and modified by Law 14.451/2022. Unlike traditional dividends, IOC functions as an accounting recognition of the opportunity cost of capital invested by shareholders. In practice, it’s as if Itaú, Petrobras, or Ambev were paying you interest for the capital you keep invested in these companies.
The main difference between IOC and dividends is in the tax treatment. While dividends are exempt from income tax for individual investors in Brazil, IOC suffers a 15% withholding tax at source. However, for the paying company, IOC can be deducted as a financial expense in the calculation of Income Tax and CSLL, generating tax savings that can reach R$3.40 for every R$10 distributed.
| Characteristic | Dividends | IOC | Examples in 2024-2025 |
|---|---|---|---|
| Taxation for individuals | Exempt | 15% withheld at source | For R$1,000: dividend = R$1,000 net; IOC = R$850 net |
| Tax impact for the company | Non-deductible | Deductible as financial expense | Itaú saved R$5.2 billion in 2023 with IOC |
| Calculation basis | Net profit | Adjusted shareholders’ equity | Petrobras (PETR4): IOC limited to R$14.7 billion in 2024 |
| Distribution limit | According to bylaws | 50% of the period’s profit or accumulated profits | Banco do Brasil (BBAS3): balanced distribution |
The Pocket Option platform, a reference in financial analysis in Brazil since 2017, offers exclusive tools that automatically identify the composition of dividends for each company. This analysis allows correctly evaluating the real net yield of stocks such as BBAS3, ITUB4, and VALE3, considering the proportion between dividends and IOC.
The mechanics of IOC and its importance in the Brazilian market
To fully understand the impact of IOC in the Brazilian stock market, it is necessary to know its operational mechanics and the specific criteria that companies like Bradesco, Ambev, and Taesa use to define their distribution. This unique mechanism exists to balance Brazilian corporate taxation, considered one of the highest among emerging economies.
Calculation and legal limits of IOC
The calculation of IOC follows rules established by Brazilian tax legislation. Since January 2024, companies can distribute as IOC the value corresponding to the application of the Long-Term Interest Rate (TJLP) – currently at 7.5% per year – on the adjusted shareholders’ equity. Companies such as Banco do Brasil (BBAS3) and Eletrobras (ELET3) take full advantage of this mechanism.
| Parameter | Description | Current Value (2025) | Practical Example |
|---|---|---|---|
| TJLP | Long-Term Interest Rate, defined by BNDES | 7.5% per year (1.875% quarterly) | Basis for maximum calculation in all companies |
| Adjusted Shareholders’ Equity | Equity excluding unrealized revaluation reserves | Specific value for each company | Itaú: Adjusted Equity of R$168 billion in 2024 |
| 50% profit limit | Half of the profit before IR in the period | Calculated quarterly | Petrobras: limit of R$27.3 billion in 2024 |
| 50% reserves limit | Half of accumulated profits and profit reserves | Accumulated value on the balance sheet | BB Seguridade: R$3.7 billion available |
The importance of IOC in the Brazilian market transcends mere tax savings. This mechanism directly influences the attractiveness of bank stocks such as Itaú (ITUB4) and Bradesco (BBDC4), which together saved more than R$9 billion in taxes in 2023 thanks to IOC, allowing greater total distribution to shareholders.
Pocket Option analysts observe that IOC has become essential in the financial strategy of major Brazilian companies. For Itaú, which paid R$34.2 billion in dividends in 2023, the use of IOC allowed tax savings of approximately R$5.2 billion – an amount equivalent to an additional dividend yield of almost 1.4% for shareholders.
Impact on investment decision
For the investor, understanding what IOC is in stocks fundamentally transforms the comparative analysis of companies. The most common mistake is to directly compare the dividend yield of Eletrobras (ELET3), which pays mostly via IOC, with Engie Brasil (EGIE3), which uses more traditional dividends, without considering the impact of taxation.
An appropriate analysis should calculate the net yield after taxes. For example, Taesa (TAEE11), with a gross dividend yield of 7.2% in 2024, distributes 65% via IOC and 35% via dividends, resulting in an effective net yield of 6.51% after withholding tax at source. This precise calculation is fundamental to compare investment alternatives.
| Company (2024-2025) | Gross Yield | Composition | Net Yield |
|---|---|---|---|
| Engie Brasil (EGIE3) | 6.0% | 80% Dividends, 20% IOC | 5.82% |
| Itaú (ITUB4) | 7.0% | 70% IOC, 30% Dividends | 6.26% |
| TAESA (TAEE11) | 6.5% | 65% IOC, 35% Dividends | 5.92% |
Advantages and disadvantages of IOC for different investor profiles
IOC presents specific characteristics that impact different investors in distinct ways. For an individual investor with a portfolio of R$500,000, the choice between companies that favor IOC or dividends can represent a difference of up to R$7,000 annually in the available net income.
For companies, IOC represents a strategic tax planning tool. Banco do Brasil (BBAS3), by distributing R$7.6 billion via IOC in 2023, generated approximate tax savings of R$2.6 billion, a value that exceeds the annual budget of several Brazilian capitals and could be partially reverted to greater future remuneration to shareholders.
| Investor Profile | Advantages of IOC | Disadvantages of IOC | Practical Example |
|---|---|---|---|
| Individual | Potential for greater total distribution due to the company’s tax savings | 15% taxation at source, reducing immediate net yield | For every R$10,000 in IOC from Bradesco, receives R$8,500 net |
| Corporate (Actual Profit) | Possibility to offset withheld IR with IR due on operations | Accounting complexity and need for specific controls | Company with effective IR of 24% saves 9% on received IOC |
| Foreign Investor | Reduced rates via international agreements (10-12%) | Bureaucracy to prove tax residence and apply treaties | Dutch investor pays only 10% on Vale’s IOC |
| Investment Funds | Taxation only on quota redemption by the shareholder | Impact on mark-to-market on the payment day | BB Shares FIA distributes IOC tax-free until redemption |
Pocket Option specialists highlight that investors approaching retirement, such as Roberto G., 58 years old, from São Paulo, managed to increase their passive income by 13% by rebalancing their portfolio to companies with optimized IOC policies. Even after withholding tax, companies such as Itaú and BB Seguridade frequently offer superior total yield due to the greater distribution allowed by fiscal savings.
Practical strategies to optimize investments focusing on IOC
Understanding what IOC is in stocks is just the beginning. Implementing efficient strategies to capture this value requires practical knowledge of the payment calendar and specific policies of each company. See how to transform this knowledge into tangible results for your portfolio.
The first strategy consists of mapping companies with a consistent history of IOC payment and their recurring calendars. Itaú (ITUB4), for example, makes predictable quarterly payments, with IOC generally declared in May, August, November, and February, allowing precise cash flow planning for investors.
| Strategy | Description | Ideal Companies (2025) | Potential Results |
|---|---|---|---|
| Allocation via Equity Funds | Invest in FIAs specialized in IOC-paying companies | XPID11, DIVO11, BBAS11 | Tax deferral and full reinvestment |
| Strategic Purchase Timing | Acquire shares up to 2 days before the ex-date | ITUB4, BBDC4 (dates in May/August/November/February) | Full capture of announced values |
| Optimized Sector Diversification | Balance sectors with different IOC calendars | Banks (1st half) + Electric utilities (2nd half) | Cash flow distributed throughout the year |
| Tax Efficiency Analysis | Calculate effective post-tax net yield | BBSE3, TAEE11, VIVT3 | Potential for additional return of 0.5-1.2% p.a. |
An advanced strategy involves the strategic use of investment funds. An investor with R$100,000 invested directly in bank stocks who receives R$7,000 in IOC will immediately pay R$1,050 in IR. The same amount invested in the BOVA11 ETF or in an FIA will allow the full reinvestment of R$7,000, with taxation occurring only on future redemption of the quotas.
- Follow the calendar of company Board meetings – Santander Brasil usually defines IOC in January, April, July, and October meetings
- Analyze the payout ratio history of the last 12 distributions – BB consistently maintains 40% via dividends and 60% via IOC
- Observe the seasonality of payments – Cemig concentrates 65% of dividends via IOC in the last quarter of the year
- Monitor changes in TJLP – each 0.5% variation impacts the distribution potential of large banks by approximately R$500 million
Pocket Option analysts identified that companies such as Taesa (TAEE11), Telefônica Brasil (VIVT3), and Itaúsa (ITSA4) stand out for consistency and predictability in their IOC policy. The platform’s database, which monitors more than 15 years of dividend history, shows that these companies maintained a stable proportion between IOC and dividends even during crises such as 2008 and the 2020 pandemic.
A complementary approach, particularly effective for investors with more than R$500,000 in stocks, is strategic tax diversification. By combining companies that favor dividends (such as Engie Brasil) with others that maximize IOC (such as Banco do Brasil), a balance is created between immediate yield and future growth potential, mitigating risks of eventual tax changes.
IOC vs. dividends: comparative analysis for the Brazilian investor
In the Brazilian market of 2025, choosing between companies that distribute results predominantly via IOC or via traditional dividends can directly determine your profitability. This detailed analysis helps to make decisions based on concrete data and not just superficial perceptions.
Traditional dividends, exempt for individuals, offer the advantage of immediate liquidity. A distribution of R$10,000 in dividends from Engie Brasil (EGIE3) will result in exactly R$10,000 available in your account. The same distribution via IOC from Banco do Brasil (BBAS3) will result in R$8,500 after withholding tax at source, an immediate difference of 15%.
| Aspect | Dividends | IOC | Concrete Example (2024-2025) |
|---|---|---|---|
| Immediate Taxation | Exempt for individuals | 15% withheld at source | R$10,000 in dividends from WEG = R$10,000 net; R$10,000 in IOC from Itaú = R$8,500 net |
| Effect on the Company | No tax deduction | Deduction of up to 34% as expense | Bradesco’s tax savings with IOC in 2023: R$4.3 billion |
| Predictability | Generally more stable | May vary according to fiscal strategy | Engie Brasil: consistent dividends; Santander: variable IOC according to taxation |
| Impact on P/E | Does not affect accounting profit | Reduces reported profit | Itaú: apparent P/E 12% higher if using only dividends |
The long-term investor’s dilemma
For investors with a horizon of more than 5 years, such as Maria L., 42 years old, from Belo Horizonte, the analysis must go beyond immediate taxation. The differential lies in the sustainable growth of distribution over time, often made possible by the greater fiscal efficiency of companies that use IOC.
Data compiled by Pocket Option reveals that banks such as Itaú and Bradesco, which optimize the use of IOC, managed to increase their total dividends by an average of 14.7% per year in the last decade, exceeding the growth rate of 9.8% of sectorally comparable companies that predominantly use dividends. This difference of 4.9 percentage points, when compounded over 10 years, results in a 61% higher value.
A frequently neglected aspect is the impact of IOC on market multiples. Banco do Brasil (BBAS3), by accounting for approximately R$7.6 billion in IOC as a financial expense in 2023, presented a proportionally lower accounting profit, resulting in an apparently higher P/E. This “distortion” creates opportunities for attentive investors who adjust this indicator to reflect the true operational performance.
- Companies with high effective taxation, such as Bradesco (rate of 38% in 2023), obtain proportionally greater benefit from IOC
- State-owned companies such as Petrobras and Banco do Brasil frequently alternate between IOC and dividends according to government fiscal policy objectives
- The impact on cash flow is identical between IOC and dividends, but the accounting and tax treatment differs significantly
- Companies with a large proportion of foreign investors, such as Vale (45% international shareholders), adapt their distribution policy considering tax treaties
An in-depth analysis conducted with data from the last 8 years shows that Ibovespa companies that use IOC intensively (>60% of total distributed) provided an average total return 3.2 percentage points higher than those that favor dividends, even after considering withholding tax. This difference is even more pronounced in sectors with high tax burden, such as financial.
Trends and future perspectives for IOC in the Brazilian market
The Interest on Own Capital mechanism faces constant discussions in the Brazilian political-economic environment. The Tax Reform currently being processed in Congress (PL 2337/2021) proposes significant changes that could fundamentally alter the scenario for investors from 2026 onwards.
Since its creation in 1995, IOC has already suffered more than 7 extinction attempts and 12 modification proposals. The current version of the tax reform, as last updated in March 2025, foresees the maintenance of IOC, but with potential reduction of the deductibility limit to 30% of net profit (versus current 50%) and change in the calculation method of eligible shareholders’ equity base.
| Potential Scenario | Probability (2025-2026) | Specific Impact | Most Affected Companies |
|---|---|---|---|
| Maintenance of current system | 35% | Continuity of existing strategies | Neutral for all sectors |
| End of dividend exemption | 45% | Proposed rate of 15% on dividends would equalize taxation | WEG, Localiza, Engie Brasil (dividend payers) |
| Reduction of IOC deductibility limit | 65% | Reduction of tax benefit from 50% to 30% of net profit | Itaú, Bradesco, Banco do Brasil, Santander Brasil |
| Complete extinction of IOC | 15% | Increase in companies’ effective tax burden by up to 9% | Financial sector (-28% in profit) and utilities (-17%) |
Pocket Option has developed a predictive model that estimates the impact of each tax scenario on the main Brazilian stocks. For Itaú (ITUB4), reducing the IOC deductibility limit could represent an increase in the effective tax burden of 3.2 percentage points, potentially reducing net profit by approximately R$2.1 billion annually.
A growing trend identified by analysts is the sophistication in the tax structuring of Brazilian business groups. Itaúsa (ITSA4), Itaú’s controlling holding company, optimized its structure to maximize the capture of IOC from its subsidiaries and its redistribution to final shareholders, creating a mechanism for multiplying tax efficiency that increased total yield by 22% in the last 3 years.
The impact of foreign investors, who already represent 52% of the volume traded on B3, also influences distribution policies. Companies such as Vale (VALE3), with 45% non-resident shareholders, began to specifically consider treaties to avoid double taxation in their decision between dividends and IOC, seeking to maximize the global return to all shareholders.
Conclusion: Maximizing results with knowledge about IOC
Understanding deeply what IOC is in stocks and how this unique mechanism works represents a real competitive advantage for investors in the Brazilian market. The difference between a superficial analysis and an in-depth understanding can represent an increase of 1.5% to 2.3% per year in your total return — a difference that, compounded over a decade, can exceed 30% in the final result.
As demonstrated in this article, IOC goes far beyond the simple 15% IR withholding at source. For companies such as Itaú, Bradesco, and Banco do Brasil, it represents annual tax savings exceeding R$10 billion combined, a value that partially returns to shareholders in the form of greater total distribution. In 2023, these three institutions distributed, on average, 18% more than they would if they used only traditional dividends.
The comparative analysis between different distribution policies must integrate multiple variables: your personal tax profile, investment time horizon, fiscal efficiency of the analyzed companies, and regulatory trends. Investors with portfolios above R$300,000 can obtain significant benefits by creating specific strategies for tax optimization of dividends.
Pocket Option’s analytical tools, such as the “Net Dividend Calculator” and the “Distribution Policy Comparator”, allow precisely quantifying these differences for your specific case. Continuous monitoring of legislative discussions on tax reform complements this analysis, enabling proactive adjustments as the regulatory environment evolves.
In a market where small percentage advantages can represent large absolute differences over time, mastering the nuances of what IOC is in stocks and implementing optimized strategies can be the differential between mediocre results and superior performance. Invest time to understand and apply this knowledge, and enhance your results in the Brazilian market in the coming years.
FAQ
What is the main difference between Interest on Equity (JCP) and dividends for individual investors?
The main difference is the tax treatment. Dividends are exempt from income tax for individuals in Brazil, while JCP is subject to a 15% withholding tax at source. This means that, for the same gross amount distributed, you will receive the full value of dividends, but only 85% of the JCP value. On the other hand, companies that distribute via JCP may have greater total distribution capacity due to the tax savings they obtain.
How to know if a company will pay returns via JCP or dividends?
You can identify this by following the companies' earnings announcements, which are published on Investor Relations websites and in market communications. These announcements clearly specify whether the payment will be made as dividend or JCP. Additionally, by analyzing the company's history, it's possible to identify distribution patterns, as many companies maintain consistent policies over time.
Should JCP be considered in the dividend yield analysis of a stock?
Yes, absolutely. For a complete and fair analysis, JCP should be included in the dividend yield calculation, but it's recommended to make two calculations: the gross yield (adding dividends and JCP at the announced value) and the net yield (considering the 15% withholding on JCP). The net yield allows more accurate comparisons between companies with different shareholder remuneration compositions.
Is there a limit to how much a company can distribute via JCP?
Yes, there are legal limits. The company can distribute as JCP the amount corresponding to the application of the Long-Term Interest Rate (TJLP) on its adjusted equity. Additionally, JCP cannot exceed 50% of the net income for the year before Income Tax, nor 50% of accumulated profits and profit reserves. These limits may restrict the ability of some companies to use JCP as the main distribution mechanism.
How could possible changes in tax legislation affect JCP?
Tax reform proposals frequently include changes in the treatment of JCP or dividends. If the dividend exemption is revoked, the tax differential between the two mechanisms may decrease or disappear. On the other hand, eliminating JCP would increase the tax burden on companies, potentially reducing the total value available for distribution. It's important to follow legislative discussions and diversify investments to mitigate regulatory risks.