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last mo.

Lula to Sign Income Tax Overhaul After Nov. 11, Raising Exemption to R$5,000 and Taxing High Dividends

The measure shifts Brazil's IRPF burden toward higher earners through a new 10% withholding on large dividend payouts beginning in 2026.

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Overview

  • Congress approved PL 1,087/2025, and Lula said he will sanction it after returning from the Belém climate summit, with the ceremony expected from Nov. 11.
  • From 2026, workers and retirees earning up to R$5,000 per month will be exempt from income tax, and reduced rates will apply up to R$7,350.
  • A 10% withholding will apply to profit and dividend distributions that exceed R$50,000 per month starting in 2026.
  • A Personal Minimum Tax is planned for 2027 on individuals with more than R$600,000 per year in exempt income, with a progressive rate up to 10%.
  • The government projects at least 15 million taxpayers will stop paying IR and Sebrae estimates nearly 80% of small businesses will benefit, while analysts foresee stronger consumption, lower household indebtedness, and a 0.15–0.2 pp lift to GDP.