Brazil Details 2026 Income Tax Overhaul as New Exemption Kicks In

Overview

• Receita Federal explains the automatic reducer that zeros income tax for monthly earnings up to R$5,000 and tapers relief for R$5,000.01 to R$7,350, with examples for multiple payers and the 13th salary.
• The new framework starts on January 1, 2026, with the existing progressive table unchanged for monthly incomes above R$7,350.
• Government figures indicate roughly 16 million people will benefit from the expanded exemption and transition band.
• To offset an estimated R$31.2 billion revenue loss, the package adds a minimum tax on very high personal incomes and reintroduces a 10% withholding on dividend distributions above R$50,000 per month and on any amounts sent abroad, measures projected to raise R$34.1 billion.
• The law requires automatic FPE and FPM transfers to protect state and municipal shares, while analysts and editorial voices question distributional impacts and electoral incentives.