Brazil Enacts New Income Tax: R$5,000 Exemption, Minimum Tax on High Earners

Overview

• Rules take effect today with full exemption up to R$5,000 per month and a gradual discount up to R$7,350, while rates above that band remain unchanged.
• A progressive minimum tax now applies to annual incomes above R$600,000, reaching a 10% floor for those earning over R$1.2 million, with about 141,000 taxpayers affected by government estimates.
• Dividend distributions to individuals above R$50,000 per month face a 10% withholding at source, which can be offset in the annual return, and a 10% withholding also applies to remittances abroad.
• The government estimates an IRPF revenue loss near R$31.2 billion, projecting roughly R$34.1 billion in proceeds from the minimum tax and new withholding to more than cover the gap.
• Beneficiary counts vary across reports, ranging from roughly 10 million to 16 million, and professionals who channel income through company profits are expected to see bigger tax increases than salaried workers.