Brazil Enacts Overhaul of Personal Income Tax as R$5,000 Exemption Takes Effect

Overview

• Workers earning up to R$5,000 per month are now exempt from income tax, with a tapered discount applying from R$5,000.01 to R$7,350 and no rate changes above that band.
• Payroll withholding adjusts immediately for January salaries, while 2026 incomes will be reconciled under the new rules in returns filed in 2027; returns filed in 2026 still follow 2025 rules.
• A new minimum tax applies to annual incomes above R$600,000, rising progressively up to 10%, with government estimates indicating roughly 141,000 high earners will be affected.
• Large distributions of profits and dividends face a 10% withholding when monthly payments to an individual exceed R$50,000, alongside taxation on certain remittances abroad.
• The government projects that about 15 million people will be fully exempt under the new threshold, and a new national minimum wage of R$1,621 is in force.