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Chamber of Deputies Unanimously Approves Income Tax Exemption Up to R$5,000

The bill now heads to the Senate as a key revenue measure stalls, raising questions about how the government will balance the roughly R$25 billion cost.

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Overview

  • Deputies voted 493–0 to pass the government-backed text, sending it to the Senate for consideration.
  • The measure grants full exemption to monthly wages up to R$5,000 and lowers rates up to R$7,350, with application planned for the 2026 tax year if sanctioned by the end of 2025.
  • The Finance Ministry estimates about 15 million formal workers will benefit, including roughly 10 million who will become exempt and 5 million who will see reduced tax.
  • To offset an estimated R$25 billion revenue loss, the bill sets a minimum tax of up to 10% on very high personal incomes (above R$600,000 annually, reaching full effect above R$1.2 million) affecting about 141,000 taxpayers, and adds a 10% levy on certain profit and dividend payments.
  • A separate revenue plan, MP 1.303, expected to yield around R$35 billion, was postponed to a last-chance vote on October 7 and could expire on October 8, potentially opening a compensation gap.