Congress Approves Overhaul Raising Income Tax Exemption to R$5,000 From 2026

Overview

• The measure passed both chambers and now awaits presidential sanction, with changes applying to payroll in 2026 (including the 13th salary) and no change to 2025 tax returns.
• Individuals earning up to R$5,000 per month will be exempt from income tax, with a discounted rate applying to the R$5,000 to R$7,350 band.
• From 2026, a 10% withholding at source will be charged on profit and dividend distributions exceeding R$50,000 per month.
• In 2027, a new minimum personal tax will apply to certain currently exempt incomes above roughly R$600,000 per year with progressive rates up to 10%, with reported exclusions for inheritances and some indemnities.
• Government estimates indicate about 15 million taxpayers will stop paying the tax, and Sebrae projects that nearly 80% of small businesses will benefit.