Lula Sanctions 10% Cut to Tax Incentives, Vetoes Clause Reviving Canceled Amendments

Overview

• Lula vetoed the provision to revalidate canceled “restos a pagar” amendments—about R$1.9 billion—citing a precautionary suspension by Supreme Court minister Flávio Dino.
• The new law imposes a linear 10% reduction on federal tax incentives while preserving exclusions such as the Manaus Free Trade Zone, the basic food basket, Prouni and Minha Casa Minha Vida.
• Tax measures include a rise in the levy on online betting firms toward 15% by 2028, higher CSLL rates for fintechs to 12% in 2026 and 15% from 2028, and an increase in withholding on JCP to 17.5%.
• A safeguard blocks creation or expansion of incentives once total benefits exceed 2% of GDP and mandates beneficiary estimates, performance targets and transparency and monitoring for new proposals.
• The government projects roughly R$20–22 billion in added 2026 revenue; most provisions begin Jan. 1, 2026, with tax hikes subject to the 90‑day constitutional wait, and Congress will review the veto after its February recess.