Lula to Sign R$5,000 Income Tax Exemption on Wednesday

Overview

• The signing ceremony at the Palácio do Planalto is expected to include Finance Minister Fernando Haddad, Senate rapporteur Randolfe Rodrigues, cabinet members and allied party leaders.
• The Finance Ministry pegs the annual fiscal impact near R$18 billion, to be offset by taxes on exclusive investment funds and sports betting, with an additional bill on digital betting, fintechs and banks still pending in the Senate Economic Affairs Committee.
• The update exempts monthly earnings up to R$5,000 and grants a discount for those making between R$5,000.01 and R$7,350, replacing the current exemption threshold of roughly R$3,076 and taking effect in 2026.
• The package also adjusts taxation for higher earners, including a minimum tax for some with annual income above R$600,000 and a progression that reaches 10% for income over R$1.2 million, including dividends.
• A new study estimates 17.9 million to 19.7 million formal workers will benefit, with a majority living outside state capitals and in municipalities that voted for Jair Bolsonaro in 2022.