Ten million Brazilians can be free from Income tax From 2026. Last week, the Ministry of Finance sent to the National Congress the proposal of exemption for monthly income of up to R $ 5,000 (R $ 60 thousand per year) – Along with partial discounts for rent between R $ 5.5 thousand (R $ 66 thousand per year) and R $ 7 thousand (R $ 84 thousand per year). The forecast fiscal waiver is $ 27 billion.
But to balance the loss of revenue, the project foresees compensation through a progressive tax, ranging from zero to 10% over income over R $ 50 thousand per month (R $ 600 thousand per year) to R $ 100 thousand per month (R $ 1.2 million per year).
By government calculations, this should generate a gain of R $ 25.2 billion next year, with additional R $ 8.9 billion of 10% tax in the remittance of dividends abroad for domiciles outside Brazil.
In all, just over 141,000 taxpayers must be impacted. The economic team argues that, in addition to representing only 0.13% of the population, these individuals currently pay an effective average tax rate of just 2.54%.
Author of the Tax Progressive Technical Note: Diagnosis for a Reform Proposal and Career Researcher at the Institute for Applied Economic Research (IPEA), Sérgio Gobetti, argues that Income Tax Reform Proposal corrects historical distortions. In this interview with Infomoneyin December, he pointed out that wage earners between R $ 5,000 and R $ 7,000 face effective 12%average tax rates, while equivalent incomes from dividends are exempt.
“It will eliminate discrepancies of the highest incomes, predominantly composed of dividends, which have lower effective rates than those applied to people who live mainly salary.”
Dividends double bitributation?
Still, the bill (PL 1087/2025) is the target of criticism, especially by those who oppose the taxation of dividends. The argument is that the measure would generate a type of double taxation, as companies pay taxes before the distribution of earnings.
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For this report of InfomoneyBernardo Motta Moreira, IBMEC Tax Law Professor, explains that, from a legal point of view, the situation does not constitute double taxation, because the company and its shareholders are distinct entities.
“IR on the legal entity and social contribution on net income (CSLL) focus on the company’s profit as an autonomous entity, while the dividend tax falls on the shareholder’s income. Taxpayers and generating facts are different,” says Moreira.
Sérgio Gobetti, from Ipea, stresses that the change will not have significant impacts on their pockets. To illustrate, he cites as an example an entrepreneur with R $ 2 million annual gross income, composed as follows: R $ 400 thousand in salaries, through pro-labore, R $ 600 thousand income, and R $ 1 million dividends. “Today, he pays $ 170,000 in taxes, with an effective rate of 8.5%. To reach a minimum of 10%, would pay another $ 30,000.”
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Although acknowledging that the project can reduce inequalities, Moreira points out that the tax burden on companies in Brazil is already quite high and can reach a combined rate of up to 34%. This is one of the reasons why some people advocate the exemption of dividends, which would be a portion of this already taxed profit. “It would be to focus on the same wealth, characterizing a double taxation in the economic sense.”
Tax justice
On the subject, the Macroeconomic Research Center for Inequalities of the Faculty of Economics, Administration, Accounting and Actuary of the University of São Paulo (Made-FEA/USP) Estimates the fiscal and distributive impact of such measures. To this end, the researchers crossed data from the National Continuous Household Sample Survey (PNAD) with those provided by the Individual Income Tax (DIRPF) declaration, added by Centis (division of the population into 100 equal parts, ordered to income, from the smallest to the largest).
Income tax is mostly progressive, but the rates are increasing only until Centil 99, which covers per capita rent monthly of up to R $ 53,000. From this level, the rate falls gradually.
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“This reveals a huge inequality in the collection of the IRPF among those at the top of Brazilian income distribution. In addition, it points out the existence of a margin for greater taxation of super rich, in order to achieve greater tax justice.”
While the effective Centil 99 rate is almost 12.5%, the richest 1% is about 10% and, for 0.1% of the top of the pyramid, drops to 3.5%. Still, if the minimum rate of 10% is applied to large incomes, this does not mean that the regressiveness of income tax at the top is completely remedied.
In the chart above, the researchers point out that an individual with annual income of R $ 1.5 million will continue to pay less tax, proportionally, than someone who receives up to R $ 14,600 per month (Centil 97).
When the new exemption track starts to be valid?
The bill was sent to the National Congress last week, where he awaits the order of the mayor, Hugo Motta (Republicans-PB). There, the proposal may still change, until it goes to the Senate. Only then go to the presidential sanction.
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The expectation of the government is that the new exemption range, as well as the minimum high income tax, including dividends, enter into force only 2026. The rules governing the income tax return last week follow unchanged.
