Change depends on the National Congress and would be valid from 2026; the Lula government seeks a way to compensate for tax waivers
The IRPF (Individual Income Tax) for those who receive up to R$5,000 per month would lead the president’s government (PT) to a loss in annual revenue of R$51 billion from 2026. The (National Association of Tax Auditors of the Federal Revenue of Brazil) sent data exclusively to the Poder360.
The projected revenue is R$312.26 billion annually. A new correction to the Income Tax table would benefit more 9.6 million Brazilians in 2026. In total, 26 million declarants would be free from taxation.
The expectation is that the president (PT) will forward a bill on the subject to Congress in 2025. There are 16.5 million Brazilians exempt with the current Income Tax table.
Data from the entity also shows that a full correction in the IRPF table would take the exemption limit to R$5,109.55, covering 28.4 million Brazilians in total. In this situation, the revenue loss would be R$234.97 billion annually.
“The desired table correction is the one that corrects all tracks. The proposal to exempt those earning up to R$5,000 must be received as a 1st step towards tax justice for the Brazilian middle class”says Mauro Silva, president of Unafisco Nacional.
This digital newspaper prepared an infographic on the topic. Read below:
LULA’S PROMISE
On November 27, the Minister (Finance) in a statement on national radio and TV announced exemption from IRPF for those earning up to R$5,000 per month. However, the changes depend on Congress and would take place in 2026.
The announcement of the new range in conjunction with , which seeks to reduce expenses, caused a negative reaction from the financial market.
The correction of the Income Tax table was a promise of Lula’s electoral campaign in 2022. The PT member stated that the income is necessary for the person to start paying the tax.
The president’s goal is to deliver the proposal by 2026. To achieve this, it will be necessary to increase the value by R$2,176 until the end of the government. Today, anyone earning up to 2 minimum wages (R$2,824) is free from IRPF.
HOW THE GOVERNMENT WANTS TO COMPENSATE
For each expense or tax waiver, the government must present a form of compensation. According to Haddad, the new IRPF exemption will be paid for by taxing those who receive more than R$50,000 monthly.
There will be a minimum rate of 10% for this group in the IRPF, which will apply to any type of financial gain such as profit, dividends, rent, bonuses and others.
Currently, the rate is 27.50% for earnings above R$4,664.68 per month, but the government will now consider types of income currently exempt.
The Executive Secretary of Finance, Dario Durigan, also said that the bill that the government will send to Congress on the subject will have changes to the rules for paying dividends outside the country.
“We have been debating the issue of paying dividends abroad so that there is no incentive to change tax domicile, but this will be presented when the bill is presented to Congress”these.
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