The House of Representatives should vote on Wednesday (1st) the bill that expands the exemption of income tax for those who receive up to R $ 5,000 per month, a measure that can benefit about 16 million Brazilians from 2026.
The proposal, considered one of the most relevant to the economic agenda of President Luiz Inacio Lula da Silva (PT), arrives at the plenary surrounded by disputes on how to compensate for the estimated loss of collection of R $ 25.8 billion in the first year of validity.
The report is by Arthur Lira (PP-AL), who assumed the role of rapporteur of the IR reform. The opinion maintained the creation of a progressive minimum tax of up to 10% of monthly income over R $ 50 thousand, a measure known as taxation of so-called “super rich”, in addition to the retention of dividend tax above R $ 50 thousand per month.
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Despite the consensus around the exemption, compensatory measures divide the base and promise a heated clash in plenary. See what the project says so far.
Who starts not to pay
For the substitute, those who receive up to $ 5,000/month will be totally free. For salaries between R $ 5,000.01 and R $ 7,350, there will be a partial discount, until it resets this benefit from R $ 7,350.
Today, in practice, the exemption reaches those who earn up to R $ 3,036 (via simplified discount), although the legal table provided for exemption up to R $ 2,259.
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The government exemplified potential gains: a driver with a salary of R $ 3,650.66 would stop paying R $ 1,058.71/year; A teacher with $ 4,867.77/month would save $ 3,970.18/year if the new rules start in 2026.
As for the exemption it will cost
The expansion of exemption to R $ 5,000 and reduction to up to R $ 7,350 has an estimated cost of R $ 25.8 billion only by 2026, and a total resignation of R $ 100.67 billion by 2028. To compensate, Lira’s opinion maintains three pillars: minimum tax of 10% and taxation of dividends and shipping remittances abroad.
Minimum Tax and Dividends: How is it?
1. Effective minimum tax on high incomes (individuals)
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The measure aims to reach individuals with monthly income over R $ 50 thousand. The rate will be progressive, reaching the 10% ceiling for gains over R $ 100,000 per month, or R $ 1.2 million per year.
Initially, Lira evaluated to reduce this ceiling to 9%, but retreated to avoid criticism of favoring to the richest. The salaries that already collect up to 27.5% at the source will not be affected by the new tax floor.
2. Dividends
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The text establishes a 10% retention at the source for dividends over R $ 50 thousand per month, paid by company to individuals resident in Brazil.
If an investor receives above the floor of more than one paying source, the overall amount received for the purpose of calculating the minimum tax to be collected will be considered.
In the IR statement, the retained amounts may be compensated.
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3. Remittances abroad
Already profits and dividends sent abroad will also have a 10%incidence, except for three cases: foreign governments with reciprocity of treatment, sovereign funds and social security entities abroad.
With these recipes, the Lira team projects surplus of about $ 12.7 billion by 2027. The rapporteur seals use this leftover to “get fat” the primary surplus.
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What is outside the “minimum of 10%”
To calibrate the impact, the substitute excludes from the base of the effective minimum tax:
- Heritage
- Savings income
- Indemnities for accident or serious illnesses
- Pensions resulting from serious diseases or work accident
- Dividends paid by foreign governments (with reciprocity)
- Sovereign background payments
- Foreign entities that manage social security
- Exempt securities (LCI, LCA, LCD, CRI, CRAS, FIIs, Encoun and Encouraged Debentures)
Lira reported that she sent projections to ministers Fernando Haddad (Fazenda) and Gleisi Hoffmann (institutional relations) to eventually remove the debentures encouraged from this armor, which can generate disagreements in the House Plenary, which should analyze taxation on these assets in the same week, and may be the subject of project highlights.
Where the “left” goes
Arthur Lira’s report not only seeks to compensate for the fiscal waiver of the new IR exemption range, but also defines the destination of the eventual “leftover” of collection. The proposed design establishes an order of priorities:
1. Compensate states and municipalities – The first destination is to guarantee transfers to federative entities, via participation funds, if there is loss of collection due to the expansion of the exemption.
This point was included to reduce resistance from governors and mayors, who feared direct impact on local revenues.
2. Reduce the CBS rate – If there is still surplus after compensation to the federated entities, the funds will be used to reduce the reference tax rate of the contribution on goods and services (CBS), the new federal consumption tax provided for in the tax reform.
In practice, the measure can relieve part of the load on consumption, one of the most sensitive themes of the new system.
In addition, the rapporteur’s text eliminates the “lock” that limited the sum of the effective rates paid by individuals and legal entities to the maximum nominal rates: 34% for general companies, 45% for financial institutions and 40% for reinsurance.
The withdrawal of this ceiling tends to expand the collection, strengthening the government’s fiscal compensation margin.
What can still change in the plenary
On the eve of the vote, the project accumulated 53 amendments presented by parliamentarians. Most of them touches on sensitive text points and can change the final design of the proposal. Among the main topics under discussion are:
• Automatic table indexation – Part of the deputies argues that both the exemption range and the high income calculation basis are automatically corrected, by the IPCA or the same rates as the Annual Budget Law (LOA). The government resists, fearing loss of tax margin in years of high inflation.
• Encouraged Debentures – There is market pressure for these papers, used in infrastructure financing, to be left out of the minimum tax on high income. Rapporteur Arthur Lira has signaled that he can still adjust this point after conversations with the farm.
• Dividend rules – Some amendments ask for fine adjustments on the device that provides 10% tax on dividends over R $ 50 thousand per month per company. The debate revolves around any exceptions and the form of compensation in the annual adjustment.
Parallel dispute not Senate
While the House votes for PL 1,087/2025 (substitute lyre), the Senate has resurrected PL 1.952/2019, reported by Renan Calheiros (MDB-AL). The project, which had been stopped for four years at Casa Alta, was approved last week to the Economic Affairs Commission.
The differences in merit between the texts are not large for the exemption track, but the proceedings became a political board between the houses, especially the dispute between Alagoas Lira and Renan Calheiros, who in addition to competing for the same electorate, vie for protagonism in Congress.
If the House text changes in the Senate, it returns to the new deliberation of the deputies before the sanction.
