President Lula sanctioned the bill this Wednesday (26); The measure comes into force in 2026, benefits 15 million workers and creates minimum taxation for those earning more than R$600,000 per year
President Luiz Inácio da Silva sanctioned, this Wednesday (26), the law that changes the rules of the (IR). The measure fulfills a campaign promise by expanding the exemption range for workers with incomes of up to R$5,000 per month, while at the same time establishing specific taxation for higher income groups. Below, understand the main points of the change.
1. Who stops paying tax?
The main change is the increase in the exemption range. From January 2026, anyone with a gross monthly income of up to R$5,000.00 (R$60 thousand per year) will no longer pay Income Tax.
Currently, the exemption ceiling is around two minimum wages. With the new rule, it is estimated that around 15 million taxpayers will benefit, either ceasing to pay the tax or paying a lower amount.
The law also benefits those who earn slightly above this ceiling. Workers with income between R$5,000.01 and R$7,350.00 will be entitled to a progressive discount, paying less tax than they pay today. For those who receive more than R$7,350.00, the table remains unchanged.
2. When does the measure come into force?
Although sanctioned now, the new rules are valid from January 1, 2026.
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In practice: The relief in monthly salary will be felt throughout 2026;
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In the statement: The impact on the Annual Adjustment Declaration will occur in 2027 (referring to the base year 2026);
3. Taxation of the ‘super rich’
To compensate for the loss of revenue due to the workers’ exemption (estimated at R$25.4 billion), the government created a “minimum tax” for high-income taxpayers.
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Who pays: People with an annual income of more than R$600 thousand or people with a monthly income of more than R$50 thousand;
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How it works: There will be a progressive rate that varies from 0% to 10%. The maximum rate of 10% will be applied to anyone with annual income above R$ 1.2 million;
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News: This minimum taxation will also apply to profits and dividends distributed by companies, which are currently exempt for individuals;
4. Changes in investments and dividends
The new law closes the gap against tax avoidance of large fortunes and changes the dynamics of profits:
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Withholding tax: From 2026 onwards, 10% IR will be charged directly at source on profits and dividends that exceed R$50 thousand per month;
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Remittances abroad: Profits and dividends sent outside the country will also be taxed at 10%, regardless of the amount. There are exceptions for specific cases, such as sovereign wealth funds and foreign governments that have reciprocity with Brazil;
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What remains exempt: The law preserves the exemption for popular and productive sector investments. Income from Savings, LCI, LCA, CRI, CRA, encouraged debentures and Fiagros. Compensation for work accidents and moral damages also remain exempt;
5. Safety Mechanism (‘Reducer’)
To prevent the sum of taxes paid by the company and the partner from becoming excessive, a “reduction” mechanism was created. If the combined tax burden exceeds the stipulated theoretical ceiling (which varies between 34% and 45%), the taxpayer will have a discount to adjust the charge to the legal limit, avoiding excessive double taxation.
6. Impact on states and municipalities
As Income Tax is a revenue shared with states and municipalities (via FPE and FPM participation funds), the law provides that the Union compensates for any losses in revenue from these federative entities, ensuring regional fiscal balance.
