Brazil Approves Income Tax Exemption for Low Earners and Moves Toward Tax Table Update
Câmara dos Deputados approves income tax exemption and discussions on tax table updates.
- • Câmara approves income tax exemption for individuals earning up to R$ 5,000 monthly.
- • The tax exemption will benefit over 26.6 million taxpayers by 2026.
- • Proposals to update tax tables are under consideration due to public pressure.
- • A progressive tax will be imposed on individuals with annual incomes above R$ 600,000.
Key details
In a major legislative development on October 2, 2025, the Câmara dos Deputados approved a proposal to exempt individuals earning up to R$ 5,000 monthly from income tax. Bill 1.087/2025 received a sweeping endorsement of 493 votes in favor, with no opposition, marking a significant commitment from lawmakers towards fiscal relief for millions. This initiative, part of a campaign promise by President Luiz Inácio Lula da Silva, is projected to benefit over 26.6 million taxpayers by 2026, costing the government approximately R$ 25.8 billion.
The proposed law allows individuals earning between R$ 3,036 (current exemption) and R$ 5,000 to receive monthly tax discounts, effectively reducing their tax obligations to zero. Additionally, those earning up to R$ 7,350 can benefit from substantial discounts. As part of the initiative, a progressive tax will be enforced on individuals with annual incomes exceeding R$ 600,000, introducing a 10% maximum rate for those earning over R$ 1.2 million, thereby impacting an estimated 140,000 high earners.
Following the approval, Câmara President Hugo Motta emphasized that today's decisions represent a historic advancement for the well-being of Brazilian families, transcending political divisions. Despite the supportive vote, critics argue that the legislation may not adequately assist the poorest citizens, labeling it as more populist in nature.
In conjunction with this development, a consensus was reached within the Câmara dos Deputados to consider an update to the income tax table, addressing the urgent need for tax adjustments reflective of inflation. Two key proposals were put forth by Deputies Tabata Amaral and Marcel van Hattem, focusing on annual updates linked to the inflation index to protect taxpayers from inflation's impact. This legislative push illustrates a shift in the political landscape, driven by public pressure for fiscal accountability and predictability.
The outcomes from both legislative actions are now pending finalization in the Senate and could significantly reshape Brazil's tax landscape, reinforcing a commitment to economic equity while catering to various economic strata.