Brazilian Congress Approves Tax Incentive Cuts to Boost 2026 Budget Revenues
Brazilian Congress approves cuts to tax incentives and raises taxes on key sectors to balance the 2026 budget, increasing revenues by R$22.4 billion.
- • Congress approved a 10% reduction in federal tax incentives affecting multiple taxes.
- • The measures aim to raise R$22.4 billion for the 2026 budget.
- • Increased taxes will impact online betting, fintechs, and large companies using JCP.
- • Legislation imposes stricter controls on tax benefits and strengthens tax crime enforcement.
Key details
The Brazilian Congress has passed a significant tax incentive cut, targeting an increase in federal revenue of approximately R$22.4 billion for the 2026 budget. Approved by both the Chamber of Deputies and the Senate on March 17, the legislation is pending President Luiz Inácio Lula da Silva's sanction before implementation.
Finance Minister Fernando Haddad highlighted the measure's necessity to prevent a R$20 billion budget shortfall. The changes include a 10% reduction in federal tax incentives applying to multiple federal taxes such as PIS, Cofins, and IPI. Specific sectors impacted include online betting companies, fintech firms, and large corporations currently benefiting from interest on equity (JCP) tax regimes. Tax rates for online betting will gradually rise from 12% to 15% by 2028, allocating half the proceeds to social security and health. Fintechs will face increasing CSLL rates, while the JCP tax will grow from 15% to 17.5%.
The legislation enforces stricter controls on tax benefits, disallowing new concessions exceeding 2% of GDP without corresponding measures. It also aims to reinforce the fight against tax crimes, especially related to constitutional immunities, and allows the revalidation of canceled unpaid expenses dating back to 2023, potentially affecting government finances by about R$3 billion. Most provisions are expected to take effect January 1, 2026, following a mandatory 90-day waiting period after presidential approval.
This article was synthesized and translated from native language sources to provide English-speaking readers with local perspectives.
