Sanctioned in November, the Income Tax (IR) reform comes into force this Thursday (1st). The new model, which increases the exemption range for around 15 million Brazilians who earn up to R$5,000 per month, brings relevant changes for both workers and investors and high-income taxpayers.
The new rules affect everything from monthly salary withholding to the taxation of dividends. To compensate for the loss of revenue, those who earn more than R$50,000 per month will pay more Income Tax, as well as part of the people who receive dividends (portion of companies’ profits distributed to shareholders). In total, 141 thousand Brazilians, according to the government, will pay more income tax.
Regarding the Personal Income Tax Declaration, nothing changes for this year’s document, because the declaration refers to the base year 2025. Only in 2027 (base year 2026), the new IR model will be definitively adjusted in the declaration.
The main change is the expansion of the exemption range:
- Monthly income of up to R$5,000: total exemption from Income Tax;
- Currently, the exemption only goes up to two minimum wages (R$3,036).
According to the government, around 15 million Brazilians are completely exempt under the new rule, which represents a tax waiver of R$25.4 billion.
Anyone who earns up to R$5,000 can save up to R$4,000 per year, considering their thirteenth salary.
Furthermore, there is a partial exemption for those earning between R$5,000.01 and R$7,350 per month, with a decreasing tax discount. Above R$7,350: nothing changes; follows the current progressive table (up to 27.5%). The discount gradually decreases as income rises, avoiding the so-called “tax step”, when small salary increases generate large jumps in tax.
