Income tax reform: zero tax up to R$ 5,000 a month and a minimum tax on high incomes (Law 15.270/2025)

Make personal income taxation more even and more in line with progressivity according to each taxpayer’s ability to pay: relieve lower-income workers, freeing income for priority needs, and correct the « inverse progression » observed at the top of the distribution, where the effective rate falls as income rises because of deductions and exemptions, notably on profits and dividends. The cost of the relief is to be offset by the minimum tax on high incomes and the withholding on dividends sent abroad.[3]

according to the explanatory memorandum of the Ministry of Finance (EM No. 19/2025, March 2025)

• People who stop paying income tax

  10,000,000

  from 2026 · according to the Ministry of Finance, at the signing of the law (26 November 2025)[7]

  Approximate figure (« 10 milhões »).

• People whose income tax is reduced

  5,000,000

  from 2026 · according to the Ministry of Finance, at the signing of the law (26 November 2025)[7]

  Approximate figure (« 5 milhões »).

• Monthly reduction (new article 3-A of Law 9.250/1995): from January 2026, a reduction of up to R$ 312.89 brings the monthly tax to zero on taxable income up to R$ 5,000; between R$ 5,000.01 and R$ 7,350 the reduction falls linearly (R$ 978.62 − 0.133145 × income) and disappears above R$ 7,350. It also applies to the 13th-month salary.[1][8]
• Annual reduction (new article 11-A): from the 2027 return (income of 2026), no reduction above R$ 88,200 of annual taxable income; according to the Federal Revenue Service, annual taxable income up to R$ 60,000 is no longer taxed. The cap of the simplified deduction rises to R$ 17,640 from 2026.[1][8]
• Monthly withholding on dividends (new article 6-A): profits and dividends paid by the same company to the same individual resident in Brazil above R$ 50,000 in a month bear a 10% withholding on the whole amount, with no deduction; it is an advance on the annual minimum tax. Profits from results up to 2025 whose distribution was approved by 31 December 2025 are excluded.[1][3][10]
• Annual minimum tax (new article 16-A): individuals whose total income for the year exceeds R$ 600,000, including exempt and exclusively taxed income, owe a minimum rate rising linearly from 0% to 10% up to R$ 1.2 million, then 10%. Excluded from the base: capital gains (except on exchange-traded operations), inheritances and gifts, savings accounts, several tax-exempt real-estate and agribusiness securities, damages, among others. Income tax already paid is deducted.[1][7]
• Ceiling on combined taxation (new article 16-B): when the company’s effective tax rate on its profits plus the shareholder’s effective minimum-tax rate exceeds 34% (45% for banks, 40% for insurers and other financial institutions), the minimum tax is reduced by the excess.[1][3]
• Dividends sent abroad (Law 9.249/1995, article 10 §4 and new article 10-A): 10% withholding, except for foreign governments with reciprocity, sovereign funds and foreign pension entities; a credit is available when the combined taxation exceeds the same ceilings.[1]
• Other provisions (articles 4 to 6): states and municipalities are compensated for their revenue loss, by the Union quarterly if the increase of their participation funds falls short; any federal revenue surplus counts towards the reference rate of the new goods and services contribution (CBS); within one year, the executive must send Congress a bill on a national policy for updating income tax amounts.[1]