Interview for LexLegal. Read the full text
The Chamber of Deputies approved, in a unanimous vote with 493 votes in favor and none against, the base text of Bill (PL) 1,087/2025, which expands the income-tax (IR) exemption bracket for workers who receive up to R$ 5,000 per month and creates a partial discount for those earning up to R$ 7,350 monthly. The measure, championed as progress in the pursuit of tax justice, still needs to be approved by the Federal Senate before being sanctioned by President Luiz Inácio Lula da Silva.
The proposal is considered one of the most relevant of the year in the field of fiscal policy. In addition to benefiting millions of Brazilians, it also inaugurates a model of progressive taxation for high incomes, including profits and dividends distributed by companies, which until then were exempt.
The updating of the income-tax table was a promise made by Lula during the 2022 electoral campaign and had been demanded by unions, civil-society entities, and economists. Currently, only those who earn up to R$ 3,036 monthly are free from paying the tax.
Under the new model, scheduled to begin in 2026, those who receive up to R$ 5,000 will have a discount of up to R$ 312.89, such that the tax due will be reduced to zero. Those with income between R$ 5,000.01 and R$ 7,350.00 will be entitled to a monthly discount of up to R$ 978.62.
According to official calculations, the measure will directly benefit 26.6 million taxpayers. This figure encompasses everyone from salaried workers to self-employed and independent professionals who are currently subject to payment of the tax.
Costs and compensation mechanisms
The impact of the tax waiver is estimated at R$ 25.8 billion per year. To balance the accounts, the bill creates progressive taxation on the so-called super-rich. Individuals with annual income above R$ 600,000 will come to be taxed at up to 10%.
The maximum rate will be applied only to those with earnings exceeding R$ 1.2 million per year. According to data from the Ministry of Finance, this measure will affect about 140,000 taxpayers — only 0.13% of the total base — who today pay, on average, 2.54% of IR. The new taxation should raise the effective burden to approximately 9%.
The bill’s rapporteur, Arthur Lira (PP-AL), emphasized on the floor that the additional revenue will allow not only the offsetting of the tax waiver but also the reduction of the rate of the Contribution on Goods and Services (CBS), a tax created by the tax reform.
“It is important to stress that this bill will directly serve 15.5 million people in the country. We are talking about a waiver of R$ 25.4 billion in the first year, which represents about 10% of the total amount of income tax paid by all Brazilians,” he stated.
The debate on tax justice
Parliamentarians of the governing base celebrated the approval as a milestone in the fight against inequalities. Representative Carlos Zarattini (PT-SP) assessed that the proposal opens the way to a fairer system.
“Our country is a country of inequality, it is a country where a tiny minority holds the greater part of the wealth while the majority of the Brazilian people live in difficult conditions. Tax justice needs to be done, and this bill is an important step toward reducing inequalities.”
Representative Fernanda Melchiona (PSOL-RS) recalled that the vote took place amid a political environment marked by the demonstrations against the “Shielding Constitutional Amendment” (PEC da Blindagem) and the bill granting amnesty to those involved in the coup-attempt acts of January 2023. “This bill is very important. Millions of Brazilians will be impacted by the reduction of income tax and, at the same time, we will have a minimum tax being charged on the super-rich,” she declared.
Criticism and resistance
Despite the unanimous approval, some criticisms were recorded during the debate. Representative Gilson Marques (Novo-SC) questioned the effectiveness of the measure and criticized the taxation of profits and dividends. “We are going to charge the richest, only 140,000 people, in order to give to the poorest. That is a lie! This money does not go to the poorest, it goes to the politicians. It would be better for it to stay with the richest, who are the ones who invest, buy machines, produce, and generate jobs,” he argued.
Representative Bibo Nunes (PL-RS) classified the initiative as “populist,” although he admitted the need to update the table. Luiz Carlos Hauly (Pode-PR), in turn, pointed out that the proposal does not solve the structural problem of the system. “Did this solve the problem of the poor’s tax? No. The poor continue to pay the highest tax burden in the world. It is deception. It has nothing to do with restructuring the system.”
Aristóteles de Queiroz Camara, tax partner at Serur Advogados, draws attention to a possible legal contradiction. “There is the possibility of judicially challenging the minimum rate, since the IR exemption on the distribution of dividends has not been formally revoked. Thus, on one hand there is the exemption and, on the other, the minimum taxation. It remains to be seen how the courts will interpret this possible contradiction.”
Legal and constitutional questions
From a legal standpoint, experts assess that the proposal should not face obstacles of constitutionality. The Federal Constitution of 1988 provides for ability to pay as a principle of the tax system, allowing taxpayers with greater income to be more heavily burdened.
However, the novelty is the minimum taxation on profits and dividends, traditionally exempt in Brazil since 1996. Jurists point out that this measure may give rise to litigation, especially among large entrepreneurs and investors, who argue about double taxation, since profit already undergoes the incidence of Corporate Income Tax (IRPJ) and the Social Contribution on Net Profit (CSLL) at companies.
Another point of attention is the impact on the federative entities. As income tax is one of the main sources of the State and Municipal Participation Funds (FPE and FPM), the Union will have to automatically compensate the revenue losses of these entities. Should the funds not be sufficient, the National Treasury will have to make up the difference.
Tax attorney Juliana Assolari, partner at Lassori Advogados, stresses that this matter may give rise to future disputes. “Analyzing the history of litigation among the Union, States, and Municipalities, I understand that the reduction in revenue may give rise to challenges before the Federal Supreme Court (STF). In the past, for example, the STF approved by majority a compensation agreement to make up for the losses to States and Municipalities from the collection of ICMS in the fuel sector.”
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