The approval of an income tax exemption for those earning up to R$ 5,000 (approx. US$ 950) was celebrated by members of the government. Guilherme Boulos, Minister of the Secretariat of the Presidency, was among them. He attended Congress after the vote and told BdF that the bill’s approval was the result of President Luiz Inácio Lula da Silva’s effort and popular mobilization.
“It is, above all, the result of Lula’s proposal. A government committed to the people and to mobilization in the streets. We took to the streets with thousands of people across Brazil, and this defeated the “Shielding” constitutional amendment (PEC da Blindagem). Now we have concluded the process with the income tax exemption and by starting to tax banks, betting companies and billionaires,” the minister said.
Expanding the exemption bracket was one of Lula’s campaign promises and has gained popular support in recent months. In addition to the exemption, the bill reduces taxation for those earning up to R$ 7,350 (approx. US$ 1,400).
Another member of the government who celebrated the vote was Finance Minister Fernando Haddad. He was the main negotiator of the proposal sent to Congress and said the measure will improve the living conditions of all Brazilians.
“It was a very important day for Brazil to once again focus on inequality. In some cases, this may represent the equivalent of a 14th salary. It is a fiscally neutral bill. It is a fair compensation that makes Brazil less unequal. The State assumes its role as a promoter of well-being. It is a milestone in Brazil’s history, as it considers all dimensions of the economy: inflation, growth, employment, but also inequality,” he stated.
According to the Ministry of Finance, around 25 million Brazilians will benefit from the measure. Haddad added that this increase in workers’ disposable income reduces indebtedness and default, boosts purchasing power, stimulates the economy and strengthens the consumer market, which is also beneficial for business owners.
The Minister of Institutional Relations, Gleisi Hoffmann, attended the vote on the Senate floor and also celebrated the approval. She thanked senators for their efforts, especially Renan Calheiros and the Workers’ Party leadership in Congress, and said this is just the “first step” toward tax justice.
“About 141,000 people who earn more than R$ 600,000 per month (approx. US$ 114,000/month) currently pay a 2% tax burden, and we are raising it to 10%. This is a historic step toward tax justice. There is more to do, but this is an important move in that direction. This is a victory for workers,” she said in a press conference after the vote.
According to the minister, the presidential signing of the bill is expected to take place on the 11th, after Lula returns from COP30 in Belém.
How it works
Currently, those earning up to R$ 3,036 (approx. US$ 575) per month are exempt from income tax, considering the simplified deduction. Above this amount, rates increase progressively up to a ceiling of 27.5%. Today, the highest rate applies to those earning from R$ 4,664.69 (approx. US$ 885).
In addition to expanding exemptions, the bill proposes a 10% income tax on profits and dividends distributed to the same individual by the same company if the monthly amount exceeds R$ 50,000 (approx. US$ 9,500), regardless of how many payments are made within the month.
To compensate for the tax relief for low- and middle-income earners, the text creates a minimum 10% tax for high-income individuals earning over R$ 1.2 million per year (approx. US$ 228,000/year) — a group corresponding to around 141,400 taxpayers. According to government data, this group currently pays an average of 2.5% on total income, including profits and dividends. Workers in general pay, on average, 9% to 11% in income tax.
For those earning between R$ 600,000 and R$ 1.2 million per year (approx. US$ 114,000 to US$ 228,000/year), the tax rate will be progressive and linear, between zero and 10%, calculated according to a formula based on taxable income.
