The Senate plenary approved, unanimously, this Wednesday (5), the bill 1087/2025 which exempts those earning up to R$5,000 per month from Income Tax (IR) and increases taxation on high incomes. If the text is sanctioned by the end of the year by President Luiz Inácio Lula da Silva, the reduction in income tax will take effect from January 2026. 
The government estimates that around 25 million Brazilians will pay less taxeswhile another 200 thousand taxpayers will have some increase in taxation. “It’s a measure that speaks to people’s real lives,” said the president of the Senate, Davi Alcolumbre.
To compensate for the loss of revenue, the project provides for an extra progressive rate of up to 10% for those who receive more than R$600,000 per year (R$50,000 per month). The text also establishes taxation for profits and dividends remitted abroad at a rate of 10%.
The project was forwarded by the government to Congress in March and was approved in October by the Chamber. The proposal’s rapporteur was senator Renan Calheiros (MDB-AL), who only accepted amendments from senators Eduardo Gomes (PL-TO) and Rogério Carvalho (PT-SE).
History
Meeting of the Senate’s Economic Affairs Committee (CAE) that voted on the bill (PL 1,087/2025) that exempts those earning up to R$5,000 per month from Income Tax (IR). Photo: Lula Marques/ Agência Brasil.
The project’s rapporteur in the Senate, Renan Calheiros, defended the proposal and highlighted that the decision would be historic for the country. “The zero tax project is one of the most important and most anticipated in recent years.”
Renan pointed out that the Executive’s proposal corrects injustices and contributes to social well-being “by promoting tax justice, reducing the tax burden on low income people and increasing the tax burden on the super rich”.
According to the senator, the “zero tax” will benefit close to 25 million workers and will be offset by the increased burden on 200,000 super rich people. “Workers will earn an average of R$3,500 per year.”
He highlighted that, for those with income between R$5,000 and R$7,350, there will be a proportional reduction in tax.
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Understand the project
If sanctioned by President Lula in 2025, the new legislation will exempt, from January of next year, income tax on monthly income of up to R$5,000 for individuals and will partially reduce the tax paid by those earning between R$5,000.01 and R$7,350.
There will be a minimum income tax rate for those earning from R$600,000 per year. The text foresees a progression, reaching 10% for income above R$1.2 million per year, including dividends.
Another point is that, from January 2026, the delivery of profits and dividends from a legal entity to the same individual resident in Brazil in a total amount greater than R$50 thousand per month will be subject to IRPF of 10% on the payment, with any deductions in the calculation base prohibited.
According to the project, payments of profits and dividends whose distribution has been approved by December 31, 2025 are excluded from the rule, even if the payment occurs in the following years.
