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Project Approved in the Chamber Expands the Income Tax Exemption for Rural Producers and Signals a Structural Change in Tax Policy for the Countryside
A legislative proposal with significant economic impact began to mobilize the Brazilian agricultural sector in 2025. Since then, the text has paved the way for a profound change in rural taxation. The Bill No. 1,196/2025, approved by the Committee on Agriculture, Livestock, Supply and Rural Development (CAPADR), significantly expands the income tax exemption for individual rural producers.
Under the approved text, producers who achieve annual income of up to R$ 508,320 can be completely exempt from tax collection. The measure was presented as a direct response to the economic reality of the countryside. This reality has historically been marked by climatic instability, price fluctuations, and high production costs.
Proposal Recognizes Particularities of Agricultural Activity
The bill is authored by Congressman Evair Vieira de Melo (PP-ES). It amends the Law No. 7,713 of 1988, by establishing specific criteria for income derived from rural activities. The text takes into consideration structural factors of the sector. Among them are unpredictability of harvests, revenue variation, and natural risks.
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The water that almost everyone throws away after cooking potatoes carries nutrients released during the preparation and can be reused to help in the development of plants when used correctly at the base of gardens and pots, at no additional cost and without changing the routine.
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The sea water temperature rose from 28 to 34 degrees in Santa Catarina and killed up to 90% of the oysters: producers who planted over 1 million seeds lost practically everything and say that if it happens again, production is doomed to end.
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An Indian tree that grows in the Brazilian Northeast produces an oil capable of acting against more than 200 species of pests and interrupting the insect cycle, gaining ground as a natural alternative in soybean, cotton, and vegetable crops.
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The rise in oil prices in the Middle East is already affecting Brazilian sugar: mills in the Central-South are seeing their margins shrink just as ethanol gains strength.
These characteristics differentiate agribusiness from other economic activities. Therefore, the proposal seeks a tax treatment that is more adjusted to the producer’s reality.
Moreover, one of the central points of the project is the annual update of the exemption limit by the IPCA. With this mechanism, the maximum amount of exempt income keeps pace with inflation. This prevents the gradual loss of the benefit over time.
Another relevant aspect is how the income will be categorized. The exempt amounts will not be classified as high income. This definition follows the parameters of the Law No. 9,250 of 1995. This way, indirect impacts on other tax brackets are avoided.
Alignment with Recent Changes in Income Tax
The proposal advances in alignment with recent adjustments in Brazilian tax legislation. In 2025, President Luiz Inácio Lula da Silva signed the Bill No. 1,087/2025. This text introduced changes in income tax aimed at urban workers.
In this context, Bill 1,196/2025 seeks to balance the tax treatment between urban and rural areas. At the same time, it recognizes the strategic role of agribusiness in the national economy. The sector is essential for generating income, jobs, and food.
Reporter Defends Fiscal Justice and Stimulus for the Sector
Reporter of the matter, Congressman Rodolfo Nogueira (PL-MS) stated that the project applies the principle of contributory capacity. Thus, tax collection better reflects the financial reality of rural producers.
According to the Congressman, reducing the tax burden on agribusiness does not represent a privilege. For him, it is a measure of fiscal justice. In his assessment, the proposal provides financial breathing room for the sector. It also strengthens competitiveness and helps maintain food production and job generation.
Nogueira also highlighted the importance of the automatic correction of the exemption amount. Without periodic updates, tax benefits tend to lose effectiveness. This compromises their effects over the years.
Less Bureaucracy and More Productive Efficiency
Another point emphasized in the report is the tax simplification. Producers within the exemption bracket will be exempt from the annual income tax adjustment declaration.
With this change, there is a direct reduction in bureaucracy. There is also a decrease in administrative costs. At the same time, producers can concentrate more efforts on productive activities.
Processing in Congress and Next Steps
Currently, Bill 1,196/2025 is being processed in conclusive character in the Chamber of Deputies. The text will be sent for analysis by the Committee on Finance and Taxation. Next, it will go through the Committee on Constitution, Justice, and Citizenship (CCJ).
If approved at these stages, the bill may be sent directly to the Federal Senate. In this scenario, there will be no need for a vote in the Chamber’s plenary. This tends to accelerate its processing.
In light of this advancement in Congress, will the expansion of the income tax exemption be sufficient to provide predictability to rural producers, or will further tax changes still be necessary to strengthen Brazilian agribusiness?
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