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Chamber Approves Tax Exemption for Up to R$ 5,000 and Creates New Charges on High Income and Dividends. Entities Say the Bill Could Fall on Companies, Increasing the Burden on Profits.
The Chamber of Deputies approved, on October 1st, the PL 1.087/2025, which eliminates the income tax for salaries up to R$ 5,000 and creates compensation mechanisms focused on high income. The text now goes to the Senate.
The project also resumes taxation on profits and dividends: there will be a 10% withholding tax when distribution to the same individual exceeds R$ 50,000 in a month, in addition to applying to remittances abroad.
Business owners claim that, as a consequence, the burden “on profits” measured in the result flowing to the investor would increase. The debate intensified after a study commissioned by Abrasca.
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The economic team argues that the change improves progressivity without breaking fiscal balance. Official presentations emphasize the focus on exemption up to R$ 5,000 and on 10% withholding on dividends.
What Changes in PL 1.087/2025: Exemption, Minimum Tax, and 10% Withholding on Dividends
The approved text provides for a withholding discount to eliminate the income tax for those earning up to R$ 5,000 monthly and creates a minimum tax for very high incomes, with an additional effective rate of up to 10%.
In parallel, the project taxes dividends over R$ 50,000 per month for the same individual, at a rate of 10%, without deductions at the time of withholding. The withheld amount can be offset in the annual tax return.
The same rate applies to profits and dividends sent abroad, a sensitive point for foreign investors.
The official justification is to broaden the progressivity of income tax and correct distortions. In a technical note, the government outlines the axes of the proposal and details the parameters of exemption and new withholding.
Abrasca Study Projects “On Profit” Burden of 40.6% and Up to 48% for Financial Institutions
A survey conducted by PwC for Abrasca estimates that, when adding Corporate Income Tax / Social Contribution on Net Profit at the corporate level with the new withholding tax on profit distribution, the average effective rate for non-financial companies in the Real Profit regime would rise to 30.77%. This would equate to a nominal rate of 40.6%, “the highest burden in the world on corporate profits,” the report states.
For financial institutions, the projected rate could reach up to 47.98% under the integrated taxation metric between company and investor, due to the higher Social Contribution on Net Profit in the sector.
According to the entity, this increase would reduce the return on investment in the country compared to the OECD average, pressuring capital allocation decisions and Foreign Direct Investment (FDI).
Abrasca has been publishing releases and technical events about dividends and their impacts, maintaining a central critique of the PL’s design.
International Comparison: Where Brazil Would Stand in Corporate Taxation Rankings
The global/OECD average for the statutory corporate tax rate hovers around ~23% in the latest readings. This level is referenced by international studies and by the literature from the OECD itself.
With the integration of corporate tax and withholding at distribution used by Abrasca, Brazil would surpass 40% in the metric of “total taxation on distributed profits.” It is this approach that underpins the claim of “highest burden in the world” in the study.
Critics note that methodologies vary between countries (e.g.: corporate tax credit against individual tax and treaties to avoid double taxation), which requires caution when comparing. Nevertheless, the recent international trend has not been towards significant increases in corporate tax rates.
Reaction from the Productive Sector: Fiep Suggests Taxing “Bets” at 15% as Compensation
The Federation of Industries of Paraná (Fiep) supports increasing the income tax exemption, but warns that shifting the burden to companies could deter investments. As compensation, the entity proposes a 15% tax on the gross revenue of fixed-odds betting (bets).
The idea is to apply a selective tax on a segment of high profitability that is currently considered under-taxed, avoiding taxing the Real Profit and industrial chains. The topic gained traction in public debate as the voting progressed.
Parliamentarians also presented amendments to address compensation with CIDE on betting, an alternative discussed in the Chamber during the bill’s processing.
The government and the rapporteur indicate openness to adjustments in the Senate, but defend maintaining progressivity and withholding on dividends as pillars of income reform.
And you, what do you think? Is the 10% withholding on dividends the fairest way or does it shift the burden onto those who invest and produce? Does it make sense to tax “bets” at 15% as compensation or does it divert focus? Leave your comment and explain which model you consider more balanced for Brazil.
