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Reform Approved in 2024 Changes Income Tax Exemption, Redefines Reporting Criteria, and Alters Withholding Starting in 2026
The Income Tax reform was sanctioned by President Luiz Inácio Lula da Silva in November 2024 and therefore changes rules for exemption, reporting, and withholding. Thus, the new limit of R$ 5 thousand monthly will come into effect only on January 1, 2026. However, declarations submitted between March and May 2026 will still be based on data from 2025, which keeps many taxpayers required to file.
Initial Change Provokes Complex Transition for Filers
The exemption of up to R$ 5 thousand will only be valid in 2026. Therefore, the declaration for that year will continue to use information from 2025. In this way, those who received up to R$ 5 thousand in 2025 will still be required to file, as explained by Wesley Santiago from Macro Contabilidade.
Additionally, Santiago highlights a relevant point. Withholding will stop occurring from the salary of January 2026, paid between January 30 and the fifth working day of February. Thus, the worker will notice the immediate relief in their paycheck.
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Federal Revenue Service Will Redefine Criteria for Mandatory Filing in 2027
In 2027, when the declaration for 2026 occurs, the transition will become even more evident. The CEO of Visão Tributária, Maynara Fogaça, clarifies that the exemption refers to tax payment. However, it does not automatically eliminate the requirement to file a declaration.
Therefore, Fogaça states that the Federal Revenue Service will need to review the criteria for mandatory filing. Thus, only taxpayers with a truly simple profile will be exempted. This group includes individuals without properties, investments, rental income, business profits, additional earnings, or partnerships.
Thus, most will still be required to file, as criteria such as capital gains, property transactions, and tax-exempt earnings remain valid.
Simulations Reveal Direct Impact on Workers’ Incomes
The magazine IstoÉ Dinheiro requested simulations from specialist Bárbara Guarinão of the firm Lewandowski Libertuci Advogados. The study considered monthly salary, 13th month salary, and the projected table for 2026.
The calculations show that workers falling into the new bracket could save up to R$ 4 thousand per year. Therefore, the benefit may equate to almost an additional salary, reinforcing the impact of the reform.
Reform Also Affects Rates and Taxation on Profits and Dividends
Starting in January 2026, the approved text establishes:
- Full exemption for earnings up to R$ 5 thousand per month, which expands the current ceiling.
- Reduction of tax for incomes between R$ 5,000.01 and R$ 7,350, which lightens the burden in that range.
- Maintenance of progressive rates above R$ 7,350, with percentages of 7.5%, 15%, 22.5%, and 27.5%, which preserves the current logic.
- Rate of up to 10% for those exceeding R$ 600 thousand annually, advancing up to the ceiling for those surpassing R$ 1.2 million per year.
- Taxation on profits and dividends above R$ 50 thousand, with a rate of 10%, including amounts sent or received from abroad.
- Maintenance of exemption for dividends approved until December 31, 2025, even if paid afterwards.
According to the federal government, released in 2024, the expansion of the exemption range will include 10 million new taxpayers, totaling 15 million exempted. Therefore, the tax waiver will reach R$ 25.4 billion, an amount equivalent to about 10% of the R$ 227 billion collected annually from personal income tax.
What do you believe will be the biggest challenge of this transition: the rapid adaptation of taxpayers to the new rules or the efficient updating of the Federal Revenue Service’s criteria?
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