By Enrique Grimberg Kohane and Gabriel Henrique Santos Nunes
The Focus is on Income Taxation in Brazil
On the evening of last Wednesday (November 27, 2024), Brazil’s Minister of Economy, Fernando Haddad, announced that the Executive Branch will send a proposal to the National Congress outlining a spending containment package of R$70 billion, along with what is expected to be the most comprehensive income tax reform in Brazil’s history.
According to the Minister, this measure is part of the second phase of the tax reform, focusing on restructuring income taxation. Among the main changes, Haddad highlighted an increase in the income tax (IR) exemption threshold.
Currently, income taxation through IR is structured into monthly income brackets with progressive rates. For 2024, the exemption threshold is set at monthly income of R$2,824, with four additional income brackets and rates ranging from zero to 27.5%. Below is an illustrative table:
| Taxable Income Bracket | Rate | Deduction |
| Up to R$ 2.259,20 | – | – |
| From R$ 2.259,21 to R$ 2.826,65 | 7,5% | R$ 169,44 |
| From R$ 2.826,66 to R$ 3.751,05 | 15,0% | R$ 381,44 |
| From R$ 3.751,06 to R$ 4.664,68 | 22,5% | R$ 662,77 |
| Above R$ 4.664,68 | 27,5% | R$ 896,00 |
The Minister’s proposal includes raising the income tax exemption threshold to R$5,000. As a compensatory measure for the potential loss of revenue, the government plans to introduce a minimum tax rate for individuals earning over R$50,000 per month.
Haddad also indicated additional changes, including:
(i) adjustments to the minimum wage rules, restricting increases to parameters outlined in the fiscal framework;
(ii) limiting the wage bonus to individuals earning up to R$2,640, adjusted for inflation, until reaching 1.5 times the minimum wage;
(iii) reforms to military pensions, including the introduction of a minimum retirement age and restrictions on pension transfers;
(iv) enforcement of salary caps in the public sector;
(v) allocating 50% of committee amendments to healthcare and limiting the growth of general amendments to below the spending cap; and
(vi) improving mechanisms for fraud prevention and addressing systemic distortions.
On the morning of Thursday (November 28, 2024), the Minister provided further details on the package, clarifying that the reform will be conducted through a Complementary Law rather than a Constitutional Amendment, as was the case with the consumption tax reform approved at the end of 2023.
Haddad emphasized that the reform package will adopt a simplified approach, facilitating swift analysis and approval in 2025, with the reforms expected to take effect in 2026.
He also highlighted that many sources of income, such as dividends, interest, and rental income, are currently untaxed. Under the new legislation, these sources of income will become taxable when their combined total exceeds a specified threshold.
Odair Cunha, leader of the Workers’ Party (PT) in the House of Representatives, stated that the proposal will be sent to Congress before the end of 2024, with deliberations scheduled to begin in early 2025. Further details will be released in due course regarding what Haddad described as “the largest income tax reform in Brazil’s history.”
This topic is of critical importance for tax planning.
The Tax Law Department at Marins Bertoldi Advogados is closely monitoring developments on this matter and is available to clarify any questions or provide in-depth analysis tailored to individual contexts.
