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The Federal Senate approved, on November 5, 2025, Bill No. 1087/2025, which amends income tax legislation to, in summary, expand the exemption threshold to monthly income of up to BRL 5,000 and introduce a minimum tax on high-income individuals, as well as withholding income tax on remittances of profits and dividends to non-residents.

The bill grants income tax exemption to individuals earning up to BRL 5,000 per month, with a gradual phase-out of the benefit so that monthly income equal to or above BRL 7,350 becomes taxable. It also provides that, within one year, Congress will submit a new bill to update the values contained in individual income tax regulations.

As a counterbalance to the revenue loss resulting from the expanded exemption range, the bill establishes a minimum taxation on annual income exceeding BRL 600,000, with a progressive rate ranging from 0% to 10%. For annual income equal to or above BRL 1.2 million, a flat 10% rate will apply.

The tax base for this minimum taxation includes rural activity income and all income received during the calendar year, including dividends earned from 2026 onward, as well as income subject to exclusive or definitive taxation and exempt or zero-rated income, with certain deductions permitted.

To mitigate the impact of these new measures, specific deductions are provided, particularly for income from agribusiness-related securities and real estate investment funds. The bill also introduces a tax credit mechanism when the combined effectiv

(IRPJ) and Social Contribution on Net Profit (CSLL) at the distributing company level, together with the individual minimum income tax, exceed 34%. Refund mechanisms are also provided where overpayment occurs, ensuring neutrality and coherence in the proposed system.

The bill further introduces new withholding tax rules at a 10% rate applicable to monthly dividend payments exceeding BRL 50,000 made by Brazilian companies to resident individuals, as well as to any dividends remitted abroad.

Dividends and profits related to results accrued up to 2025 are exempt from withholding, provided that their distribution is approved by December 31, 2025, and paid according to the approved terms by 2028 for residents or by December 31, 2026 for non-residents.

The approved bill now proceeds to presidential sanction, which may be full or partial (with vetoes). The expectation is that this stage will occur before December 31, as the new rules are scheduled to take effect in January 2026.

For further information, the BRZ Tax team remains available.