Global Daily Tax News, Brazil Issues Personal Income Tax Reform Regulations, (Dec 31, 2025)

Brazil's Federal Revenue has issued Normative Instruction RFB No. 2299 of 2025, updating the general tax rules regarding personal income tax.

In particular, the update is intended to take into account the recent overhaul agreed by lawmakers to Brazil's tax brackets, including the introduction of a new minimum tax on the country's highest earners and the significantly increased personal tax allowance.

Bill 1087/25 significantly raises the tax-free allowance to BRL5,000 per month (USD908) and reduces tax for those earning between BRL5,000 and BRL7,300, with effect from January 1, 2026.

For taxpayers' income above this threshold, the nation's standard progressive tax rates will apply, of 7.5 percent, 15 percent, 22.5 percent, and 27.5 percent.

The tax relief is to be funded by the introduction of a minimum tax rate of up to 10 percent on the nation's highest earners' income, including company profits and dividends. Tax on top earners' income will be covered by regulations in due course and will be applied only in 2027 returns in respect of the 2026 calendar year, the Federal Revenue has confirmed.

There will be no withholding tax on profits and dividends related to results determined up to the calendar year 2025, where distributions have been approved by December 31, 2025, and which are payable under civil or corporate law, the Federal Revenue has confirmed.

However, from January 1, 2026, the withholding tax will apply to amounts exceeding BRL50,000 (USD9,090) per month paid by the same legal entity. The withholding tax must be applied by all companies, including those liable to tax under the Simples Nacional tax regime.

The new Normative Instruction also responds to a ruling from the Supreme Federal Court, which deemed unconstitutional the imposition of a withholding tax of 25 percent on retirement and pension income paid to residents abroad. Income from work paid to residents abroad will remain subject to withholding income tax at a rate of 25 percent.

The Normative Instruction also provides for the implementation of new requirements on gambling services providers to provide information necessary for services users to accurately declare tax due on profits earned from fixed-odd lottery wagers. Liability must be declared through a new application to be made available by the tax agency in March 2026, to enable the accurate payment of tax by the end of April 2026.