The proposed Budget Law was submitted to the National Congress with a projected increase in the minimum wage from R$1,412.00 to R$1,509.00. However, it was decided to keep the income tax exemption threshold for workers earning up to R$2,813.00 unchanged.
Currently, individuals earning twice the minimum wage will be required to pay income tax.
Context of the past
In Brazil in 1996, individuals earning at least 8 monthly minimum wages were subject to income tax. However, due to the table values not being adjusted, by 2019 it affected individuals earning less than 2 minimum wages (R$2,112.00).
The present government pledged to adjust the income tax brackets as part of their campaign promise, but the expected timeline for this modification has been pushed back to 2026.
In 2022, upon assuming the presidency, the tax exemption threshold was stuck at R$1,903.98. However, following numerous criticisms and protests, it was adjusted to the current amount of R$2,824.00.
Regrettably, the proportions were not kept for 2024. In other words, while the minimum wage is set to rise, the exemption amount will stay the same.
In 2025, the projected minimum wage is R$1,509.00, meaning that two salaries will amount to R$3,018.00. Due to the absence of any mention of adjustments in the Budget Guidelines Law (PLOA), individuals earning at least R$2,824.00 will be subject to income tax.
Government Pledge
The current president aims to present the proposal by 2026, but there is no assurance that the minimum value will be adjusted in line with the indexing of the minimum wage.
However, it is possible to adjust the amount, as happened in 2024. In May 2024, Government Leader Jaques Wagner stated that the goal of not including low-income individuals is to honor the pledge made during the campaign to maintain the tax rate for monthly incomes up to $5,000 until 2026.
We will continue to support the government in its upcoming actions and provide updates in case of any changes.
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