On October 1, 2025, Brazil’s Chamber of Deputies approved Bill No. 1,087/25, which significantly changes the taxation of individuals in Brazil and the taxation of dividend remittances to foreign recipients.
High-Income Taxation: Dividends
According to the Bill, starting in January 2026, the payment, crediting, use, or distribution of profits and dividends by a legal entity to an individual resident in Brazil exceeding BRL 50,000 in the same month will be subject to withholding of the Minimum Individual Income Tax (IRPFM) at a rate of 10%.
The same rule applies to profits and dividends paid, credited, distributed, used, or remitted to nonresidents, which will also be subject to withholding income tax at a 10% rate.
High-Income Taxation: Annual
Additionally, the Bill establishes a progressive annual tax on income starting at BRL 600,000, with a maximum rate of 10% for income equal to or above BRL 1,200,000 per year. The progressive rate will be calculated using the following formula:
• Rate (%) = (Income ÷ 60,000) – 10
For example, if an individual resident in Brazil earns BRL 900,000 annually, the formula would be (900,000 ÷ 60,000) – 10, resulting in a 5% rate.
All income received during the calendar year will be considered, including those normally taxed on an exclusive or final basis, as well as exempt income or income subject to zero or reduced rates.
IRPFM Reduction Mechanism and Exception
The Bill establishes an adjustment mechanism: if the sum of the effective corporate tax rate and the IRPFM rate exceeds the nominal rates of the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profit (CSLL), the Executive Branch must grant a reduction in the IRPFM, as regulated.
Additionally, IRPFM will not apply to dividends from profits generated up to the 2025 calendar year, provided that the distribution approval occurs by December 31, 2025.
Income Tax Exemption Range
The approved text also expands the Individual Income Tax (IRPF) exemption threshold to BRL 5,000 per month and reduces the taxation on monthly income up to BRL 7,350. Income above this amount will continue to be subject to the current progressive IRPF rates.
Next Steps
Bill No. 1,087/25 will now move to the Federal Senate for voting. If amended, it will return to the Chamber of Deputies. If approved without changes, it will proceed to presidential sanction.
Written by Hanna Lauar, Senior Associate at Drummond Advisors