The New Era of Income Tax and Its Impact on Brazilians Abroad and Foreigners with Assets in Brazil

PL 1087/2025: what are the impacts for Brazilians abroad and foreigners in Brazil?

Bill No. 1087/2025, recently approved by the Federal Senate and submitted for presidential sanction, marks a structural turning point in Brazil’s fiscal policy.

The proposal reforms key aspects of Laws No. 9,250/1995 and No. 9,249/1995, creating a system that combines a reduction in income tax for the middle-income bracket with the establishment of a minimum tax on high incomes and distributed profits.

This measure is directly aligned with international efforts to conform to OECD guidelines, especially in combating base erosion and profit shifting (BEPS) and promoting global tax transparency. Its effects will be felt not only by residents in Brazil but also by Brazilians abroad and foreign investors with assets in the country.

Income Tax Reduction for Middle Incomes

The bill establishes, from January 2026 onwards, a monthly tax reduction for individuals earning up to BRL 5,000.00, making this bracket exempt from income tax. For income between BRL 5,000.01 and BRL 7,350.00, there will be a progressively decreasing reduction, which phases out above that limit.

The same principle applies to annual income, with full exemption for earnings up to BRL 60,000 and partial reduction up to BRL 88,200.

Minimum Tax on High Incomes

The most innovative aspect is the creation of a minimum tax for individuals with annual income exceeding BRL 600,000, applicable as of 2026 (2027 declaration).

The rate will be:

• Progressive from 0% to 10% for income between BRL 600,000 and BRL 1.2 million;

• Fixed at 10% for income above BRL 1.2 million.

This rule also applies to income that is exempt or taxed exclusively at source, such as capital gains, profits, dividends, and financial income. The goal is to ensure that high-income taxpayers do not escape effective taxation entirely, aligning the Brazilian system with models already adopted by OECD countries.

Taxation of Profits and Dividends

As of 2026, profits and dividends distributed to individuals resident in Brazil that exceed BRL 50,000 per month will be subject to a 10% withholding tax.

Profits remitted abroad will also be taxed at 10%, except when destined for foreign governments with reciprocity agreements, sovereign funds, or pension funds.

For foreign investors, the bill creates a tax credit mechanism to avoid double taxation, allowing the offset of taxes paid in Brazil if the total burden on profits exceeds the nominal IRPJ and CSLL rates.

International Impacts

This reform has direct repercussions in the international context:

• Brazilians living abroad: will need to reassess their ties with Brazil, especially if they maintain corporate participation or financial assets subject to the new dividend taxation.

• Foreigners investing in Brazil: will face a standardized 10% tax on remitted profits, with the advantage of a credit mechanism — reinforcing legal certainty and fiscal predictability.

• Multinational companies: will need to adjust their distribution and profit repatriation structures to prevent tax overlap.

Federative Compensation and Transparency

The bill provides that States and Municipalities will be compensated for any potential revenue losses resulting from the expanded income tax base on dividends, preserving the federative pact.

Furthermore, the project requires the Executive Branch to maintain a permanent policy of updating income tax values, reducing the inflationary effect on the tax burden — a longstanding demand of society.

Conclusion

Bill 1087/2025 signals an alignment of the Brazilian tax system toward equity and international harmonization.

For Brazilians abroad, freelancers, investors, and companies, this measure demands careful tax planning — especially given the new taxation of dividends and the obligation to prove the origin and destination of global income.

More than a mere change in rates, the text shows that Brazil is finally consolidating an international tax model consistent with global standards of transparency and fiscal justice.

If you are interested in professional legal services related to Tax Consulting and Tax Regularization in Brazil, our firm specializes in this field. To contact us, please email: contato@trpuppioadvocacia.com.br