As expected and widely reported, on November 26, 2025, the President of the Republic finally signed into law Bill No. 1,087/2025, now published in the Official Gazette this Thursday as Law No. 15,270/2025. This legislation marks a structural change in the taxation of individual income in Brazil, with significant impacts for investors, business owners, and self-employed professionals.
The main change is the end of the historic exemption on profits and dividends. Starting in January 2026, these amounts will be subject to withholding tax at a rate of 10% when they exceed fifty thousand reais per month. This measure aims to broaden the tax base and reduce distortions in the tax system, bringing Brazil closer to practices adopted in other countries.
Another new feature is the creation of the Minimum Individual Income Tax (IRPFM), which will apply to taxpayers whose total income exceeds six hundred thousand reais per year. The IRPFM will have a progressive rate of up to 10%, covering income that is currently exempt, such as financial investments and certain corporate distributions. This change reinforces the trend toward higher taxation on high incomes, with the stated goal of promoting tax fairness. In contrast, the exemption threshold for salaries has been expanded to include monthly income of up to five thousand reais. This measure benefits low-income taxpayers and seeks to offset the effects of the new rules on the middle class.
The provisions take effect in January 2026, but the remaining period of 2025 offers strategic planning opportunities and several points of attention. Transitional rules allow profits accumulated until December to be distributed tax-free, provided formal approval occurs by December 31, but there are issues that leave room for double interpretation, requiring extra caution from taxpayers. This window is crucial for companies and partners who wish to optimize their tax burden before the change.
Given this scenario, it is highly recommended that companies and individuals with equity interests immediately review their profit and dividend distribution policies, assess the impact of IRPFM on currently exempt income, and adjust their cash flow and compensation strategies. Convening extraordinary meetings to deliberate on accumulated profits becomes an essential measure to ensure decisions are made within the legal deadline. Anticipating these steps can result in significant tax savings and avoid audit risks.
