Income tax (rates / brackets)

Brazil's income tax system applies progressive rates to resident individuals and foreign nationals earning Brazilian-source income. The current tax brackets range from 0% on annual income up to BRL 22,847.76, with marginal rates increasing to 7.5%, 15%, 22.5%, and a top rate of 27.5% on income exceeding BRL 4,664.68 monthly. These brackets are adjusted annually for inflation.

The income tax framework is governed by Law No. 7,713 of 1988 and subsequent amendments, with administration and enforcement by the Secretariat of Federal Revenue (Receita Federal do Brasil). The system applies to employment income, self-employment earnings, investment returns, and other sources of income.

Effective January 1, 2026, Brazil introduced significant changes to increase employee net pay. The reform reduces IRRF (Imposto de Renda Retido na Fonte) withholding rates and implements a simplified standard deduction mechanism. These modifications aim to provide immediate relief to workers by lowering the amount of income tax withheld from monthly salaries, thereby increasing take-home pay without requiring changes to the underlying tax brackets themselves.

Employers and payroll teams must update their withholding calculations and tax tables to reflect the new IRRF reduction rates and simplified deduction rules starting January 2026. Payroll systems require reconfiguration to ensure accurate withholding under the revised methodology. Organizations should verify compliance with Receita Federal guidance and maintain documentation of the new withholding calculations. Professional payroll advisors should be consulted to ensure proper implementation and to address any employee-specific tax situations that may be affected by the reform.