As of May, 13.7 million people will stop paying income tax, informs the Federal Revenue

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Government will expand the Income Tax exemption range from the current R$ 1,903.98 to R$ 2,112. A discount of R$ 528 will also be granted on the tax that would be due by the employee. The Federal Revenue Secretary, Robinson Barreirinhas, informed this Friday (17) that 13.7 million people will stop paying Income Tax (IR) as of May. The number represents about 40% of the total taxpayers. On Thursday (16), President Luiz Inácio Lula da Silva (PT) confirmed that the government will raise the minimum wage from the current R$1,302 to R$1,320; and that the IR exemption will benefit those who earn up to two minimum wages. The amendment will be proposed through a Provisional Measure, which needs the approval of the National Congress to become law. The expectation is that the MP will be edited in the coming days. In an interview with TV Globo, Barreirinhas explained that the exemption range will be increased from R$1,903.98 – in force since 2015 – to R$2,112. So, those who earn up to R$ 2,640 will not pay income tax as of May, but the exemption range will not be R$ 2,640. Understand In addition to the exemption range expanded to R$ 2,112, there will be a monthly discount of R$ 528 direct at source. That is, on the tax that would be due by the employee. That’s because the government wants to keep the promise to exempt everyone who earns up to two minimum wages (from May, the minimum amount will be 1,320). In practice, adding the two mechanisms, whoever earns up to R$ 2,640 will not pay income tax – neither at source nor in the annual adjustment statement. “They [quem ganha até dois salários mínimos] there will be no rebates, no deductions at the source of Income Tax, that discount that comes with your paycheck. There will be no deductions and they will also not have to pay anything in the annual adjustment statement for the following year”, said the Revenue Secretary. According to the Federal Revenue, the taxpayer will not need to do anything to guarantee the exemption. Until May, the Revenue systems will be updated to allow the automatic granting of the R$ 528 discount. How will it work for those who earn more than two salaries? The increase in the exemption range to R$2,112 will benefit all taxpayers, regardless of income. As the IR table is progressive, it means that everyone who contributes will not pay tax on the exempt portion. “All income tax payers benefit from this R$2,112 exemption range. You don’t need to do anything. Everyone will benefit from this range,” said Barreirinhas. According to the Federal Revenue, for those who receive more than two minimum wages, the simplified discount of R$ 528 may not be worth it. This is because many taxpayers are entitled to greater discounts under current legislation (due to social security contributions or deductions based on the number of dependents, for example). In this scenario, the total discount to which the taxpayer is entitled will be deducted, not just the R$528. $2,112, he will benefit too. But he will not choose to make the deduction of R$ 528, because the current legislation already allows a greater deduction for these larger brackets”, said the secretary. Impact of the measure With the proposal to increase the expanded exemption range to R$ 2,112 and grant a simplified monthly discount of R$ 528, the government will no longer collect R$ 3.2 billion this year, considering that the measure will come into effect from from May. In 2024, the impact on accounts will be R$ 6 billion. According to the Revenue Secretary, the impact would be even greater, of more than R$ 10 billion in 2023, if the government opted to increase the exemption range to R$ 2,640, without granting the discount. “The methodology we are using, it grants benefits to those who earn up to two minimum wages with fiscal responsibility, without harming public accounts”, defended Barreirinhas.

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