Government limits greater exemption from IR on higher incomes, and waiver in 2023 will be R$ 3.2 billion – 02/18/2023 – Market

The Federal Revenue will extend the IRPF (Individual Income Tax) exemption to two minimum wages (R$ 2,640) as of May, but the scope of the benefit will be smaller for higher income workers.

The option of the government of Luiz Inácio Lula da Silva (PT) was to adopt a design that would reduce the impact of the measure on public accounts. The waiver should be around BRL 3.2 billion this year and BRL 6 billion in 2024.

According to the Revenue, the IPRF exemption range will be corrected from the current R$ 1,903.98 to R$ 2,112.

Additionally, a simplified monthly deduction in the amount of BRL 528 will be created, which will be automatically applied if it is beneficial to the taxpayer.

This fixed discount cannot be accumulated with other deductions, such as social security contributions, alimony and dependents. Whichever is more advantageous.

The government’s assessment is that the BRL 528 discount will only favor lower income brackets, since salaries above BRL 5,020 already pay the INSS (National Social Security Institute) a contribution amount greater than the new deduction simplified.

“This mechanism that we adopted perfectly serves those who earn up to two minimum wages, without reducing the taxation of the highest income brackets too much. For those who earn BRL 10,000.00, for example, the simplified discount of BRL 528 will not be worth it. .00, as your current deductions are higher,” says the IRS.

The highest incomes will only have the benefit of increasing the range to R$ 2,112 – a 10.9% readjustment.

As for those with lower wages, the government claims that the measure formed “has the same effect as an increase in the exemption range to R$ 2,640.00”.

As shown to Sheetthe impact of a simple readjustment of the exemption range to two minimum wages would be greater, at R$ 10 billion in 2023 and R$ 16 billion annually from 2024 onwards, according to calculations by XP Investimentos.

The waiver, considered high in a context of fiscal deficit, led the Ministry of Finance to seek mechanisms to mitigate losses.

In the coming weeks, the Federal Revenue will update its systems with the corrected table and the new deduction, as well as guide paying sources so that they also update their IRRF (Income Tax Withholding) calculation tools.

“This operationalization serves for Brazilian men and women to feel the benefit immediately in their pocket. There will be no withholding tax for this income range [até dois salários mínimos]. That is, they will not have to wait for the declaration in the following year to ask for the refund of what was withheld”, says the agency.

The note also brings some simulations. For those who have a gross salary of R$ 2,640, there will be no IR discount from May. Those with remuneration of R$ 2,700 will pay only R$ 4.50 at source.

For salaries of R$ 3,500, the discount will be R$ 75.40 with the new rules. Those who earn R$ 5,000 will pay R$ 354.47 per month.

Monthly income	simplified discount	Calculation basis	maximum income tax
BRL 2,640.00	BRL 528.00	BRL 2,112.00	BRL 0.00
BRL 2,700.00	BRL 528.00	BRL 2,172.00	BRL 4.50
BRL 3,500.00	BRL 528.00	BRL 2,972.00	BRL 75.40
BRL 5,000.00	BRL 528.00	BRL 4,472.00	BRL 354.47

The most recent update of the IRPF table took place in April 2015, when the current exemption range of R$ 1,903.98 was fixed. Since then, accumulated inflation has reached 54.4%.