Brazil’s Senate approved landmark tax legislation late on 5 November that simultaneously lightens the burden on much of the middle class while imposing a new levy on higher earners and on cash that leaves the country. From 1 January 2026, the monthly income-tax exemption will jump from R$3,036 to R$5,000, cutting or eliminating payroll withholding for an estimated 15 million workers. Law-makers also created a progressive surcharge on monthly personal income above R$50,000 and, crucially for globally mobile staff and their employers, a flat 10 % withholding tax on any dividends or profit distributions remitted abroad that exceed R$50,000 in the calendar month.
The government projects the middle-class relief will cost R$31 billion (US$5.7 billion) in 2026. By taxing outbound dividends as well as very high salaries, Brasília hopes to avoid a widening fiscal gap while signalling that wealthier residents and multinational shareholders must share the adjustment. Senator Renan Calheiros, the bill’s sponsor, told reporters he would advance separate legislation to raise taxes on online betting platforms and payment fintechs should the revenue offset fall short.
![Brazil lifts income-tax threshold and adds 10% tax on outbound dividends]()
Practical impact: foreign assignees who are tax-resident in Brazil and receive home-country dividends may now see a 10 % haircut at source, unless a double-tax treaty provides relief. Multinational companies running cost-plus service centres in Brazil will need to adjust gross-up policies so expatriates are not disadvantaged. HR and payroll teams should review shadow-pay calculations and flag employees whose global equity income may cross the R$50,000 monthly threshold.
For mobility managers, the higher personal allowance partly offsets Brazil’s steep social-security contributions and record-high inflation, easing pressure on COLA budgets for mid-level transferees. However, the new dividend tax erodes the appeal of Brazil as a hub for senior leadership who receive large bonus payouts in stock. Tax advisers recommend reviewing remuneration structures before year-end and considering timing of dividend distributions to mitigate the surcharge.
Longer term, the dual move underscores President Lula’s strategy of using targeted tax incentives to win back middle-class voters while tightening controls on cross-border capital. Mobility teams should watch follow-up regulations from the Receita Federal clarifying how the 10 % withholding will interact with Brazil’s extensive treaty network and whether exemptions will apply to pension or stock-option income.
The government projects the middle-class relief will cost R$31 billion (US$5.7 billion) in 2026. By taxing outbound dividends as well as very high salaries, Brasília hopes to avoid a widening fiscal gap while signalling that wealthier residents and multinational shareholders must share the adjustment. Senator Renan Calheiros, the bill’s sponsor, told reporters he would advance separate legislation to raise taxes on online betting platforms and payment fintechs should the revenue offset fall short.
Practical impact: foreign assignees who are tax-resident in Brazil and receive home-country dividends may now see a 10 % haircut at source, unless a double-tax treaty provides relief. Multinational companies running cost-plus service centres in Brazil will need to adjust gross-up policies so expatriates are not disadvantaged. HR and payroll teams should review shadow-pay calculations and flag employees whose global equity income may cross the R$50,000 monthly threshold.
For mobility managers, the higher personal allowance partly offsets Brazil’s steep social-security contributions and record-high inflation, easing pressure on COLA budgets for mid-level transferees. However, the new dividend tax erodes the appeal of Brazil as a hub for senior leadership who receive large bonus payouts in stock. Tax advisers recommend reviewing remuneration structures before year-end and considering timing of dividend distributions to mitigate the surcharge.
Longer term, the dual move underscores President Lula’s strategy of using targeted tax incentives to win back middle-class voters while tightening controls on cross-border capital. Mobility teams should watch follow-up regulations from the Receita Federal clarifying how the 10 % withholding will interact with Brazil’s extensive treaty network and whether exemptions will apply to pension or stock-option income.
