Brazil's President Lula Announces Major Income Tax Exemption for Lower Earners

President Lula Confirms Income Tax Exemption in National Address

Brazilian President Luiz Inácio Lula da Silva delivered a pre-recorded national address on Sunday, November 30, 2025, at 8:30 p.m. local time (2330 GMT), announcing a significant expansion of income tax exemptions for lower-income earners. The move fulfills a central promise from his 2022 election campaign and is set to take effect in 2026.

During the address, President Lula highlighted the ratification of a bill that will exempt individuals earning up to 5,000 reais (approximately $940 USD) per month from income tax. This measure more than doubles the previous exemption threshold. The new legislation also provides tax discounts for those with monthly incomes up to 7,350 reais (approximately $1,400 USD).

Millions to Benefit from New Tax Policy

The presidential palace estimates that approximately 15 million Brazilians will directly benefit from this new law. Of these, about 10 million individuals will no longer pay income tax, while another 5 million will experience a reduction in their tax burden. The bill, which received unanimous approval in both the House and the Senate, marks a significant political victory for the Lula administration.

President Lula underscored the social impact of the reform, stating, 'A promise made, a promise kept.' He further emphasized his economic philosophy, noting, 'A lot of money in the hands of a few means misery. A little money in the hands of many means a distribution of wealth.'

Offsetting Revenue Loss with High-Income Taxation

To compensate for the anticipated loss in state revenue from these exemptions, the government plans to implement a minimum effective tax rate for high-income individuals. This new taxation will apply to those earning over 600,000 reais (approximately $113,000 USD) annually, with rates progressively increasing up to 10% for incomes exceeding 1,200,000 reais (approximately $226,000 USD) per year. This adjustment is expected to affect around 140,000 wealthy individuals in the country.

Broader Economic and Social Recovery Efforts

Beyond the tax reform, President Lula's national address also touched upon the broader recovery of social programs and the economy. The administration's agenda includes restructuring welfare programs to enhance support for vulnerable populations, reforming taxation policies to stimulate investment, and implementing structural changes to improve public services. These efforts aim to foster inclusive growth and social equity, with a focus on ensuring affordable food prices and simplifying regulatory frameworks to attract foreign investment.