The Chamber of Deputies approved yesterday, October 1, 2025, Bill No. 1,087/2025, which, in addition to increasing the personal income tax exemption threshold to R$5,000.00, also created a minimum tax on so-called “high incomes” and instituted taxation on profits and dividends.

The approved bill is noteworthy for including transitional rules for the application of income tax on profits and dividends earned up to the 2025 calendar year.

The bill’s wording provides for taxation of results accrued up to December 31, 2025; however, it creates an exception stating that profits and dividends accumulated up to 2025, if duly approved in a shareholders’ or partners’ meeting by December 31, 2025, will not be subject to the new 10% tax.

Furthermore, the new rule determines that the distribution of accumulated profits and dividends must occur in the 2026, 2027, and 2028 calendar years, in accordance with the terms set forth in the approval minutes.

Companies with accumulated profits or 2025 results should consider anticipating their corporate deliberation on profit allocation to ensure the acquired right to maintain the current income tax exemption.

As we have already warned, given the way the bill was approved, there may be room for potential judicial discussions, since the fiscal year’s results are generally subject to approval of the accounts and allocation by the fourth month following the year-end, which could conflict with the provisions of the approved bill.

Additionally, earnings from LCI, LCA, CRI, and CRA were excluded from the calculation of so-called “high incomes.” Also excluded are capital gains (except those obtained from stock market operations), donations received as an advance on inheritance, exempt income, amounts received in lump sums and taxed exclusively at source, and savings account interest.

The text approved by the Chamber will still go to the Senate, which traditionally proposes amendments; thus, further adjustments may occur, especially regarding the taxation of profit reserves.