On 8 October 2025, Brazil’s Chamber of Deputies approved the withdrawal of Provisional Measure (PM) No. 1303/2025 from the legislative agenda, allowing it to expire without conversion into law. Originally issued on 11 June, PM No. 1303 sought to introduce and increase taxes on income from financial investments and sports betting, while offsetting the repeal of a decree that increased the Tax on Financial Transactions (IOF) (for prior coverage, see the article in the July issue of Indirect Tax News). Although PM No. 1303 took immediate effect, it required formal conversion into law by 8 October to remain valid. As no vote was held, none of the proposed tax changes will be implemented.
In a separate and unexpected development, the Senate unanimously approved a bill on 5 November 2025 that would raise the zero-tax threshold for individuals, increase taxation on high-income earners and reinstate a dividend withholding tax—delivering on a campaign promise by the president. If signed into law by the president by the end of 2025, the new measures will take effect on 1 January 2026. The government estimates that approximately 25 million Brazilians will benefit from reduced income tax, while around 200,000 high-income taxpayers will face increased taxation.
PM No. 1303 targeted financial institutions, billionaires and betting companies, aiming to boost government revenue. Key proposals included:
Initial revenue projections were approximately BRL 10.5 billion for 2025 and BRL 21 billion for 2026. The expiration of the PM leaves the government facing an estimated BRL 35 billion revenue shortfall in 2026, with the government expected to implement new spending cuts.
The expiration of PM No. 1303 means that the following proposals will not take effect, and taxpayers will continue to be subject to the original tax rates and exemptions, at least for the time being:
Following the expiration of Provisional Measure No. 1303, the Ministry of Finance began preparing a new fiscal package aimed at reducing expenditures and boosting revenue. The spending cuts are projected to yield savings between BRL 15 billion and BRL 20 billion. On the revenue side, the government plans to introduce taxes on betting companies and fintechs, with estimated collections of BRL 3.2 billion starting in 2026. To maintain support from the financial sector and Congress, the Ministry has opted to preserve tax exemptions for investment products such as LCIs and LCAs.
Building on the momentum from the individual income tax reforms approved on 5 November, Senator Renan Calheiros introduced Bill No. 5473/2025 that seeks to offset potential federal revenue losses stemming from both the new fiscal package and the expired PM No. 1303. Key provisions include doubling the tax rate on fixed-odds betting platforms from 12% to 24%—higher than the 18% rate under PM No. 1303—and increasing the CSLL from 9% to 15% for fintechs, and from 15% to 20% for other financial institutions such as credit, financing, investment and capitalisation firms. The bill is slated for a vote during the week of November 10 but is expected to encounter resistance.
Edilson Muniz
Queli Morais
BDO in Brazil
In a separate and unexpected development, the Senate unanimously approved a bill on 5 November 2025 that would raise the zero-tax threshold for individuals, increase taxation on high-income earners and reinstate a dividend withholding tax—delivering on a campaign promise by the president. If signed into law by the president by the end of 2025, the new measures will take effect on 1 January 2026. The government estimates that approximately 25 million Brazilians will benefit from reduced income tax, while around 200,000 high-income taxpayers will face increased taxation.
Key Provisions of the Expired PM No. 1303
PM No. 1303 targeted financial institutions, billionaires and betting companies, aiming to boost government revenue. Key proposals included:
- Increasing the withholding tax on Interest on Net Equity (INE) from 15% to 20%;
- Raising the Social Contribution on Net Profits (CSLL) for fintechs and certain other financial institutions from 9% to 15%;
- Adjusting the IOF rate;
- Taxing financial instruments such as Agribusiness Credit Bills (LCA), Real Estate Credit Bills (LCI) and Development Credit Bills (LCD) at a 5% rate; and
- Increasing the tax rate on the gross revenue of online betting companies from 12% to 18%.
Initial revenue projections were approximately BRL 10.5 billion for 2025 and BRL 21 billion for 2026. The expiration of the PM leaves the government facing an estimated BRL 35 billion revenue shortfall in 2026, with the government expected to implement new spending cuts.
Impact of the Expiration of PM No. 1303
The expiration of PM No. 1303 means that the following proposals will not take effect, and taxpayers will continue to be subject to the original tax rates and exemptions, at least for the time being:
- No increase in the withholding tax rate on INE;
- No increase in the tax rate on betting company revenue;
- No CSLL increase for fintechs; and
- No elimination of the income tax exemptions for incentivised securities (LCI, LCA, CRI, CRA and incentivised debentures) or the introduction of a 5% tax rate.
Taxation of Individuals
The Senate-approved measures relating to individuals are as follows:- Individuals earning up to BRL 5,000 per month would be exempt from income tax. Under existing rules, individuals earning up to BRL 3,036 are exempt, with progressive rates up to 27.5% applying above that threshold.
- Introduction of a progressive surtax of up to 10% on high-income individuals (those with annual earnings exceeding BRL 600,000, or BRL 50,000 per month).
- Reintroduction of a 10% withholding tax on the distribution of profits/dividends by the same legal entity to individuals.
Next Steps
Following the expiration of Provisional Measure No. 1303, the Ministry of Finance began preparing a new fiscal package aimed at reducing expenditures and boosting revenue. The spending cuts are projected to yield savings between BRL 15 billion and BRL 20 billion. On the revenue side, the government plans to introduce taxes on betting companies and fintechs, with estimated collections of BRL 3.2 billion starting in 2026. To maintain support from the financial sector and Congress, the Ministry has opted to preserve tax exemptions for investment products such as LCIs and LCAs.Building on the momentum from the individual income tax reforms approved on 5 November, Senator Renan Calheiros introduced Bill No. 5473/2025 that seeks to offset potential federal revenue losses stemming from both the new fiscal package and the expired PM No. 1303. Key provisions include doubling the tax rate on fixed-odds betting platforms from 12% to 24%—higher than the 18% rate under PM No. 1303—and increasing the CSLL from 9% to 15% for fintechs, and from 15% to 20% for other financial institutions such as credit, financing, investment and capitalisation firms. The bill is slated for a vote during the week of November 10 but is expected to encounter resistance.
Edilson Muniz
Queli Morais
BDO in Brazil