You may have heard that anyone earning up to five thousand reais no longer pays Income Tax, but this information can be confusing. It is important to know that the Income Tax table has NOT been updated; income brackets and tax rates remain exactly the same.
What has changed? A new tax reduction rule has been created, meaning the calculation now involves two steps. First, the tax is calculated using the standard monthly progressive table. Then, a discount is applied based on the salary amount.
Discount Tiers:
- Up to R$ 5,000.00: Total discount.
- Between R$ 5,000.01 and R$ 7,350.00: Partial and gradually decreasing discount.
- Above R$ 7,350.00: No discount.
Real Examples:
- R$ 5,000.00 Salary: The standard table calculation results in R$ 312.89. Under the new rule, a discount of R$ 312.89 is applied, bringing the final tax to R$ 0.00.
- R$ 7,000.00 Salary: The initial tax is R$ 801.35. After applying the partial discount formula (resulting in a R$ 46.60 reduction), the final tax is R$ 754.75.
In summary, this is not a table adjustment or a traditional exemption, but a reduction in the tax due.
Need help? ORGATEC specializes in accounting for foreign companies. Get in touch with us!.