Income Tax: understand the changes approved by the Chamber | Policy

The text of the project that changes the rules of the Income Tax (PL 2337/21) was approved by Chamber of Deputies on Thursday (02) and now needs to go through the Senate. Among the main points, the proposal increases the exemption range, which has not been updated since 2015. Experts warn that, even so, the value is below inflation.

In the table of Individual Income Tax (IRPF), the exemption range changes from R$1,903.98 to R$2,500 monthly, correction of 31.3%. This means that those who receive up to R$2,500 will no longer be required to send the declaration to the Internal Revenue Service and will be free of discounts.

the tax lawyer André Moreira, partner of the office Sacha Calmon Misabel Derzi, says that the adjustment is not enough, as it does not match the inflation of the period. For him, the exemption amount would have to be increased to around R$4,000, the price of the ideal minimum wage calculated by Inter-Union Department of Statistics and Socioeconomic Studies (Dieese).

A study of the National Union of Tax Auditors of the Federal Revenue (Sindifisco), released in February, even showed that the difference in the table was 113.09%, considering the accumulated inflation from 1996 to 2019. Thus, the exemption range should be extended to those earning up to R$ 4,022.89. The table’s correction was a campaign promise by President Jair Bolsonaro in 2018. “If I don’t correct the table for inflation, I’m raising the lawless income tax. They are selling a false promise of benefit to the worker”, he criticizes.

The Professor of Accounting Sciences at Ibmec, Paulo Henrique Pegas, agrees that the exemption range is outdated, but assesses that the new value is possible for the country’s fiscal situation. According to the rapporteur and deputy Celso Sabino (PSDB-PA), calculations estimate that around 16 million Brazilians will be exempt.

The measure also changes the tax to be deducted for other taxpayers, being a “progressive reform”: those who earn more will pay more taxes. A citizen, for example, who receives R$ 40 thousand per year and currently has the income tax due of R$ 686.42, will pay only R$ 150. Meanwhile, another citizen who receives R$ 120 thousand and owes R$ 17,960.24 of tax, will be required to pay R$17,977.50 — a difference of R$17.60. The increase, however, is seen as contribution stability.

“By putting more money in the hands of people with lower income, this value returns to the market because it will be used for consumption, which can help stimulate the economy”, says Pêgas. “I believe that changes still need to be made to the text, but we are on the right path. It’s as if you chose the right medicine in the wrong dosage.”

Currently, in the simplified declaration, the discount is 20% of taxable income, limited to R$ 16,754.34, which replaces deductions such as expenses with health, education and dependents. According to the approved text, the limit goes to R$ 10,563.60. The senior tax manager at EY Brasil, Felipe Coelho, warns that, if the text goes ahead, the new rules will take effect next year, and their effects will be felt in the declaration sent in 2023, referring to the base year 2022.

Coelho also adds other changes to the proposal for individuals. “Before, the taxpayer had to calculate the tax on investments in shares on a monthly basis and pay it off. Now this will be done on a quarterly basis. Thus, the exemption for sales changes from R$ 20 thousand to R$ 60 thousand, which does not represent an increase because the relative period goes from one to three months”, explains the manager. “Another thing is that compensation if there are losses will be allowed regardless of the quarter and the nature of the operation.”

Property owners will be able to update the value of the property on the income tax return, if it is out of date. Until then, the taxpayer could only do this in case of sale. The novelty will allow you to pay 4% tax on the valuation, instead of 15% at the time of negotiation. Thus, when selling the property, the tax to be calculated will be much lower. A person who owns an old property worth R$100 thousand, but which has appreciated to R$1 million, can calculate the tax in advance and pay less to the public coffers.

EY Brazil’s senior tax manager, Felipe Coelho, considers that the option is only advantageous for those who intend to sell in the future. “Spontaneous updating only makes sense for those who intend to sell the house or apartment. If you want to live in the property forever, you have no reason to pay this tax”, he says.

the tax lawyer André Moreira considers that this was a way that the government found to raise funds in the short term and believes that this part of the proposal is just an accessory. “There are other more important points, such as the taxation of profits and dividends, which, in my opinion, will drive away investors and compromise the country’s growth”, he adds.

For the study coordinator of the Economic Observatory of the Methodist University of São Paulo (Umesp), Sandro Maskio, the income tax reform is not enough to solve the complexity of the Brazilian tax system, which, as a whole, is very regressive. “It is a complex and difficult change to make because it involves interests from different social classes and different spheres of power. But when we slice the reform, making small changes, we lose a little sense of the whole”, believes Maskio. “There is something very unfair in Brazil today, which is the indirect tax. When a poor person buys a product, he or she pays the same taxes as a rich person and thus ends up spending all their income on basic items to survive.”

Maskio also assesses that the deduction on education is very small and could be modified as a way to encourage the improvement of the training process for workers and young people. “For health and education deductions, the logic is that the individual is not burdening the State with the use of these services. He’s paying out of his own pocket. While there are no limits on health spending, the education deduction is very small. This is one of the Achilles’ heels of the Brazilian economy.”

The exemption range goes from R$1,903.98 to R$2,500 monthly. The other ranges will be readjusted between 13.2% and 13.6%, while the installments to be deducted will increase from 16% to 31%. Deductions for dependents and education remain at the same amount.

  • Simplified statement

According to the initial proposal, this discount would only be possible for those who earn up to R$ 40 thousand per year, limited to R% 8 thousand (20%). But according to the text approved in the Chamber, anyone can use the simplified declaration – as happens today.

The change is that the 20% discount on taxable income limited to R$ 16,754.34 will be, at most, R$ 10,563.60.

Those who receive up to R6,980 per month or R83,700 per year will have a reduction in the tax owed. On the other hand, by having less payroll deduction, the worker will also receive a smaller refund when sending the IRPF.

Taxation of profits and dividends distributed by companies to individuals or legal entities will also apply to those domiciled abroad and in relation to any type of action. Profit or dividend distributed on assets or rights, such as debt securities or a machine, should also be taxed. The approved rate is 15%.

Micro and small companies participating in the Simples Nacional, in addition to companies not participating in this special regime, taxed on presumed profit with billings of up to R$4.8 million, are excluded from the charge.

The IRPJ will be reduced from 15% to 8%, effective after the implementation of an additional 1.5% of the Financial Compensation for the Exploitation of Mineral Resources (CFEM), which will focus on the extraction of iron, copper, bauxite, gold, manganese, kaolin, nickel, niobium and lithium. The additional 10% provided for in the legislation for monthly profits above R$ 20 thousand is still valid.

The Social Contribution on Net Income (CSLL) will decrease 0.5 percentage point in two stages, subject to the reduction of tax incentives, going from 9% to 8% in the general case. Banks will go from 20% to 19%; and other financial institutions, from 15% to 14%.

All changes will be valid from 2022 since, following the principle of anteriority, changes in taxes should only be valid for the following year.