From 7% to 17%: How Lula Just Raised Taxes on Small Business in Brazil by 150%
Let me tell you a story from Brazil.
I love this country. I love the chaos, the color, the contradictions. The way strangers talk to each other in elevators. The smell of churrasco on a Sunday afternoon. The joy of a sunset over Ipanema or a sunrise in Jericoacoara. The music that pulses in the veins of Salvador. The quiet dignity of the interior. The beauty of the people—proud, warm, resilient.
It’s a place that can drive you mad and then break your heart open with a moment of generosity so pure it makes you believe again.
That’s why this hurts.
It’s the story of a young developer named Rafael. Born in Fortaleza. Smart. Scrappy. Resourceful. He built a client base overseas. Americans, Brits, Germans. All happy to pay him in dollars. Rafael didn’t ask for much. Just wanted a simple life. Some beach, some steak, fast Wi-Fi. Maybe a flat in the northeast. A girlfriend who didn’t hate capitalism.
So Rafael did what Brazil told him to do: he played by the rules. He registered his business. He chose the Lucro Presumido regime. Paid his PIS and COFINS. Declared his income. Paid his 6.73% in corporate taxes. Paid IOF when he brought the money in. Took no salary, just dividends. Like everyone else. His effective tax? Just under 7%. Not zero. Not shady. Just lean. Honest. Efficient.
Then Came the Socialists
But that’s not good enough for the Left. Not under Lula.
Now, in the name of "justice," they’re slapping on a 10% dividend tax. And just to make sure no one escapes, they’re throwing in a minimum personal tax of another 10% on total income over 600,000 reais a year. That’s less than $110K. That’s not the ultra-rich. That’s Rafael, the solo hustler with an LLC and some clients abroad.
Let me be clear: this isn’t tax reform. This is punishment. It’s a 150% increase in tax on the country’s most productive digital workers. From ~7% to ~17%. Because Lula and his socialists can’t stomach the idea of someone building quietly and legally without going through their redistribution machine.
They call it justice. I call it theft.
What Do You Get in Return?
Let’s look at what Rafael gets in return:
Public schools? Trash.
Healthcare? Broken.
Infrastructure? A joke.
Security? Forget it.
Currency stability? Pray to St. Jerome.
And now they want more. Always more. Always from the ones who create, who export, who build.
They want Rafael to pay for the pension of the guy who never worked. For the bureaucrat with 18 months of vacation. For the NGO that teaches communism with state funds. For a digital real that tracks every cent.
It’s not enough that Rafael pays 7%. No, Lula wants him to pay 17%. Because that’s "fair."
The World is Still Open
But here’s the thing: Rafael has options. And so do you.
The world is big. Dubai. Paraguay. Estonia. Texas.
You don’t have to sit there while your government cannibalizes your ambition.
You can leave. You can rebuild. You can take your laptop and your brain and your ideas somewhere that doesn’t spit on them.
Because in Brazil, if you try to win—if you try to play it straight—they still treat you like a criminal.
But the criminal is the one who takes 17% of your income and calls it justice.
And that’s not you.
That’s them.
The Silent Exodus: Foreigners Are Leaving Too
And Rafael isn't alone.
There are tens of thousands of foreigners living in Brazil who chose this country. Chose it despite the bureaucracy. Despite the taxes. Despite the rules that change like the weather in São Paulo.
They came for the warmth. For the rhythm. For the wild beauty. For the language that sings. They came for the people—yes, the people—who, when they aren’t being crushed by their own state, are some of the most vibrant, entrepreneurial, warm-hearted souls on Earth.
Take Josh, a UX designer from London. He moved to Florianópolis with his Brazilian wife. Took a chance on Brazil. Built his own company. Pays his accountant, pays his taxes, hires locals. He earns in pounds, spends in reais, and lives in a country that now tells him: you owe us double.
Or Marta, an Italian SEO consultant who moved to Bahia. Fluent in Portuguese. Volunteers teaching English to favela kids. Runs her business online. Operates from a cafe in Salvador. Paid ~7% tax. Now told: pay 17%.
These people aren’t tax evaders. They’re contributors. They invest in Brazil not just with money but with faith. And now that faith is being shattered.
Lula's Message to Creators: You Are Not Welcome
Because what Lula has done isn’t about tax brackets. It’s about punishing the mobile, the digital, the self-made. The very class of global citizens who can choose where to live, where to work, where to spend and contribute.
Brazil has long suffered under the idea that ambition must be regulated, that prosperity must be policed. Lula just doubled down on that idea. He thinks this is a country of endless cows to be milked. But the new class of knowledge workers don’t moo. They move.
And they are moving.
We’re hearing it in every expat group, every crypto chat, every coworking space: get out before 2026. That’s when the dividend tax hits. That’s when the minimum tax hits. That’s when the doors close.
Make your money now. Lock in your profits. Move your company. Build a Plan B.
Where Should You Go?
Here are viable alternatives for those ready to opt out of Lula’s Brazil:
Dubai: Zero income tax. World-class infrastructure. No nonsense.
Paraguay: Simple residency. Territorial taxation. Dirt cheap.
Georgia: 1% tax for small business. No nonsense banking.
Uruguay: Residence in weeks. Tax exemption on foreign income for 10 years.
Malta: 5% effective corporate tax. EU banking. Mild climate. English-speaking.
Philippines: Low cost of living. Simple visa options. English widely spoken. Offshore income usually untaxed.
These are not pipe dreams. These are options. And more and more people are taking them.
The Window Is Closing
Because what Lula and his advisors don’t understand is that the future of Brazil’s middle class and its integration into the global economy is not found in oil or soy. It’s in remote work. It’s in the services export sector. It’s in the Rafas, Joshes, and Martas of this world.
But instead of nurturing them, the government crushes them. Doubles their taxes. Labels them privileged. While ministers still fly private jets and pension schemes for the public sector bankrupt every state from Rio to Rio Grande.
So yes, this is a 150% tax hike. But it’s also a signal.
A signal to those who can leave: leave now. To those who can build abroad: start today. To those with a foreign passport: renew it. To those without one: get one. Because Brazil has made it clear.
If you work hard and succeed quietly, you will be punished loudly.
And that’s not the social contract.
That’s a socialist trap.
Rafael is packing his bags. Josh is restructuring in Estonia. Marta is flying to Dubai.
The good ones always leave first.
And when they do, all that’s left is the bureaucracy.
And the people who voted for it.
Book a Consultation: Build Your Exit Plan
If you're a freelancer, entrepreneur, or remote worker in Brazil earning dollars, euros, or pounds—you have options. Don't wait for 2026. The time to act is now.
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Book a personal consultation today. One hour can change your trajectory.
Because the best time to leave is before they lock the doors. And the second-best time? Right now.
