Update to Rules for Individual Microentrepreneurs Under Discussion in Congress
The discussion over updating the rules for individual microentrepreneurs (MEI) has taken on new contours in the National Congress. The current assessment is that including a specific provision related to the MEI could avoid obstacles imposed by other fiscal rules, such as the 2026 Budget Guidelines Law (LDO). That law prohibits granting new tax incentives and extending existing benefits, and according to experts, the provision would open the way for a much-needed update to the rules governing this category.
Political Pressure and Fiscal Impact
However, the government‘s position is cautious. Amid political pressure, the administration argues that any progress on this issue must be phased in and cannot generate a fiscal impact this year. For the measure to be implemented, Congress will need to carve out an exception to the current fiscal framework. That framework calls for triggers to be activated in 2027, following a primary deficit of 0.43% of GDP in 2025, including a ban on new tax benefits.
The report on the Proposed Constitutional Amendment (PEC) states that the complementary law “may establish transitional measures, conditioned on maintaining employment levels, to mitigate the impacts resulting from this constitutional amendment for individual microentrepreneurs, microenterprises and small businesses.”
Resistance and Financial Impacts
The proposed changes for microentrepreneurs are already being debated in Congress through a complementary bill (PLP). However, the bill faces resistance from the economic team, which estimates a fiscal impact of R$ 48.5 billion in 2027 and R$ 53.7 billion in 2028. The measure has already passed the Senate but is stalled in the Chamber of Deputies. The text approved by senators broadens the MEI eligibility criteria, raising the annual revenue limit from R$ 81,000 to R$ 130,000 and allowing the hiring of up to two employees.
In the Chamber, the substitute text approved by the Finance and Taxation Committee (CFT) proposes an even larger increase in the MEI revenue limit, setting it at R$ 145,000, with an annual adjustment based on the IPCA.
Appeal to the President and Dialogue With the Economic Team
Deputy Hugo Motta, who is leading the discussions, appealed to President Luiz Inácio Lula da Silva to move the issue forward, especially in light of the reduction of the workweek. “Our intention is to allow these entrepreneurs to hire more people, since we are reducing the workweek. This will bring significant progress, especially as we seek to formalize work,” Motta said.
Because of the fiscal impact, the deputy also noted that the matter is being discussed with the economic team and with the Minister of Planning and Budget, Bruno Moretti. The new MEI revenue cap has not yet been defined, and implementation may be phased in.
Working Group to Reach Consensus
To move the rules update forward, a working group is expected to be set up on Wednesday (27). The initiative aims to draft a consensus text on the issue, as explained by Deputy Jorge Goetten (Republicanos-SC), the bill’s rapporteur. The group will include legislative staff and representatives of the Finance Ministry and the Entrepreneurship Ministry.
Simples Nacional and Tax Reform
In addition to discussing raising the MEI cap, Goetten also intends to address the situation of the Simples Nacional (Brazil’s simplified tax regime for small businesses) in the context of tax reform. However, he stressed that he does not want the debate over the MEI to be “contaminated” by this parallel issue. “Lawmakers know we need to discuss what will happen to the Simples [Nacional]. We need to update it for the tax reform, because this system was not covered. If there is room, without compromising the main goal, we will move forward,” the deputy said.
The Simples Nacional was preserved with the approval of the PEC that established the consumption tax reform. Business owners who currently pay taxes through the Simples will be able to choose to keep this system for all taxes, including the new consumption taxes — CBS and IBS — or migrate to the general regime for those taxes.
