Brazil Moves to Lift the Cap on Its 13 Million Microbusinesses

Brazil · Economy

A move to raise the Brazil MEI limit would hand more room to grow to the country’s smallest businesses, the bedrock of its formal job market and a common gateway for foreign residents.

Brazil has taken a concrete step toward loosening the rules on its smallest businesses. On Monday, President Luiz Inácio Lula da Silva sent Congress a bill to raise the revenue cap for individual microentrepreneurs, a category that covers more than thirteen million people.

The proposal would lift the ceiling in two steps and let each microbusiness take on a second worker. It is a small-sounding change that touches a very large share of the workforce.

What the Brazil MEI limit change would do

The MEI, short for Microempreendedor Individual, is a simplified status for solo operators that bundles their taxes into one low monthly payment. It covers couriers, hairdressers, electricians, small shopkeepers and many gig workers.

Under the bill, the annual revenue cap would rise from eighty-one thousand reais (about $15,640) to one hundred ten thousand reais (about $21,240) in 2027, then to one hundred forty thousand reais (about $27,030) in 2028.

In monthly terms, that stretches the allowance from roughly six thousand seven hundred and fifty reais to about eleven thousand six hundred. The text also raises the headcount limit, letting a microentrepreneur employ two people rather than one.

Why the cap matters

The ceiling has not moved since 2018, so inflation has steadily eaten into it. In practice the freeze pushed growing operators to either hide income or jump early into a heavier tax regime called Simples Nacional.

That matters because small businesses are the backbone of Brazil’s formal job market. Microentrepreneurs and small firms accounted for more than eighty percent of net formal job creation in the country last year.

The category has also become Brazil’s main tool for pulling workers out of informality. In the first two months of this year alone, microentrepreneurs made up nearly four-fifths of the more than one million new businesses registered nationwide.

The government frames the bill as a way to keep these businesses in the formal economy and on the tax rolls. The flip side, critics note, is lost revenue, since a higher cap means more activity taxed at the lighter rate.

The politics and the timeline

The proposal arrives with political momentum. Lower-house speaker Hugo Motta tied it to a broader deal struck during debate over a constitutional change to working hours, making it one of his stated priorities.

A special committee is already studying the text, with a rapporteur who wants it voted before lawmakers break for recess on July 18. It would run alongside a separate, long-stalled bill to update the wider Simples Nacional brackets.

Even with that momentum, passage and the exact final wording are not guaranteed, and business groups want a broader overhaul. They argue the freeze has squeezed not just microentrepreneurs but small and medium firms too.

What it means for foreign residents

For foreigners living in Brazil, the MEI is a familiar on-ramp to self-employment, open to those with permanent residency or work-authorized status. A higher cap would let them earn more before facing heavier paperwork.

The headcount change is just as useful for a freelancer or small trader who wants to grow without leaving the simplified regime. The practical upshot is more room to scale a side business before the tax burden steps up.

For now the current eighty-one-thousand-real ceiling still applies, and the new figures depend on Congress. Anyone close to the threshold should treat the change as likely but not yet law.

Frequently Asked Questions

What is the new Brazil MEI limit?

The bill would raise the annual revenue ceiling for individual microentrepreneurs from eighty-one thousand reais to one hundred ten thousand reais in 2027 and one hundred forty thousand reais in 2028. The change is not yet law and still needs approval in Congress.

Can foreigners register as an MEI?

Yes, provided they hold permanent residency, work-authorized temporary residency or recognized refugee status, along with a Brazilian tax ID. Tourists cannot use the MEI status, and the same residency rules would continue to apply under the higher cap.

When would the higher cap take effect?

If Congress approves the bill, the first increase would apply in 2027 and the second in 2028. Until then the current eighty-one-thousand-real ceiling remains in force, so the change should be treated as proposed rather than guaranteed.

Related: A Small-Business Tax Break Balloons Into a Big Budget Worry in Brazil