Brazilian fixed income investors face no changes to the tax exemption on Real Estate Credit Letters (LCI) following the implementation of the Minimum Personal Income Tax (IRPFM) in 2026, according to Daniela Barreto, Investment Strategy Manager at financial institution Inter.
Addressing widespread confusion among individual investors, Barreto clarified that the new minimum tax target applies exclusively to high-income earners and does not introduce income tax on LCIs or alter how they compare against Bank Deposit Certificates (CDB).
The clarifications follow recent legislative developments in Brazil that reignited debate over fixed income profitability. A previous proposal under Provisional Measure 1,303, which sought to impose a 5 percent tax rate on earnings from LCIs and Agribusiness Credit Letters (LCA), expired in October 2025 without being enacted into law by Congress. Consequently, LCIs and LCAs retain their full tax-exempt status for individual investors.
The Minimum Personal Income Tax, which entered into force in 2026, operates under a separate framework. It applies strictly to taxpayers earning more than R$ 600,000 annually, calculating tax obligations across aggregate earnings such as salaries, company dividends and rental payments. Crucially, the calculation excludes tax-exempt fixed income instruments, including LCIs, LCAs, Real Estate Receivables Certificates (CRI) and Agribusiness Receivables Certificates (CRA).
Barreto explained that in practice very little changes for the majority of retail investors because the new minimum tax impacts only a restricted bracket of ultra-high earners. For small and medium investors, the core logic of evaluating LCIs against CDBs remains virtually identical to previous years.
Net Return Comparisons Between LCI and CDB
Choosing between an LCI and a CDB depends primarily on comparing net returns after taxes rather than nominal interest rates. Although CDBs often advertise higher nominal percentages of the Interbank Deposit Certificate (CDI) benchmark, their yield is reduced by income tax deducted upon redemption.
Income tax on CDB earnings follows a sliding scale based on the investment duration:
- 22.5 percent for investment periods up to 180 days
- 20 percent for terms ranging between 181 and 360 days
- 17.5 percent for maturities between 361 and 720 days
- 15 percent for holding periods exceeding 720 days
Because LCIs remain completely exempt from income tax for individual investors, Barreto warned that focusing solely on advertised CDI percentages can lead to erroneous conclusions when evaluating potential returns.
Investment Horizons and Tax Advantages
The fiscal advantage of an LCI is most pronounced in short-term investments, where CDBs are subject to the highest tax rates. For example, in an investment lasting up to 180 days, an LCI offering 77.5 percent of the CDI delivers approximately the same net financial return as a CDB paying 100 percent of the CDI.
As the investment horizon extends, the tax benefit of LCIs decreases because the CDB tax rate falls to 15 percent for periods over 720 days. For maturities beyond two years, a CDB yielding around 91 percent of the CDI can generate a net return comparable to an LCI paying 77.5 percent of the CDI.
As a practical rule, shorter investment terms increase the tax advantage of LCIs. Conversely, longer maturities narrow the required rate gap, allowing CDBs with lower nominal rates to match or surpass the net performance of LCIs.
Barreto noted that historical performance does not guarantee future results, and advertised rates in market simulations do not reflect net earnings after taxes.
Essential Factors Before Selecting Assets
Evaluating fixed income options requires looking beyond net financial returns. Barreto highlighted four critical criteria that investors should analyze prior to allocating capital:
- Liquidity: Not all fixed income products permit early redemption prior to maturity, making it vital to confirm withdrawal rules.
- Investment Term: Maturity dates should align precisely with when the funds will be needed to avoid early redemption penalties or losses.
- FGC Protection: Both LCIs and CDBs can benefit from coverage by the Credit Guarantor Fund (Fundo Garantidor de Créditos), within established statutory limits.
- Issuer Risk: Investors should assess the financial health of the issuing bank, as claiming FGC guarantees in the event of default can require time.
The FGC coverage provides security of up to R$ 250,000 per individual CPF per financial institution, capped at an aggregate limit of R$ 1 million every four years.
Recommended Strategies for Conservative Investors
The implementation of the IRPFM does not require fundamental changes to investment planning for conservative or beginner investors, according to Barreto. She recommended that investors consistently evaluate net returns, honor investment timeframes, diversify product types, and distribute capital across different institutions to maximize FGC protection limits.
Asset selection must also align with individual risk profiles. A common asset allocation strategy involves keeping an emergency reserve in a CDB with daily liquidity, while placing capital designated for medium-term goals into LCIs.
Integrated investment platforms, such as the environment provided by Inter, assist investors by consolidating various fixed income instruments in one place, allowing users to compare yields, maturities and structural features before making investment decisions.
Key Clarifications on LCI and CDB Rules
To resolve ongoing doubts among market participants, key aspects of the tax structure can be summarized directly:
The new minimum income tax does not levy tax on LCIs, which remain tax-exempt for individuals after the 2025 tax proposal expired. The IRPFM affects only taxpayers with aggregate annual incomes exceeding R$ 600,000 from taxable sources.
Whether an LCI yields more than a CDB depends on the specific rates and term lengths, requiring a net return calculation after tax. LCIs hold a distinct advantage in short-term investments due to the higher tax bracket applied to short-duration CDBs.
For emergency funds, daily liquidity CDBs remain the preferred instrument in most scenarios due to immediate retrieval options. Both LCIs and CDBs enjoy FGC backing up to R$ 250,000 per CPF per institution and R$ 1 million globally over four years. Finally, financial advisors advise against concentrating capital in a single product, recommending a balanced allocation based on financial goals and liquidity needs.
