Brazil's Congress Approves Tax Exemption for Churches, Potentially Costing Up to R$50 bn

The Chamber of Deputies approved PEC 5/2023 at the end of May, expanding constitutional tax immunity for churches, religious charities and related entities. The amendment would extend exemption from income and asset taxes to purchases of goods and services, meaning religious institutions could acquire items such as microphones, aircraft or medical equipment without paying consumption taxes.

Fiscal analysts estimate the measure could create a revenue gap of at least R$10 billion per year for the federal budget and up to R$50 billion over all government levels, potentially raising the new consumption‑tax rate by one percentage point. The cost would be borne by taxpayers, including faithful who continue to pay the higher rates. The proposal, authored by Deputy Marcelo Crivella, still requires Senate approval and may face a constitutional challenge in the Supreme Court.

The Ministry of Finance, evaluating “pautas‑bomba” proposals, includes PEC 5/2023 among projects that could total nearly R$1 trillion in impact over ten years, underscoring the broader concern about fiscal sustainability in Brazil.