Lula Signs Into Law R$12.6 Billion Debt Forgiveness for MEIs
In addition to the law providing debt relief for microentrepreneurs, the president introduced a constitutional amendment proposal for free public transportation on weekends
President Luiz Inácio Lula da Silva (PT) signed into law yesterday a measure that raises the annual revenue cap for Individual Microentrepreneurs (MEIs) from R$81,000 to R$140,000 by 2028 and forgives R$12.6 billion in debt.
At the same ceremony, held at the Palácio do Planalto, Lula submitted to the National Congress a Proposed Amendment to the Constitution (PEC) aimed at funding free public transportation. In his remarks, the president advocated free fares on Saturdays, Sundays, and public holidays and said the event might be his last official engagement until next Sunday, the day of the election runoff.
“Perhaps this will be the last official act I sign as president of the Republic until October 25,” he said. The measures are part of government initiatives aimed at reducing debt among small entrepreneurs and easing the financial burden on households.
Complementary Law No. 186/2026 establishes new rules for Individual Microentrepreneurs. The main changes include tax debt forgiveness, an increase in the annual revenue cap, and the possibility of hiring additional employees.
The Prospera MEI package also provides for the renegotiation of bank debt through Desenrola 3.0, non-repayable financial support of up to R$5,000 for investments, and simplified tax obligations. MEIs may be exempt from issuing invoices for sales to individuals, while “nano-MEIs” will be exempt from issuing invoices for all sales and from registering for a CNPJ, under the announced rules. The government estimates that a total of 17.6 million entrepreneurs could benefit from the package.
The changes affecting MEIs will take effect in stages. Debt forgiveness is scheduled to take effect on January 1, 2027, while the annual revenue cap will increase to R$110,000 in 2027 and R$140,000 in 2028. It is important to note that the debt forgiveness does not cover all financial obligations. Bank debt, loans, labor-related obligations, and state or municipal taxes are not automatically included in the measure, explains labor law attorney Igor Bezerra Alves.
“Amounts that have already been paid will not be refunded. There is also an important condition: to retain the benefit, entrepreneurs must make timely payment of the monthly contributions due during the six months following the measure’s entry into force on January 1, 2027. Failure to comply with this obligation may result in the cancellation of the debt forgiveness,” the specialist notes.
Another point highlighted by Bezerra Alves is that the legislation preserves eligibility for the benefit even in the event of certain registration changes after the law is published. “It is also important to remember that the ability to hire two employees does not eliminate labor and social security obligations. Entrepreneurs will still be required to comply with formal employment registration requirements and the payment of wages, vacation pay, the 13th-month salary, FGTS contributions, and all other employee rights,” he emphasizes.
The specialist also recommends that business owners should not choose the MEI regime based solely on the amount of taxes they would pay. According to him, immediate tax savings may ultimately result in much greater losses if the business is not properly classified under the regime.
“Before making this decision, I recommend assessing current revenue and projected revenue for the coming years, the number of employees, operating costs and, most importantly, whether the business activity is permitted under this regime. There is little benefit in securing a lower tax burden now only to face retroactive assessments, fines, or labor-related issues later due to non-compliance with legal requirements,” the attorney advises.
According to Joseph Couri, president of the Union of Micro and Small Industries of the State of São Paulo, the measures signed into law by President Lula are positive and align with the sector’s longstanding call for an adjustment to the revenue cap.
Despite the improvements, he believes the higher revenue cap could also be extended to companies under the Simples Nacional tax regime, in addition to the debt forgiveness measure. Other industry priorities that should also be considered include adjustments to certain aspects of the tax reform. He added that the sector should continue bringing these demands to the government.
“The measure does not address every request or demand made by MEI businesses. Of course, automatic adjustments would be very welcome. Has it solved 100% of the problems? No. Has it solved a significant portion of them? Yes. Is it moving in the right direction? Yes. Can it be improved? Like everything in life, it can be improved, but these are positive measures because they support MEI businesses and this smaller segment at the base of the Simples system,” Couri said.
WHAT CHANGES UNDER THE LAW
The changes approved by the National Congress and signed into law by President Lula are expected to increase the number of microentrepreneurs in Brazil, following the first adjustment to the revenue cap in more than eight years.
Who is eligible
The debt forgiveness applies to federal government claims, whether or not enrolled as outstanding federal debt, existing as of October 13, 2026, for which individuals duly registered as MEIs are liable.
What is not forgiven
- Debts arising after October 13, 2026;
- ICMS and ISS;
- Any other taxes or contributions other than the social security contribution paid through DAS-MEI.
Subsequent removal from the regime
If a MEI is subsequently removed from the MEI framework or excluded from Simples Nacional after the law is published, the benefit will not be forfeited. The exception applies to changes with retroactive effect that invalidate the entrepreneur’s previous eligibility under the regime.
What the MEI must do
Submit the deregistration request and, if there is ongoing litigation, provide evidence of the filing of the withdrawal and waiver. The withdrawal applies only to the forgiven claims and does not result in attorneys’ fees.
Pay on time the contributions falling due during the six months following January 1, 2027. Failure to do so will result in the cancellation of the debt forgiveness.
Monitor the regulation to be issued by the Office of the Attorney General of the National Treasury (PGFN), which will establish the applicable procedure.
Those who do not meet these criteria cannot simply “join the eligible group.” Their alternatives remain installment payment plans or tax settlement programs.
What should business owners consider before switching to MEI?
Revenue cap: The limit will be R$110,000 in 2027 and R$140,000 from 2028 onward. For those starting their business activities in 2027, the limit will be proportional: R$9,166.67 per month.
Employees: The two-employee limit applies only to activities in rural areas involving manufacturing, commerce, and the provision of rural services. Even in these cases, employees must receive exclusively either the minimum wage or the minimum salary established for their professional category. This requires careful attention to employment contracts and the risk of misclassification when transitioning to the MEI regime.
Public procurement: There is an additional advantage: the law allows procurement procedures exclusively for MEIs for lower-value items.
Source: Ministry of Entrepreneurship, Microenterprise and Small Business (MEMP) and Aline Fidelis, partner in the Labor & Employment and Social Security practice at Tauil & Chequer Advogados in association with Mayer Brown.
FREE FARES
The PEC submitted by Lula to Congress provides that at least 26.8% of the annual funds allocated through mandatory individual and congressional caucus amendments be used to fund free urban public transportation. Considering the R$44.8 billion in mandatory parliamentary amendments provided for in the 2027 budget, the government estimates that approximately R$12 billion would be allocated to free public transportation.
The proposal seeks to make fare-free public transportation possible, potentially beginning on Saturdays, Sundays, and public holidays. The funds would be transferred to the federal entities responsible for providing the services without reducing the constitutionally mandated share allocated to healthcare. During his remarks, Lula said the measure is intended to allow workers to use their days off to visit relatives, meet friends, and enjoy leisure activities without having to commit part of their household budget to transportation.
“It is only fair that we make transportation free on weekends and public holidays so that, when people have time to rest, they can visit a relative, a child, a parent, a close friend, or a group of friends, and also receive visitors themselves,” he said.
The president linked the initiative to the debate over ending the “6x1” work schedule, under which employees work six days followed by one day off. According to Lula, giving workers more free time must be accompanied by conditions that allow them to make meaningful use of their days off.
Lula also recalled the difficulties he faced while working in industry in São Paulo, when he would walk long distances because he did not have enough money for public transportation. “There were many times when I walked 8 kilometers because I didn’t have a damn coin to pay the fare,” he said.
The president said he intends to assess the results of the measure before expanding free transportation. “We won’t be able to do everything at once, but we are starting an important experiment to see whether these measures work,” he said.
TIMELINE
The changes affecting MEIs will take effect in stages. The debt forgiveness is scheduled to take effect on January 1, 2027, while the annual revenue cap will rise to R$110,000 in 2027 and R$140,000 in 2028.
The Free Fare initiative, meanwhile, depends on congressional approval of the PEC. The proposal provides for changes to the allocation of funds beginning with the 2027 budget, but free public transportation is not yet guaranteed.
If approved and implemented, the initiative could reduce household spending on transportation on weekends and public holidays, expanding access to leisure, cultural activities, and time with family.
