Provisional Presidential Decree reinstates payroll tax relief for 17 sectors

Act repeals portions of previous Decree that had revoked payroll tax exemptions for industries with the highest employment rates in Brazil

On February 28, Provisional Presidential Decree No. 1,208/2024 was issued in an extra edition of the Federal Official Gazette. The act has reinstated the payroll tax relief for 17 business sectors with the highest perceived employability. 

The decree preserves the tax benefit, which has been in place since 2012, as it revokes sections of Provisional Presidential Decree No. 1,202/2023, which had previously mandated these companies to resume paying Social Security taxes on payrolls. 

It should be noted that, to compensate for the tax exemption, the government has reintroduced a 1% rate increase in the Cofins-Import duties for certain goods listed in the Table of Tax on Industrialized Products (TIPI).

What is the payroll tax relief?

In force since 2012, the payroll tax relief is a benefit that allows specific business sectors to opt out of paying the employers’ contribution amounting to 20% of the company's total payroll value. In its place, these businesses are subject to the Social Security Contribution on Gross Revenue (CPRB), with rates ranging from 1% to 4.5%, contingent upon the nature of their operations.

Ever since its inception, this tax exemption has been consistently renewed over the following years. Its primary objective is to reduce labor costs for industries that are major employers in the country, thereby promoting the hiring of new workers and stimulating economic expansion. 

Which sectors are entitled to this benefit?

The benefit currently applies to the following sectors:

• Footwear manufacturing;
• Call center;
• Communications;
• Clothing (sales and manufacturing);
• Civil engineering;
• Leather;
• Construction and infrastructure work companies;
• Vehicle and bodywork manufacturing;
• Machinery and equipment;
• Integrated circuit design;
• Animal protein;
• Information Technology - IT;
• Communication Technology - ICT;
• Textile;
• Rapid transit services;
• Collective road transport services;
• Road freight services.

Future developments

Businesses are advised to keep a close watch on the developments regarding this issue, as despite the revocation of the payroll tax reinstatement at this initial stage, the Federal Government has introduced a new bill to bring the matter back for further discussion in Congress, on an urgent basis. However, it remains uncertain when — or whether — the bill will be signed into law and eventually implemented.

It is important to note that other provisions initially introduced by Provisional Measure No. 1,202/2023, such as the end of the Emergency Program for the Resumption of the Events Sector (Perse) and the restrictions on the offsetting of tax credits, will continue to apply until they are either ratified or rejected by lawmakers.

Tax and labor support

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