Brazilian Supreme Court extends deadline for resolution on payroll tax relief to September

The Federal Government and lawmakers have until September 11 to resolve the issue. Until then, the tax relief will remain in effect for companies

Justice Edson Fachin, the current Vice President of the Federal Supreme Court (STF), has extended to September 11 the deadline for Congress and the Federal Government to reach a consensus on the issue surrounding the payroll tax relief. The order was issued on July 16, as part of the Direct Action for the Declaration of Unconstitutionality (ADI) 7,633.

The extension was requested by both the Federal Attorney General's Office and the Federal Senate's Attorney General's Office. They argued that negotiations to find ways to compensate for the budget deficit were still ongoing. Additionally, they pointed out that the approaching parliamentary recess would make it challenging to deliberate on the matter.

Situation overview

Implemented in 2012, the payroll tax relief policy allows companies operating in certain sectors to replace the standard 20% payroll tax with the "Social Security Contribution on Gross Revenue" (CPRB), which ranges from 1% to 4.5% of the company’s turnover.

Since its inception, the benefit has been consistently renewed. At the end of 2023, Congress passed Law 14,784/2023, which extended the policy until 2027. However, later that year, the Federal Government issued Provisional Presidential Decree No. 1,202, which called for the revocation of the tax relief starting in April 2024. This led to a conflict between the Legislative and Executive branches, ultimately bringing the matter before the Supreme Court.

Repercussions

With the extension of the deadline for a consensual solution, companies in the eligible sectors will continue to benefit from the exemption until September 11. After that date, they will need to comply with the terms set forth by the authorities.

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