Law extending payroll tax relief until 2024 approved

Legislation provides for a four-year transition period before the benefit is phased out

Law No. 14.973/2024 was issued in a special edition of the Federal Official Gazette on September 16. Among other provisions, the law extends the payroll tax relief for companies until the end of 2024, while also establishing a gradual reintroduction of taxation for the industries that benefit from this policy over the next four years. The text was signed into law by the President of the Republic within the deadline set by Supreme Court Justice Cristiano Zanin, following negotiations between the Federal Government and Congress.

In effect since 2012, the payroll tax exemption allows certain sectors to replace the 20% employer contribution on salaries with the Social Security Contribution on Gross Revenue (CPRB), at rates ranging from 1% to 4.5%, depending on the industry. However, since late 2023, there has been a standoff between Congress and the Federal Government regarding the continuation of this policy, due to the tax revenue loss it entails.

The law temporarily extends the benefit but introduces a transitional regime that gradually reinstates full taxation for companies. By 2028, the employer’s contribution will return to the full 20% of payroll, fully replacing the CPRB. The schedule for this transition is outlined below:

COFINS-Importação

As a result of the reinstatement of the full tax for companies, there will be a gradual reduction in the additional rate applied to the COFINS-Importação (COFINS tax on imports) tax rate, which was introduced in 2011 to offset revenue losses.

Thus, the reduction in the additional rate will be applied as follows:

Other measures

The law also introduces several measures aimed at mitigating the effects of the payroll tax relief and enhancing tax collection. These include the repatriation of funds held abroad by Brazilians, provided that the income tax is paid, and the adjustment in real estate values so that the taxes are paid in advance.

Individuals will have the option to adjust the value of their real estate properties in the Annual Tax Return (DAA), with a 4% tax applied to the difference between the market value and the acquisition cost. For legal entities, the revaluation of real estate in permanent assets will be taxed at a rate of 6% for Corporate Income Tax (IRPJ) and 4% for Social Contribution on Net Income (CSLL).

Special Foreign Exchange and Tax Compliance Regime

The Special Foreign Exchange and Tax Compliance Regime (RERCT-Geral) has also been created, allowing for the voluntary reporting of assets, resources, or rights that were previously unreported or misreported, whether in Brazil or abroad.

Taxpayers who join the program will be granted amnesty for tax-related offenses associated with the rectified amounts, such as tax evasion and smuggling. Enrollment must be completed by December 16, within 90 days of the law's issuance.

Tax and labor support

DPC has a team of qualified professionals dedicated to ensuring our clients' tax and labor compliance, while staying up-to-date with the latest legislative changes. For more information, please contact us: dpc@dpc.com.br.