Law extends payroll tax relief until 2027

In force since 2012, the tax relief on payrolls will be maintained for the 17 industries with the highest employment rates

On December 28, Law No. 14,784/2023, was issued, extending the payroll tax relief for companies across 17 industries with the most job openings in Brazil.

The benefit, initially introduced in 2012 and extended in subsequent years, was scheduled to end at the close of 2023, as a bill that provided for a new extension was vetoed by the Brazilian Federal Government. The veto, however, would be overridden by the National Congress, leading to the act’s enactment.

As a result, industries covered by the law will continue to enjoy the tax relief benefits until December 31, 2027, which exempts companies from paying social security contributions on payrolls, replacing this tax with other sources of revenue.

This effort aims to enhance the competitiveness of these businesses in the Brazilian market, fostering economic growth and job creation. Check out the key points below:

What is payroll tax relief?

The exemption replaces the calculation of social security contributions based on a company’s payroll with taxation based on other criteria. The aim is to alleviate companies' labor costs, making it more affordable to hire workers while stimulating local economy.

This scheme allows companies to refrain from paying the 20% of the total payroll value to the Social Security System. Instead, these businesses will be subject to another tax – the ‘Social Security Contribution on Gross Revenue’ (CPRB), with rates ranging from 1% to 4.5%, depending on the entity’s business activity.

It is worth noting that, in order to make up for the loss of revenue, the law provides for a 1% increase in another tax - the Cofins-Importação -, a provision that has also been extended by the new act.

Which industries are benefitted?

Seventeen sectors deemed to have high employment rates in Brazil will benefit from the payroll tax relief. See below:

• Footwear manufecturing;
• 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.

Legal entities wishing to apply for the payroll tax relief must pay the CPRB tax pertaining to January for each year covered by the extension. It is important to note that this decision is irrevocable.

Tax and labor compliance

DPC has a dedicated team that stays abreast of the latest legislative changes in the labor and tax environments, ensuring that our clients are in constant compliance with regulations. You can rely on our specialized support at: dpc@dpc.com.br.