Tax | Certain Remarks on Taxation Over Labor in Brazil

The taxation over labor in Brazil is considered high, but there are certain sectors that the impact burden can be reduced. 

In general, the social security contribution due by the employer is levied on the payroll and has a rate between 20% to 22,5% of the gross salary with no limitation on the amount of earnings subject to contributions. In addition to that, there are other taxes which can be added up to 5,8%. 

For some sectors, however, i.e. IT, construction, transportation, there is an option of exchange the social security contribution tax for a social security tax on the gross income, which has rates ranging from 2% to 4,5%, depending on the sectors. This can be a good tradeoff because put out the pressure on the payroll and lessen the pressure on the need of firing employees in times of crisis as the one we are current undergoing. 

But this possibility to choose the tax for aforementioned sectors is valid through the end of 2020, and the renewal is currently been discussed in the Congress. Companies in such sectors may be affected if the tax option becomes not available. It is a point of attention to the companies themselves and investors/lenders in such segments.


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