Brazil has established new transition rules to determined companies which were exempted of Social Security tax over payroll, as they will begin to pay it from 2025. Originally, this exemption was planned to be finished in 2027, but in April a judge suspended the decree where it was certified. This measure included a payment over gross entity revenue (between 1% and 4,5%), instead of 20% in salary-based payroll contributions.
This idea benefits 17 sectors, such as IT services, call centers, transport, construction, industry and journalism. Moreover, current president, Lula da Silva, tried last December to remove it, but the Parliament denied it. The new transition rules mean that companies will return to paying 20% tax rate on payrolls progressively until 2028. In 2025, they will start paying 5%, then 10% in 2026, 15% in 2027, and finally 20% in 2028 (the same percentage as in 2014).
During this transition period, companies must maintain at least 75% of their previous year’s workforce. If they do not comply with this requirement, they will have to pay the higher rate of 20% directly. This is to avoid mass redundancies due to the increased tax burden.
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