Brazil: Payroll tax exemption – president of the republic vets project that would extend the measure

published on 28 November 2023 | reading time approx. 1 minute

The Social Security Contribution on Gross Revenue (CPRB), also known as payroll exemption, is the possibility of collecting rates of 1 percent to 4.5 percent on gross revenue instead of collecting 20 percent INSS (National Institute of Social Security) on the payroll, reducing the tax burden for companies.

The calculation method was established in 2011, by Law Nº 12.546, and over these years has been regulated by several normative acts, which bring a taxing list with all the possibilities of framing the CPRB, based on the company's activity, its classification in the National Classification of Economic Activities (CNAE) or the product it manufactures (NCM).

Scheduled to conclude in late 2023, the payroll tax exemption has a project to extend the measure until 2027. However, this extension was vetoed yesterday, 23 November, by the President of the Republic, as indicated in the following statement:

"I would like to inform you that, in accordance with the provisions of § 1 of Art. 66 of the Constitution, I decided to fully veto, due to contravention of public interest and unconstitutionality, the Law Project n. 334 of 2023, which "extends until 31 December 2027, the terms that deal with the arts. Law nº 12.546, of 14 December 2011, and the § 21 caput of art. 8 of Law nº 10.865, of 30 April 2004, and gives other provisions."

The measure is not yet definitive, as the National Congress has 30 days to reject the veto, requiring an absolute majority of votes from Deputies and Senators for such rejection.

If the veto is maintained, it will mean a major change for companies framed in the payroll tax exemption, with a view to resulting in a significant increase in the employer’s social security contribution starting in January 2024.