On September 16, 2024, Law No. 14,973 was published, which regulates the gradual end of payroll tax relief and provides measures to compensate for the temporary losses arising from the corresponding tax benefit.
Among the compensatory measures are:
- the permission for individuals or legal entities to update the acquisition cost of real estate declared to the tax authorities to market value, with lower tax rates;
- the repatriation of lawful resources held abroad and not declared or incorrectly declared;
- an additional 1% Cofins-Import tax until December 31, 2024, to be gradually reduced during the transition period: 0.8% in 2025; 0.6% in 2026, and 0.4% in 2027;
- measures to combat irregularities in social and pension benefits; and
- the redirection of forgotten money to the National Treasury accounts.
End of Payroll Tax Relief
Payroll tax relief, established by Law No. 11,546 in 2011 as part of the “Plano Brasil Maior” (Greater Brazil Plan), changed the taxable bases and tax rates of social security contributions levied on employee remuneration for certain business categories.
For certain sectors, the collection of social security contributions shifted to being based on gross revenue from services and/or products at rates ranging from 1% to 4.5%, instead of being levied on employee and individual taxpayer remuneration at a rate of 20%. This is known as the Social Security Contribution on Gross Revenue (“CPRB”).
Since 2015, the CPRB became an optional alternative to collecting contributions based on payroll. This option has been extended several times, most recently through Law No. 14,784 on December 28, 2023.
The extension until 2027 brought by Law No. 14,784 had been vetoed by the President, but this veto was later overturned by Congress. The government then filed a Direct Action of Unconstitutionality (ADI) .
Given the resulting legal uncertainty, the preliminary injunction originally granted was suspended, allowing the Executive and Legislative branches to find a solution that would not harm taxpayers or the public budget, ultimately culminating in Law No. 14,973/2024.
Gradual Reoneration
Law No. 14,973/2024 maintains the payroll tax relief in 2024, with companies paying the CPRB in place of the employer’s social security contribution on payroll.
Starting in 2025, there will be a gradual reonoration of payrolls, meaning that beneficiaries will contribute cumulatively on both payroll and gross revenue at rates that will be adjusted annually, as summarized below:
| Year | CPRB Rate | Payroll Contribution Rate (Employer’s Share) |
| 2025 | 80% | 25% |
| 2026 | 60% | 50% |
| 2027 | 40% | 75% |
| 2028 | 0% | 100% |
During the transition period from 2025 to 2027, the law stipulates that no social security contribution will be levied on the 13th salary of employees.
Compensatory Measures
Real Estate Valuation Update for Income Tax Purposes
With the approval of the law, the government allows the revaluation of real estate by individuals, with a 4% income tax (IR) rate. Previously, taxpayers could not make the update voluntarily without paying at least a 15% capital gains tax.
It is also possible to revalue real estate for legal entities, with a reduced rate of 6% for corporate income tax (IRPJ) and 4% for the social contribution on net profit (CSLL).
Who are the beneficiaries?
- Individuals: real estate already reported in the Annual Income Tax Return (DAA);
- Legal entities: real estate that is part of the company’s permanent assets (i.e. in non-current assets).
How to make the update?
- Deadline: to be defined by the Federal Revenue Service (RFB);
- Tax payment: until December 15 2024 (90 days after the law’s publication);
- DAA 2025/2024: inclusion of the taxed amounts in the assets and rights section as an additional acquisition cost of the real estate.
What is the tax rule?
- Individuals: 4% IRPF on the capital gains;
- Legal entities: 6% IRPJ and 4% CSLL on the capital gains, with the taxed amounts not being deductible as depreciation expenses.
Capital Repatriation
The law provides a measure for the voluntary regularization of assets, rights, or resources of lawful origin: the new Special Regime for General Exchange and Tax Regularization of Assets, called RERCT-Geral.
Individuals or legal entities residing or domiciled in Brazil may adhere.
The regularization includes resources located in Brazil or abroad as of December 31, 2023, of lawful origin, which have never been declared or were incorrectly declared in previous years (e.g., financial assets, insurance policies, loans, foreign exchange operations, equity interests, real estate, vehicles, aircraft).
The (cumulative) conditions for adherence are as follows:
- DERCAT: submission of a declaration (DERCAT) of the irregular assets’ patrimonial situation as of December 31, 2023, or, if there is no balance or ownership of assets on this date, a description of the acts performed in previous tax declarations;
- Payment of IRPF as capital gains (15%) on the actual value of the assets to be regularized, determined by converting the foreign currency value to reais, using the selling exchange rate set by the Central Bank of Brazil as of December 31, 2023;
- Payment of a fine of 100% on the IRPF assessed.
The final deadline is December 15, 2024.
If the conditions are met, the tax debts initially owed to the tax authorities will be forgiven, and a 100% reduction of late payment fines will be granted.
Reduction of the Additional Cofins-Import Rate
The law introduces changes to the additional Cofins-Import rate, applying an additional 1% rate until December 31, 2024, for certain imported goods, as provided in the IPI Table (“TIPI”).
This additional rate will be gradually reduced, with 0.8% in 2025, 0.6% in 2026, and 0.4% in 2027, until it is phased out.
Forgotten Money
Finally, among the measures to offset the end of payroll tax relief is the possibility of directing forgotten amounts in inactive bank accounts for several years to the National Treasury, unless reclaimed by the account holders within the next 30 days. The government will publish a notice listing the accounts.
Our Tax team is available to answer any questions on the subject via email: tax.bluz@baptistaluz.com.br
