Brazil Global Payroll & Tax Information Guide

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Payroll in Brazil – 2022 Updates

Due to covid-19, the following measures were taken by the Brazilian authorities:

• Loosening of the fiscal target above the previously forecasted deficit of US$ 24.8 billion
• Support for the most vulnerable population, with anticipation of the 13th salary (US$ 9.2 billion) and salary allowance (US$ 2.5 billion), transfer of PIS / PASEP to FGTS (US$ 4.3 billion) and reinforcement of Bolsa Familia (US$ 620 million)
• Relaxation of labor laws to maintain jobs
• Aid for informal and self-employed workers (US$ 8 billion)
• Extension of payment of taxes, FGTS and contributions reduction (US$ 6 billion)
• Financial support to states (US$ 17.5 billion)
• Financial support to the airline industry
• Expansion of liquidity in the markets, with the release of US$ 40 billion in compulsory deposits
• Support from BNDES and public banks (BNDES: US$ 11 billion + Caixa: US$ 15 billion + Banco do Brazil: US$ 25 billion)
• Support for small and medium-size companies (US$ 8 billion)
• Postponement of readjustment of pharmaceuticals products

Learn more on the KPMG website here.

Basic facts on payroll in Brazil

In both North and South America, Brazil is the largest economy outside the United States.

In Brazil, there are only federal taxes, along with social security, and contributions to a public pension fund. Employees are tasked with filing their own taxes, as well as any additional taxes owed after employer withholdings.

The official currency of Brazil is the Brazilian Real (BRL).

Taxes

In Brazil, only the federal government requires taxes. States, cities, and municipalities do not require income taxes from their employees.

Income Tax

Rates and Thresholds

Residents in Brazil are taxed on their worldwide income. Non-residents are taxed exclusively at source on their Brazilian-sourced income. The source of income is determined by the place where the taxpayer is located, irrespective of where the work is performed. All income received abroad is subject to the progressive tax rate table, which ranges from 0% up to 27.5%. Wages and cost of living are significantly lower in Brazil than they are in the U.S. and Canada. Those that make less than BRL 1,903.99 pay no income taxes. The highest tax rate, 27.5%, is reserved for those that make BRL 4,665.69 or more. For a closer look, see the tax rate chart below.

How Withholding Works

The main taxes or contributions that Brazilian employers withhold are income taxes, social security, INSS (public pension fund), and severance. The company part of INSS is 20% of the gross salary, without limit. The employee INSS is 8 to 11% of the gross amount, with a maximum amount of BRL 570.90 (11% * BRL 5,189.82). Regulations change somewhat depending on the industry.

Returns and Tax Credits

Most employees choose the standard deduction of 20% of their annual income. The other option is to deduct qualifying expenses. Very similar to the United States, Brazilian employees must file their taxes by the end of April (technically, the last workday) on the prior year’s income. The government will not authorize an extension on tax filings.

Tax Rate Chart

 * Non-resident employees are taxed 25% of their income, regardless of what they make. The table above does not take into account an additional social security tax for employees which is from 8- 11%.

Tax-exempt Income

There are some cases in which the income can be considered as tax-exempt in Brazil, for example:

• Income received outside Brazil by non-tax residents in Brazil.
• Income exempt by a Double Tax Treaty provision.
• Distribution of dividends by Brazilian companies.
• FGTS withdrawal.
• Interests and withdraws from savings accounts in Brazil.
• Capital gains on foreign assets/investments bought/constituted prior to tax residency

Corporate Tax

The corporate tax rate is 34%. In Brazil, the corporate income tax rate is a combination of a 15 percent basic rate, a 10 percent surtax on income that exceeds BRL 240,000 per year and 9 percent social contribution on pre-tax profits.

Sales Tax

The sales tax rate is 17%.

Compensation and Benefits

One unique benefit to Brazilian employees is the 13th Month Salary. Essentially, after a full year of work, that employee is entitled to an extra full month’s salary. It works much like a mandatory bonus. Employees also receive overtime pay, paid sick leave, and vacation days.

Minimum Wage

Minimum wages vary by industry and region. However, the bare minimum wage for all employees in Brazil is BRL 1,212 a month.

Overtime

Overtime is considered on a daily rather than strictly a weekly basis. Any hours exceeding 8 are paid 1.5 times regular pay.

Hours of Work

In Brazil, the standard employee workweek is 40 hours capped at 44 hours per week.

Holidays & Sick Leave

All employees are allotted by law 15 sick days. If an employee is still too sick to work at 15 days, then they are entitled to social security benefits. Once an employee has remained with their employer for a full year, they are legally entitled to 30 days’ vacation/holiday pay at 1 1/3 regular pay. Employers also observe 10 national holidays in 2022. See the full list here.

All employees are allotted by law 15 sick days. If an employee is still too sick to work at 15 days, then they are entitled to social security benefits. Once an employee has remained with their employer for a full year, they are legally entitled to 30 days’ vacation/holiday pay at 1 1/3 regular pay. Employers also observe 10 national holidays in 2022. See the full list here.

Foreign Hires

Foreign employees that come to work in Brazil must secure the appropriate work visa. For business trips or short work visits, there is a 3-month-long business trip work visa. Those needing a temporary work visa for longer can apply for a Visto Temporario V and remain for two years at the same employer. These foreign workers are allowed one renewal for an additional two years (4 years total). If a foreign employee uses up all 4 years and still wishes to remain working in Brazil, they must apply for a permanent work visa, Visto Permanente.

Non-residents are taxed only on Brazilian-earned income at a flat rate of 25% (no deductions are allowed). Rental income received from a Brazilian-located property is taxed at 15%. Income received abroad by non-residents is tax exempt.

For more information about how our Global Payroll Control Platform integrates with local payroll providers in Brazil, contact us today.