Signed into law on the last day of 2021, Law 14.288/21 extends the payroll tax exemption until 2023. The new legislation addresses the concerns of various businesses looking to recover economically, and experts argue that the measure also brings greater security to the country’s economy.
The payroll exemption has been in effect since 2011 and was designed to replace the employer’s contribution to Social Security based on employee salaries. Prior to its introduction, contributions were calculated at 20% of the payroll. With the change, the rate now ranges from 1% to 4.5% of the company’s gross revenue.
A total of 17 sectors benefit from the measure, including footwear, call centers, communications, apparel, civil construction, construction and infrastructure companies, leather, vehicle and bodywork manufacturing, machinery and equipment, animal protein, textiles, information technology, communication technology, integrated circuits projects, metro and rail passenger transport, road passenger transport, and road cargo transport.
According to the law, the Executive Branch will still define monitoring mechanisms and evaluate the impact of the payroll tax exemption on job retention in the affected companies.
Attorney Willer Tomaz, partner at Willer Tomaz Advogados Associados, states that, in the context of the pandemic and global economic setbacks, national legislation has undergone changes to create a better environment for entrepreneurship, “which is the cornerstone of any prosperous economy in a developed country.”
“By exempting payroll taxes, Law 14.288/2021 will temporarily benefit various productive sectors, from footwear to construction, leading to significant gains in wealth generation and the recovery of domestic economic growth. These results will need to be monitored by the Executive Branch, as mandated by the newly passed law,” Tomaz emphasizes.
Tax lawyer and partner at Dias, Lima e Cruz Advocacia, Mateus da Cruz, agrees, noting that “beneficiary companies can continue contributing to Social Security with a reduced percentage of their revenue, instead of contributing based on their payroll. This helps preserve jobs.”
“It is essential to maintain the payroll tax exemption until a broader tax reform is implemented, as discontinuing it in the current economic scenario will lead to an excessive increase in fiscal costs for businesses, ultimately resulting in layoffs to reduce payroll expenses,” Cruz assesses.
Article published on IG Economia Portal.
