Brazil Clarifies Social Tax Rules for Rewards to Employees

Employers are not required to pay Brazil’s payroll-based social security tax of 20% on some rewards that companies provide to employees for outstanding performance, Brazil’s federal revenue service said in a document May 21.

The document, Consultation Solution No. 151 (Portuguese), states that the qualifying rewards exempt from the 20% social security tax rate must be based on performance and cannot be the result of “legal obligations or required adjustments.” The qualifying rewards cannot be issued more than twice a year to the same employee.

According to the document, performance-based awards that are automatically granted to employees who exceed company ...