The agreement for the gradual reinstatement of payroll taxes, reached between the National Congress and the federal government, brings a significant change to Brazil’s fiscal and business landscape. Announced by the Minister of Finance and the President of the Senate, the agreement establishes the start of the tax reinstatement in 2025, concluding in 2028 when all companies will face the same tax rate.
This commitment comes in response to the suspension of parts of Law 14.784/2023 by Minister Cristiano Zanin of the Supreme Federal Court (STF), which had extended the payroll tax exemption until 2027. Companies benefiting from the law were exempt from paying the social security contribution on the payroll, instead paying a lower percentage on gross revenue—between 1% and 4.5%, compared to the usual 20% rate.
With the new agreement, the reinstatement will be implemented progressively: 5% in 2025, 10% in 2026, 15% in 2027, and reaching the full 20% in 2028. This phased approach was Minister Haddad’s counterproposal to business requests to maintain the exemption until 2025.
The Attorney General’s Office (AGU) also got involved, filing a petition with the STF to modulate Zanin’s decision according to the agreement terms. Additionally, given the impact of delaying the tax reinstatement on public finances, the government promises to send a measure to Congress to compensate for the revenue loss, though this measure has not yet been detailed by the minister.
This tax reinstatement not only affects companies but also impacts municipalities, which will see changes in their social security contributions. The suspended law proposed reducing the rate for municipalities with up to 156,000 inhabitants from 20% to 8%. The reinstatement is part of a broader vision of tax reform, which will include discussions on income and payroll taxes.
The President of the Senate emphasized the importance of convergence between the Executive and Legislative branches to find solutions for the companies affected by the imminent obligation to pay contributions starting in May.