The tax reform proposal submitted by the government to the National Congress on April 25, 2024, brings significant changes for companies, especially concerning benefits considered as “indirect salary.” Among these benefits are corporate health plans and company-provided cars, which, according to the new rule, will not be eligible for tax credits.
Indirect Salary and Tax Credits
The justification for this decision is that these benefits, when provided by companies, function as an extension of the employee’s salary. If the value of these benefits were paid directly as part of the employee’s salary, it would be subject to taxation. Therefore, allowing companies to deduct these expenses as tax credits would create a disparity in the tax treatment compared to citizens who pay for these services directly.
This measure could increase the operational costs of companies, which will have to bear these benefits without the possibility of tax deduction. For many companies, this might mean a review of the benefits offered or transferring part of the costs to employees.
Tax Reform and Non-Cumulativity
One of the main objectives of implementing the tax credit system through the reform is to prevent the cumulativity of cascading tax charges. This means avoiding a tax being levied at a production stage already taxed previously. However, by excluding benefits considered as “indirect salary” from the tax credit, the reform seeks to balance the tax burden among different forms of employee remuneration.
The decision to veto the tax credit for health plans and other business benefits classified as “indirect salary” represents a significant change in how companies manage their expenses and employee benefits. This measure, included in the context of the tax reform, aims to promote greater equity in the tax system but also imposes new challenges on companies that need to balance operating costs and maintaining attractive benefits for their employees. The debate in Congress will be crucial to define the final contours of this reform and its impacts on the Brazilian corporate environment.