This complete global solution for HR professionals combines custom research, strategic white papers, country primers, webinars, and the expert guidance you’ve come to expect from...
March 31—Companies battling Brazil's tax department over the taxation of employee vacation bonuses won an important court victory March 24.
The federal tax department has required companies to pay social security taxes on payments to employees for vacation bonuses, claiming that these bonuses constitute employee salary. The required bonuses amount to an additional payment of one-third of an employee's monthly salary. Tax collections on this bonus have been estimated at $2.4 billion a year by government officials.
In March of last year, Brazil's superior court of justice, the country's second highest appeals court, ruled that companies do not have to pay the tax, but this January the tax department released a statement that it would continue to tax vacation bonuses.
In its March 24 ruling, Brazil's highest labor court, the supreme labor court, ruled that the tax cannot be applied to the vacation bonus, which is not salary but a “compensatory” payment established by Brazil's constitution and therefore not subject to social security taxation. This bonus, the court stated, “is not meant to cover services provided by employees” and does not constitute salary.
The court did, however, uphold the tax department's right to tax the normal payment of one month's salary during an employee's vacation period, which in Brazil is 30 days. According to the court, this represents a salary payment while the extra one-third does not.
Still to be heard from on this issue is Brazil's highest court, the supreme federal court, where several cases are under consideration.
To contact the reporter on this story: Ed Taylor in Rio de Janeiro at firstname.lastname@example.org
To contact the editor responsible for this story: Rick Vollmar at email@example.com
For more information on Brazilian HR law and regulation, see the Brazil primer.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)