Bloomberg Law for HR Professionals is a complete, one-stop resource, continuously updated, providing HR professionals with fast answers to a wide range of domestic and international human resources...
Feb. 9—Brazilian companies won an important court victory at the end of January in a dispute over whether the value of employer-funded liability insurance for executives and directors is taxable as salary.
In recent years, companies in Brazil have begun purchasing liability insurance for top management, a trend that accelerated following the 2013 enactment of Brazil's new anti-corruption law, which expanded the potential liability of company executives.
According to attorney Caio Taniguchi of the firm Aidar Attorneys, “Today it is very common for the executives themselves to demand this insurance when they occupy high management positions.”
The tax department has treated these premium payments as indirect salary and assessed social security taxes on them.
Employers have challenged this interpretation and on Jan. 26 won their first victory when a tax department administrative court ruled on the question in favor of one of Brazil's largest shopping centers. The only previous ruling on the issue, in 2009, had supported the government.
In the January case, the tax department argued that the purpose of liability insurance is to protect the personal assets of the insured executives and that its value therefore constitutes salary. The department also took the position that a 1991 law makes it clear that insurance premium payments are not exempt from social security taxation.
The administrative court, however, ruled that the insurance does not constitute salary because it is not paid to the employee and is a protection for his or her employer.
“It is because he is working that he needs insurance for protection,” the court said.
Judge Nereu Miguel Ribeiro Domingues stressed that at no point do insured executives receive payments resulting from their insurance, noting that “even when there is an insurance claim, the executive is not benefitted.”
Attorneys told Bloomberg BNA that the decision is a major victory for employers and will likely serve as a precedent for future cases.
“In cases of personal liability, it is very clear that it is the company that has the greatest interest in the insurance because it wants its employees to make the best decisions for the firm,” attorney Pedro Souza of the law firm SABZ Attorneys said.
To contact the reporter on this story: Ed Taylor in Rio de Janeiro at email@example.com
To contact the editor responsible for this story: Rick Vollmar at firstname.lastname@example.org
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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)