Brazil: Court Rejects Social Security Tax on Executive Insurance

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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 Executive Is Not Benefitted'

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

To contact the editor responsible for this story: Rick Vollmar at

For more information on Brazilian HR law and regulation, see the Brazil primer.


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