Companies in sectors covered by payroll tax relief can choose to leave the regime before the end of its validity, scheduled for 2028. The gradual reindexing, which begins in 2025 and extends until 2027, is making the regime less advantageous for many sectors, according to an assessment by Pedro Ackel, Legal and Tax Director of theBrazilian Association of Administrative Support Service Providers (Abrapsa).
"The law approved this year proposes a transition process that, year after year, will make the tax relief regime less attractive for many companies," says Ackel. The main advantage of the payroll tax exemption regime has been the replacement of the 20% social security contribution on payroll with a contribution calculated on the companies' gross revenue, called the Social Security Contribution on Gross Revenue (CPRB), with rates ranging from 1% to 4.5%. This modality has been particularly beneficial for companies with large payrolls, such as those in technology, construction, and 17 other sectors of the economy.
However, starting in 2025, companies will face a hybrid taxation system, in which the rate on gross revenue will be gradually reduced, while the contribution on payroll will be gradually reintroduced. In 2025, for example, the CPRB rate will be reduced to 80% of the current value, and companies will have to pay a 5% contribution on the payroll. In 2026, the contribution on the payroll increases to 10%, and in 2027, reaches 15%, while at the same time, the CPRB rate continues to decrease. This transition model has raised concerns in labor-intensive sectors, which are already considering the possibility of leaving the regime before 2028.
Financial impact on affected companies and sectors
"The proposed hybrid taxation system could cause companies that already have high payrolls relative to their revenue to see their costs increase starting in 2025," explains Pedro Ackel. He observes that the projection of salary costs and revenue will play a decisive role in the companies' choice to stay or abandon the tax relief regime. For those companies whose payroll represents a significant portion of their revenue, the new regime may prove financially unviable, encouraging them to exit the program before 2028 and return to the conventional payroll contribution regime.
Some sectors, such as technology and construction, are particularly affected by this transition, since in them, wages represent a large proportion of gross revenue. Many companies in these sectors may choose to abandon the tax relief as early as 2025 due to the increase in the tax burden brought by the new rule.
Possible return of pejotization
A possible consequence of this re-energization is the return of the practice of pejotization. Pejotization consists of hiring professionals as legal entities (PJs), which allows companies to avoid labor charges such as FGTS, 13th salary, and vacations. With the new scenario of progressive taxation, companies may start developing pejotization projects for high-salary positions, aiming to minimize the costs caused by reoneração.
Pejotization, which lost strength in recent years due to opposing jurisprudence decisions, may regain ground if payroll tax relief becomes financially unfeasible for large companies. "Professionals in strategic positions and high salaries will be the most affected, as pejotization is an alternative to reduce labor costs for these roles," adds Ackel. He also indicates that before making any decision on this matter, it is advisable to analyze the labor and tax risks.
The future of tax relief and payroll tax reform
The payroll tax reform, scheduled for 2025, could directly impact the future of the exemption regime. "There are ongoing discussions for a broader reform of payroll taxation, which could make payroll relief unnecessary even before 2027," he states. He emphasizes that the reform under study aims to create a more efficient and less burdensome tax system for companies, which could accelerate the end of the current tax relief regime.
Still, Pedro emphasizes that, although it is too early to definitively state the impact of this reform, it will bring significant changes to the Brazilian tax landscape, and companies need to be attentive to possible changes in the contribution regime. "The early end of the tax relief may become a reality if the reform offers more advantageous or simplified alternatives for payroll taxation," he concludes.
With the gradual reoneração scheduled between 2025 and 2027, the payroll tax relief regime, which currently benefits labor-intensive sectors, may become less attractive. Companies in sectors such as technology and civil construction are already considering the possibility of abandoning the regime, opting to return to the traditional payroll contribution model. Furthermore, the gig economy of key professionals emerges as an alternative to reduce labor costs. The payroll taxation reform, scheduled for 2025, could determine the future of this regime and the viability of its continuation.
