Brazil Introduces Modifications to Profit-Sharing Plans for Employees (Sunnyvale, CA) - Modifications to profit-sharing plans for employees (participação nos lucros ou resultados, PLR) for individual income tax purposes have become effective in Brazil from January 1, 2013. Nair & Co. which provides global HR services for companies setting up foreign operations finds out that Law 12,832/2013 was published in the Official Gazette on June 21, 2013, thereby enacting amendments to Law 10,101/2000 and modifying the tax exemption thresholds for profit sharing plan payouts to employees. Profit sharing plans facilitate payments to employees depending on the company’s profitability in addition to employees’ regular salary and bonus. Highlights of the amendments are summarized below: In Brazil, profit-sharing plans are taxed through the withholding tax mechanism, which is applicable separately from any other income earned and according to the prescribed progressive rates. The income earned through profit-sharing plans is not considered to be a part of the taxable base used for calculating income tax which is reported in the yearly income tax return. For profit-sharing plans, the below yearly progressive rates are required to be applied: Profit-sharing plan payouts Up to BRL 6,000.00 (around EUR 2,050)
Applicable tax rates The income is exempted
From BRL 6,000.01 (around EUR 2,050) to BRL 9,000.00 (around EUR 3,076)
7.5 per cent
From BRL 9,000.01 (around EUR 3,076) to BRL 12,000.00 (around EUR 4,101)
15 per cent
From BRL 12,000.01 (around EUR 4,101) to BRL 15,000.00 (around EUR 5,126)
22.5 per cent
Over BRL 15,000.01 (around EUR 5,126)
27.5 per cent
A commission elected by both the company and its employees carries out the negotiation of a profit-sharing plan. The commission also includes a representative appointed by the corresponding labour union. For more information about doing business overseas or to know more about our International HR Services team please contact us.
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Published on Jul 26, 2013
Nair & Co. which provides global HR services for companies setting up foreign operations finds out that Law 12,832/2013 was published in the...