12 May 2023
Employment Tax
Impact High
Summary
The Brazilian government published the Provisional Measure (MP No. 1,171), which provides for the new progressive withholding tax table for monthly payroll deductions.
The Detail
On Sunday 30th April 2023, the Brazilian government published the Provisional Measure (MP No. 1,171), which provides for the expansion of the income tax exemption range for individuals (IRPF) and must be implemented as of May 1st on payroll deductions.
In addition to this, the Provisional Measure also predicted the possibility of using a simplified monthly discount, corresponding to BRL 528. If it is favourable to the taxpayer in relation to the deductions already allowed in the monthly tax calculation.
| Taxation Band (BRL) | Taxation Percentage | Overall Deduction (BRL) |
| 0 – 2,112 | 0% | Zero |
| 2,112.01 – 2,826.65 | 7.5% | BRL 158.40 |
| 2,826.66 – 3,751.05 | 15% | BRL 370.40 |
| 3,751.06 – 4,664.68 | 22.5% | BRL 651.73 |
| Over 4,664.68 | 27.5% | BRL 884.96 |
In addition to increasing the exemption range to R$2,112, the measure also implements a monthly discount of R$528 at source (as mentioned). Together, the two amounts reach R$ 2,640 for the exemption range, which corresponds to 2 minimum wages (BRL 1,320).
Therefore, in practice, whoever earns up to this amount will not pay income tax either at source or in the Annual Tax Return. The change does not affect the Annual Income Tax Returns that are being delivered now because it refers to the previous year.
How we can help
The Vialto Partners Brazil team can assist clients with identifying the impacts resulting from these changes as well as implementing the required adjustments in the compensation package and payroll processing.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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