Payroll taxes in Brazil: An employer’s guide

When you hire in Brazil, you — as the employer — are responsible for calculating, withholding, and submitting payroll taxes from your team members’ pay slips. For some taxes, you are also required to make employer contributions.

In this article, we’ll explain clearly which taxes you need to withhold, which taxes you need to contribute to, and how to remit and make payments. So let’s jump straight in.

What is payroll tax?

Payroll taxes are the contributions employees and businesses make to the government to fund public programs, such as retirement, healthcare, and unemployment insurance. They typically include income tax and social contributions, and are set at pre-determined rates.

These rates (and the rules governing them) vary by country, but it’s every employer’s responsibility to ensure they are compliant, and that they are withholding and submitting the correct amounts.

What is the difference between payroll taxes and corporate taxes?

Generally, payroll taxes are tied to your employees’ wages, while corporate taxes are based on your company’s profits. 

Which payroll taxes do you need to withhold from your employee in Brazil?

In Brazil, the taxes you’ll need to withhold are:

Income tax (IRRF)

Brazilian residents are taxed progressively based on their level of income, at rates of between 0% and 27.5%. You must withhold taxes from their pay slip based on these rates.

When to pay: Payments must be made by the last working day of the following month.

Social security contributions (INSS)

Employees are required to contribute between 7.5% and 14% of their salary to the country’s social fund. This covers benefits for retirement pensions, disability payments, and health insurance..

When to pay: Payments must be made by the 20th day of the following month.

Note that you may also be required to withhold additional taxes for certain employees, such as child support payments, student loan repayments, or any other court-ordered garnishments.

Which payroll taxes does your business need to contribute to?

As well as withholding the contributions listed above, you are also required to make your own contributions, as follows:

INSS contributions

As the employer, you must also make social security contributions. These should total 20% of your employees’ gross salary.

When to pay: At the same time as employee contributions (see previous section).

Employees' Severance Indemnity Fund (FGTS)

This fund provides employees with a severance fund accessible under certain conditions, such as dismissal without cause or retirement. The contribution rate is 8% of your employees’ gross salary.

When to pay: Deposits must be made by the 7th of the following month.

Work Accident Insurance (RAT)

This program covers costs related to workplace accidents and occupational diseases. Rates vary based on your industry’s risk level, and are set at the following:

• Low risk: 1%

• Medium risk: 2%

• High risk: 3%

When to pay: Payment is due by the 20th of the following month.

Social assistance contributions (third parties)

You are also required to contribute to several other programs that fund various social assistance entities, such as SENAI, SESI, and others. The contribution rate is approximately 5.8% of your employees’ gross salary.

When to pay: Payment is due by the 20th of the following month.

To quickly see a full breakdown of payroll taxes and employment costs for your Brazilian hire(s) based on their salary, use our free Employee Cost Calculator tool.

How do you remit and pay payroll taxes in Brazil?

You must first register with the Brazilian Federal Revenue Service (Receita Federal) and obtain a CNPJ (Cadastro Nacional da Pessoa Jurídica) number.

For each pay period, you will then need to calculate the correct amounts for withholding. If you use Remote Payroll or Remote EOR, we will do this for you.

You should remit and make the relevant payments through an authorized bank in adherence with the deadlines listed above.

How do you manage payroll taxes as an international employer?

When you hire a Brazil-based team member from abroad, there are several ways you can manage their payroll and payroll taxes.

If you already have your own legal entity in Brazil, you can:

• Handle it in-house. You can hire your own payroll tax specialists and manage everything internally. This can be costly, however.

• Use a local third party. You can hire a local firm to handle payroll, although this can be unreliable, costly, and pose data risks.

• Use a PEO. A professional employment organization (PEO) acts as an outsourced HR provider, and includes payroll.

• Use a global payroll provider. Global payroll providers — like Remote — have local specialists in multiple countries, ensuring that you are fully compliant with all tax requirements in each one. This is especially convenient if you have (or plan to have) employees in different countries, as you can manage all of them through one platform.

If you don’t have your own entity in Brazil and you still want to hire there, you can:

• Set up your own entity. This can be extremely costly and time-consuming, but if you plan on establishing your business long-term in Brazil, it might be a viable approach. To pay your employees, you would then need to choose one of the options above.

• Use an EOR. Employer of record (EOR) providers — like Remote — enable you to quickly and easily hire anywhere in the world, and also handle all the core HR functions (such as compliance and payroll). As well as being generally more cost-effective than opening your own entity, this option is highly scalable and, again, enables you to streamline all your global HR tasks in one place. How does an EOR work?

Global HR —

5 min

EOR, Payroll, or both: What does your business need?

Understand the difference between EOR and payroll services — and clarify which one your business needs to pay your international team members.

What about independent contractors?

In Brazil, independent contractors are classified differently to employees. As a result, they (in most cases) are responsible for calculating, managing, and paying their own taxes.

However, it’s crucial to understand the difference between contractors and employees, as you may inadvertently create misclassification risk. This can result in severe fines and penalties for your business. Learn more about hiring contractors in Brazil.

How can Remote help?

Knowing which payroll taxes you need to calculate, withhold, and contribute to requires local expertise, especially as these rules can — and do — change. And if you make a mistake or fail to comply, the financial consequences can be significant.

Whether you have your own entity in Brazil or not, Remote ensures that you are withholding and contributing the correct amounts, and that you are fully compliant at all times with local tax and employment laws. We also provide 24/7 support for any guidance you may need.

To see how we can help — and to learn which approach is the most suitable for your business — speak to one of our friendly payroll experts today.

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