Brazil

Registrations and Establishing an Entity

To operate payroll in Brazil, a company must establish a legal presence. The most common corporate entities are:

• Limitada (Ltda) – Limited Liability Company
• Sociedade Anônima (S.A.) – Joint Stock Corporation

Foreign shareholders must appoint a Brazilian resident as legal representative, obtain a tax identification number (CNPJ or CPF), and register with commercial boards and tax authorities. Depending on the state, incorporation can take 45–90 days.

After incorporation, businesses must also:

• Register with eSocial (payroll platform)
• Appoint a local accountant
• Open an in-country bank account (mandatory for payroll and tax payments)

Banking

All payroll and statutory payments must be made from a Brazilian bank account. Bank branches are typically open Monday to Friday from 10:00 to 16:00. The Central Bank and Receita Federal (tax authority) monitor financial flows for compliance, particularly those above BRL 6,000 (corporate) or BRL 2,000 (individuals).

Working Week

The standard working week in Brazil is 44 hours, spread across Monday to Saturday, though most commercial offices operate Monday to Friday. Work hours are commonly 08:30 to 18:00 with a 1 to 1.5-hour lunch break. Overtime must be paid at a premium, typically 50% or more depending on labour agreements.

Employment Law

Holiday Accrual

Employees are entitled to 30 days of paid vacation after 12 months of service. Holiday pay includes a bonus equal to one-third of the monthly salary. If the leave is not granted within the required time, the employee must be paid double the amount.

Maternity Leave

Female employees are entitled to 120 days of paid maternity leave, extendable by two weeks with medical certification. Employers may extend leave by two additional months and claim a tax deduction. Job security is guaranteed during pregnancy and five months postpartum.

Paternity Leave

Employees are entitled to 5 days of paid paternity leave. This can be extended by 15 additional days under certain tax-incentivised programs.

Sick Leave

Employers pay the first 15 days of sick leave. Thereafter, the social security system (INSS) covers payments. In cases of work-related accidents, the employee gains job security for 12 months following return to work.

National Service

There is no compulsory military service in Brazil for payroll purposes. However, male employees may need to provide proof of military registration.

Tax & Social Security

The Brazilian tax year is the calendar year. Employers are required to withhold and remit personal income tax and make extensive contributions to social security and labour-related funds.

Income Tax (IRRF)

Income tax is withheld monthly and calculated progressively:

Returns must be filed monthly and employers must also submit an annual DIRF (employee income report) by the end of February.

Social Security (INSS)

Both employer and employee contribute to Brazil’s social security system:

• Employee contributions (2024):
  
  
  • 7.5% to 14% (progressive, capped at BRL 7,786.02/month)
    
    
• Employer contributions:
  
  • 20% on payroll
  • 0.5%–6% for workplace accident insurance (RAT)
  • 2.5% for education levy
  • Up to 5.2% for additional sector-specific levies

All amounts are paid monthly and reported through eSocial.

Payroll

Payroll must be processed using eSocial, Brazil’s integrated digital platform. Each pay run must include salary, allowances, overtime, tax and INSS deductions, and be transmitted to the government in real time.

Payslip Example

Payslips must display:

• Gross salary
• INSS and IRRF deductions
• Net pay
• Vacation pay and one-third bonus (if applicable)
• Employer contributions

Digital payslips are acceptable if employees provide consent.

Reports

Employers must retain payroll records for at least 5 years. These include payslips, contracts, time records, and tax filings.

Reporting

Key filings include:

• eSocial (real-time payroll and contribution data)
• DIRF (annual tax statement, by 28 February)
• SEFIP/GFIP (FGTS and social security, phased out under eSocial)

New Employees

Employees must be registered with eSocial at least 24 hours before starting. Required documents include:

• CPF (individual tax number)
• Valid work visa (for expatriates)
• Signed employment contract
• Bank details and job information

Expatriates must have a local bank account and meet immigration requirements before registration.

Leavers

Final payments must be made within 10 days of termination. If notice is waived, payment must be immediate. Termination must be registered in eSocial, and FGTS severance funds must be processed.

Severance may include:

• Unused vacation
• Pro-rated 13th salary
• FGTS fines (40% for no-cause terminations)
• Prior notice pay (if applicable)

Employee Benefits

Mandatory benefits include:

• 13th salary (paid in two instalments by December)
• Paid vacation + 1/3 bonus
  
• Transportation allowance (partially employee-funded)
• FGTS (8% monthly contribution to severance fund)

Optional benefits may include:

• Meal or food vouchers
• Health insurance
• Private pensions
• Bonuses or profit-sharing (subject to labour agreements)

Expenses

Business-related expenses such as mileage, travel, and meals may be reimbursed or paid via payroll. These may or may not be taxable depending on treatment and supporting documentation. Company cars and housing allowances are subject to tax unless proven work-related.

Foreign nationals must obtain a work visa before employment. The main types are:

• Business Visa: Valid for up to 90 days; no work allowed
• Temporary Residence Visa: Authorises work for up to 2 years
• Permanent Visa: For senior executives or specialised talent

Application process:

1. Job offer and signed employment contract
2. Submission to the Brazilian Ministry of Labour and Immigration
3. Visa issued by the Brazilian consulate
4. CPF registration and local ID on arrival

Employers must sponsor the visa and provide justification for hiring a foreign worker over a local candidate.

• Brazil mandates 13th salary and a vacation bonus for all employees
• FGTS (Severance Fund) must be contributed monthly and is triggered during terminations
• All payroll must be processed through eSocial, replacing legacy systems like GFIP
• Employers are responsible for multiple levies on top of INSS and IRRF
• Labour courts enforce employee rights, so compliance with contract and payroll is essential
  
  

Further Information

For more information, or assistance with Brazil Tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.