Our guide to Payroll in Brazil

Doing Business in Brazil

Investing in Brazil

The Constitution states that foreign investment should be of national interest for the citizens of Brazil. Subsequently, federal and state governments are open towards foreign investment that provides economic development, for example, providing wealth and job opportunities. Foreign and local investors are treated equally, and are both eligible for investment incentives.

There is additional incentive for industrial exporting companies. The Recof-Sped is aimed at industrial exporting companies and allows the suspension of taxes in the importation or the domestic acquisition of goods to be used in manufacturing products, parts or components intended for exportation or the local market.

Basic Facts about Brazil

Population: 212.6 million (World Bank, 2020)

Capital: Brasilia

Largest City: Sao Paulo

GDP: USD 1.445 trillion (World Bank, 2020)

Main Exports: Iron ore, crude petroleum, soybeans, coffee, cars, poultry meat and gold

Main Language: Portuguese

Monetary Unit: 1 Real = 100 Centavos

Internet Domain: .br

International Dialling Code: +55

How to say:

Hello: Olá

Good morning: Bom dia

Good evening: Boa noite

Do you speak English? Fala inglês?

Good bye: Adeus

Thank you: Obrigado (if you are male) Obrigada (if you are female)

See you later: Até logo

Registrations and Establishing an Entity

The company is required to have an established legal entity in order to process a payroll.

There are several types of corporate entities contemplated by Brazilian law, but the most used are the Limited Liability Company (sociedade limitada or “limitada”) and the Joint-stock Corporation (sociedade anônima or “S.A.”).

The Limited Liability may be formed by one or more individuals and/or companies. In case of foreign shareholder, it is required to grant a power of attorney to a Brazilian resident to represent it in the country, with powers also to receive summons. This power of attorney has to be legalized at the Brazilian Consulate. Non-resident quota holder must obtain a tax identification number from the Brazilian Internal Revenue Services (called CNPJ or CPF). No minimum capital requirements are imposed on Ltdas, but compliance with the thin capitalization rules is advisable to prevent potential challenge of interest deduction. Capital must be denominated in Brazilian currency.

The timescale for completion of this process varies a lot depending on the city of incorporation, but it would be fair to consider a period between 45-90 days.

Banking

It is mandatory to make payments to both employees and the authorities from an in-country bank account owned by the customer. Generally, banks are open to the public from 10:00AM to 4:00PM, and closed on Saturdays. The Supreme Court has decided that the Brazilian IRS has the right to access confidential bank information of both legal entities and individuals independently of justice authorisation. The RFB can extend control over financial transactions. The RFB will receive information on monthly transactions that exceed R$6,000.00 for legal entities and R$2,000.00 for individuals.

Working Period

Normal working hours should not exceed 8 hours per day and 44 hours per week. The 44-hour workweek applies to any employee, with exceptions such as bank clerks, telephone operators and so forth, who are subject to different workweeks pursuant to specific regulations. Time worked in excess of the above shall be considered as overtime.

The working day for commercial offices is usually eight hours, typically from 8:30AM or 9:00AM to 5:50PM or 6:00PM. Lunch breaks range from one hour to one and a half hours.

Employment Law

Monthly salaries may not be lower than the minimum wage established by applicable law. At present, the “minimum wage” is equivalent to R$ 1,621.00 (approximately US$ 308,64). Some specific activities have minimum wage amounts agreed with the respective Unions, but may not be lower than the national minimum wage.

Holiday Accruals

After a 12-month period, employees are entitled to 30 days of remunerated annual rest as vacation, which shall be taken within the subsequent 12 months. Additionally, the employees’ compensation is increased by 1/3 of his/her salary as determined in the Brazilian Constitution. In the event the legal period to take a vacation has already expired, then the employer must double pay the employee.

Maternity Leave

Female employees are entitled to 120 days of absence for maternity leave. This period can be extended by two weeks, if requested by a doctor. According to recent legislation, the employer can grant two additional months to the employee and deduct the cost from the corporate tax. Upon notifying her employer about the pregnancy, the employee cannot be dismissed without cause until five months after delivery.

Paternity Leave

Male employees are entitled to 5 days of leave after the childbirth. According to recent legislation, the employer can grant 15 additional days to the employee and deduct the cost from the corporate tax.

Sick Leave

The employer should pay the first 15 days of sickness; all additional days will be paid by government pension. In case of work accidents, the first the employee shall have tenure of at least one year after his/her return.

Employee Benefits

Expenses

Typical benefits provided in country include the following:

• Medical Coverage: the benefit shall be extended to all employees and executives.

• Meal Allowance: the benefit must be granted to all employees and shall not be considered as part of the beneficiary´s compensation, if the company were registered in the Workers Meals Program (PAT).

• Transportation Voucher: the Company should cost the employees’ expenses with commute. The beneficiary should cost his/her expenses with the amount equivalent to 6% of his base salary and the Company should pay the exceeding amount.

• Bonus: as a general rule, according to the Brazilian labor legislation, a bonus is a discretionary benefit and does not need to follow rules in relation to the beneficiaries, value (fixed or variable) and periodicity. However, depending on the manner and the frequency of the payments, this benefit might be considered as part of the employees´ compensation, hence subjected to payroll taxes and labor charges.

The specific bonuses’ format might trigger the following implications:

• Fixed payments should be basis for payroll taxation (INSS, FGTS and IRRF), 13th salary, vacation, overtime, night shift premium and prior notice;

• Variable amount paid recurrently should also be basis for all the payroll and labor charges, as well as weekly paid rest; and

• Variable amount paid about once or twice a year should be basis only for 13th salary, as well as payroll taxation.

Tax & Social Security

The tax year runs from 1st January to 31st December.

Income Tax

Employers in Brazil are responsible for calculating, withholding, and remitting the Withholding Income Tax (IRRF) levied on employees’ remuneration, as well as for making social security and other mandatory social contributions on behalf of workers. Additional contributions may also apply to finance government programs, such as unemployment insurance and trade union funds, when applicable.

Furthermore, Brazilian labor legislation requires employers to comply with regulations related to the statutory minimum wage, payroll frequency, mandatory benefits, and employees’ labor rights.

Income Tax (Employee Discount)

Individuals resident in Brazil, as well as individuals resident abroad who are dependents of taxpayers required to file the Individual Income Tax Return (DIRPF), must hold a Brazilian Individual Taxpayer Identification Number (CPF), which is mandatory.

The Individual Income Tax Return (IRPF) must be filed annually within the period established by the Brazilian tax authorities, typically between March and April, and submission is carried out exclusively through electronic means.

The filing is completed either through the official tax return program provided by the Brazilian Federal Revenue Service or directly via the Brazilian Federal Revenue Service online platform (e-CAC), in accordance with the current guidelines published on the official government portal. These systems ensure:

• automatic validation of the declared information;
• secure transmission of data; and
• issuance of an electronic receipt upon successful submission.

Taxpayers must access the official electronic system using valid registration credentials, such as CPF, the receipt number of the previous tax return, access code, or digital certificate, and must strictly comply with the filing deadlines established annually in the Federal Revenue Service’s tax calendar.
Monthly Withholdings by the Employer

All employers are required to remit, on a monthly basis, the income tax amounts withheld from employees’ remuneration and to report paid income and withholdings in accordance with the applicable ancillary tax obligations.

The monthly payment of the Withholding Income Tax (IRRF) must be made by the 20th day of the month following the occurrence of the taxable event.

Income Tax (Employee Withholding)

For individuals who hold a local employment contract in Brazil, the employer is responsible for the calculation, withholding, and remittance of the Withholding Income Tax (IRRF). This tax is due on a monthly basis and is calculated according to a progressive tax table, with rates ranging from 0% to 27.5%.

In the case of income received from abroad, the carnê-leão regime applies, under which the taxpayer themselves is responsible for calculating and remitting the monthly income tax, also based on the progressive income tax table, with rates from 0% to 27.5%.

Progressive Reduction of IRRF – effective from January 2026

As of January 2026, a progressive reduction of IRRF applies to monthly income exceeding BRL 5,000.00 and up to BRL 7,350.00, in accordance with the reduction mechanism established by the Federal Government.

IRRF Reduction Formula – 2026

IRRF Reduction = 0.133145 × Gross Monthly Income

Application Rules

• The amount calculated using the reduction formula must be deducted from the IRRF determined under the monthly progressive tax table;
• The reduction may not result in a negative tax amount;
• For monthly income up to BRL 5,000.00, IRRF is fully exempt;
• For monthly income above BRL 7,350.00, the reduction does not apply, and the tax must be calculated entirely under the progressive tax table.

IRRF (Withholding Income Tax): With Progressive Reduction

IRRF (Withholding Income Tax) – Monthly Progressive Tax Table for 2026 (Tax Base)

Social Security

Brazil has a comprehensive Social Security system, administered by the National Institute of Social Security (INSS), which is linked to the Ministry of Social Security.

The system aims to ensure social protection for workers and covers benefits such as retirement pensions, survivors’ pensions, social security benefits, work-related accident insurance, unemployment insurance, and other social assistance initiatives.

Both employees and employers are required to make social security contributions. Contribution rates vary according to the salary margin, type of employment relationship, and the level of risk associated with the company’s business activity.

Employers must calculate, report, and remit their own social security contributions as well as the amounts withheld from employees, through the official reporting systems. Monthly contributions must be paid by the 20th day of the month following the relevant payroll period.

Late payments are subject to a penalty of 0.33% per day of delay, calculated on the outstanding amount and limited to a maximum of 20%, in addition to interest charges as determined by applicable legislation.

INSS (Social Security):

The Ordinance also sets the minimum and maximum contribution basis for 2026, which may not be less than BRL 1,612.00 or greater than BRL 8,475.55.

As a general rule, the employer contributions are:

• Employer contribution – 20% of the total payroll (monthly remuneration paid to all workers, including autonomous);

• RAT– (insurance against labor accidents) - varies from 0.5% to 6% of the total remuneration paid to employees, depending on the “level of risk” presented by the type of activity of the company.

• Education allowance - 2.5% of the total remuneration paid to employees.

• Contribution for governmental entities - varies from 0% to 5.2% levied on the total payroll amount.

Reporting

Monthly

• eSocial: submission of Social Security and Withholding Income Tax (IRRF) information by the 20th day of the month following the taxable event.
• FGTS Digital: payment of the Severance Indemnity Fund (FGTS) by the 20th day of the month following the taxable event.

Yearly

DIRF - Deadline for issuance of Income Statements – 2026

As of 2025, the information that previously fed the DIRF has been reported monthly through eSocial and, depending on the type of income, also through EFD-Reinf.

Accordingly, for the 2026 tax year, the DIRF is no longer required, as data related to income paid and Withholding Income Tax (IRRF) is already fully reported in the official systems. This enables the Brazilian Federal Revenue Service to cross-check, validate, and consolidate information without the need for an annual declaration.

Income Statements are now generated based on the information transmitted through eSocial, ensuring greater consistency, traceability, and alignment with tax and social security databases.

eSocial: This is a relevant and well-established innovation of the Brazilian tax administration, developed by the Brazilian Federal Revenue Service, with the purpose of centralizing, within a single digital environment, the submission of labor, social security, and tax information by companies. The system consolidates data that were previously reported through multiple ancillary obligations and supports the gradual and definitive replacement, depending on the subject matter, of declarations such as GFIP, DIRF, RAIS, and CAGED.

As a result of this consolidation, eSocial enhances integration among government authorities, increases the traceability of information, and strengthens control over employee admission, management, remuneration, and termination processes, reducing redundant filings and raising the level of corporate compliance.

While, on the one hand, the concentration of multiple ancillary obligations into a single environment tends to reduce Brazilian tax bureaucracy, on the other hand, it provides supervisory authorities with a clearer, standardized, and more detailed view of the business rules adopted by companies operating in Brazil—particularly in relation to hiring, employment relationship management, payroll processing, and termination of employment contracts—thereby strengthening oversight and data cross-checking.

Payroll

It is legally acceptable in Brazil to provide employees with online payslips.

Reports

Payroll reports must be kept for at least five years.

Payslip Example

Local language example:

New Employees

When an employee is hired, the Labour Ministry must be informed following the specific procedure (eSocial) within 24 hours before the new employee begins his/her activities. This procedure requires registration with the authorities within 24 hours of contracting.

New starts are required to provide the following documentation:

• CPF
• Work Visa
• ID (For Employee / For Dependent if the employee has)
• Copy of Passport
• Contract
• Local Bank Account

Leavers

Payment for leavers must be made within 10 consecutive days of the employee’s last day. If it is a pre-determined contract, payment must be made by the next working day after the last day worked.

During the period of notice, employees may take leave for up to two hours a day with pay. If the employer fails to give the required notice, the employee is entitled to be paid his or her regular salary for the period of required notice.

Termination for a just cause does not require an advanced notice. Notification of leaver to authorities must be made i.e. eSocial, FGTS.

Employee Benefits

Expenses

Typical benefits provided in country include the following:

• Medical Coverage: the benefit shall be extended to all employees and executives.

• Meal Allowance: the benefit must be granted to all employees and shall not be considered as part of the beneficiary´s compensation, if the company were registered in the Workers Meals Program (PAT).

• Transportation Voucher: the Company should cost the employees’ expenses with commute. The beneficiary should cost his/her expenses with the amount equivalent to 6% of his base salary and the Company should pay the exceeding amount.

• Bonus: as a general rule, according to the Brazilian labor legislation, a bonus is a discretionary benefit and does not need to follow rules in relation to the beneficiaries, value (fixed or variable) and periodicity. However, depending on the manner and the frequency of the payments, this benefit might be considered as part of the employees´ compensation, hence subjected to payroll taxes and labor charges.

The specific bonuses’ format might trigger the following implications:

• Fixed payments should be basis for payroll taxation (INSS, FGTS and IRRF), 13th salary, vacation, overtime, night shift premium and prior notice;

• Variable amount paid recurrently should also be basis for all the payroll and labor charges, as well as weekly paid rest; and

• Variable amount paid about once or twice a year should be basis only for 13th salary, as well as payroll taxation.

Visas & Work Permits

To work in Brazil, all business visitors must obtain a visa. The application should be made prior to travelling to Brazil. Applicants should make their request for a visa to the Brazil embassy within their country of origin or current residence. A visa may not be required by citizens of countries that have specific arrangements with Brazil.

There are three standard types of visa for expatriate employees:

• Business visa: The holder may enter Brazil at any time, but not stay for more than 90 consecutive days, and not more than 180 days in any given year. The holder cannot be a registered employee of the Brazil entity.
• Temporary residence visa: Similar to the business visa, but allows greater flexibility and the holder may work in Brazil for up to two years. It is renewable providing certain conditions are met.
• Permanent visa: This visa may be granted for those who will work in Brazil for an indefinite period. It is generally reserved for those with specialist skills that cannot be readily replaced in Brazil, for example senior management team members, highly skilled professionals etc.

• 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.