Públicada em: Tuesday, February 6, 2024

Provisional Measure 1.202/2023, which deals with the payroll tax reinstatement, has introduced three significant changes to the tax legislation.

Limitation on Compensation by Taxpayers

The first change establishes a restriction on the monthly amount which could be subject to compensation by taxpayers, resulting from credits obtained from judicial decisions that have become final and unappealable.

The measure has granted the Ministry of Finance the possibility to stipulate limitations on compensations, observing the following rules:

  • the imposed limits do not apply to credits resulting from final and unappealable judicial decisions whose values do not exceed R$ 10 million;
  • it may not limit the amounts to less than 1/60 of the total value of the credit resulting from a final and unappealable judicial decision, being such credit demonstrated and updated on the date of submission of the first compensation declaration.

Therefore, the change imposes a significant restriction on taxpayers’ right to credit already judicially recognized through a final and unappealable decision, as the taxpayer will no longer be able to compensate these credits with other debts they hold in the amount of their choosing. Below is the table of the values that taxpayers will be able to compensate depending on the credit resulting from a final and unappealable judicial decision:

Credit AmountMinimum Period for Compensation
Up to R$ 10,000,000.00No minimum period
From R$ 10,000,000.00 to R$ 99,999,999.9912 months
From R$ 100,000,000.00 to R$ 199,999,999.9920 months
From R$ 200,000,000.00 to R$ 299,999,999.9930 months
From R$ 300,000,000.00 to R$ 399,999,999.9940 months
From R$ 400,000,000.00 to R$ 499,999,999.9950 months
From R$ 500,000,000.00 onwards60 months

Termination of Tax Incentives

The second change establishes the termination of the tax incentives with a zero-rate of Corporate Income Tax (IRPJ), Social Contribution on Net Income (CSLL), PIS, and COFINS from the Emergency Program for the Recovery of the Events Sector (Perse). Initially, taxpayers eligible to participate in the program could benefit from the zero-tax rate until the year 2026, according to the 60-month term originally set out in Law 14.148/21. The termination will occur from the following deadlines:

  • IRPJ: the tax relief remains in effect until 1, January 2025, in respect of the non-retroactivity principle.
  • CSLL, PIS, and COFINS: termination of the tax relief and return of its taxation starting from 1, April 2024.

Gradual Resumption of Tax Reinstatement

The third change repealed the National Congress’ extension of the payroll tax relief benefit until 2027 for all covered sectors, with the plan to gradually resume taxation for certain economic activities classified into two groups, taking into account the CNAE (National Classification of Economic Activities) which generated the most revenue, based on the previous calendar year.

The tax reinstatement will proceed as follows:

  • Graduated rates from 2024 to 2027, which will be applied to the salary contribution up to the value of one minimum wage, with the current rates applying to the amount that exceeds this limit.
  • Collection of the Employer’s Social Security Quota for companies with a main activity listed in annexes 1 and 2, described below.
  • Counterparts: Companies with reduced rates must maintain a workforce equal to or greater than the one on January 1st of each year.

The activities described in the annexes are as follows:

Annex 1: pertains to companies in the railway, road, and metro-rail sectors, school and taxi transportation, television and radio broadcasting, development and licensing of computer software, consultancy, maintenance of services, and technical support in information technology;

Annex 2: involves companies in the sectors of leather manufacturing and tanning, travel goods, footwear, and construction of highways and railways, artwork, urbanization, generation and distribution of electric power and telecommunications, water supply networks, sewage collection, pipeline transportation, civil engineering works, and ports, maritime and river works, publishing and printing of books, newspapers, magazines and graphic products, and business management consultancy activities.


    Payroll Tax Reinstatement: The Three Key Changes Introduced by MP 1.202

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