Brazil Government Announces End to Tax Credits for Social Tax Exemption
On June 5, 2024, the Brazilian government made a surprising decision to end tax credits aimed at offsetting the social tax exemption for employers. This decision has cast uncertainty over an agreement reached in May to resolve a long-standing dispute regarding Brazil’s 20% employer social tax.
Earlier in May, the government and Brazil’s Congress had agreed to exempt 17 labor-intensive industries from the social tax in 2024 and gradually phase it back in by 2028. This agreement was made in response to an injunction issued by Supreme Federal Court Justice Cristiano Zanin, which reinstated the tax that had been initially exempted for employers in 2011.
Following the government’s recent decision, Justice Zanin suspended his injunction and gave Congress a 60-day deadline to pass legislation that would implement the terms of the agreement. The future of the social tax exemption and the implications of the government’s decision remain uncertain.
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