With the approval of the reform of social security system (constitutional amendment 103, 2019), new INSS tax rates for wages were set in Article 28. The new rates will apply from March 2020. The INSS service in Brazil is responsible for all social security issues and related social security contributions. INSS contribution rates are paid by insured workers, including domestic workers, and by self-employed workers.
What is the current regulation?
So far, depending on the amount of income, the contribution rates of 8%, 9% and 11% applied to the following income limits:
|Up to R $ 1751.81||8%|
|R $ 1751.82 –R $ 2919.72||9%|
|2919.73 – R $ 5839.45||11%|
What is the new regulation?
On the one hand, the new regulation provides for new contribution rates and, on the other hand, a progressive calculation system, so that only the share of income that is in the respective higher contribution rate category is taxed higher. These are the new categories:
|I||up to 1 minimum wage||7,5%|
|II||over 1 minimum wage up to R $ 2,000.00||9%|
|III||R $ 2,000.01 to R $ 3,000.00||12%|
|IV||R $ 3,000.01 to the limit of contribution salary||14%|
Example: An employee who earns up to one minimum wage only pays 7.5%. However, if he earns 1,500 Reais, for example, he pays 7.5% on the part that reaches one minimum wage and 9% on the part that exceeds this amount, which corresponds to an effective tax rate of 8.25%.
Who (does not) benefit from the new regulation?
The new formula in some cases reduces the INSS contribution rate, e.g. B. for those who earn up to 3,000.00 Reais. On the other hand, those who earn more than the INSS upper limit pay more than the current rule, as shown in the following example:
Example: income of R $ 5,839.45
Alíquota 1 – Completa: R $ 998.00 * 7.5% = R $ 74.85
Alíquota 2 – Completa: R $ 1,002.00 * 9% = R $ 90.18
Alíquota 3 – Completa: R $ 1,000.00 * 12% = R $ 120.00
Alíquota 4 – Completa: R $ 2,839.45 * 14% = R $ 397.52
Total contribution: R $ 682.55
Effective contribution rate: 11.69%
According to the current rule, the contribution would be R $ 642.34 (5,839.45 * 11%), which corresponds to an increase of R $ 40.21.
The differences between the current and the new rule can be calculated using a government-provided calculator on the website: https://www.servicos.gov.br/calculadora/
These regulatory changes could affect your business with view to customizing or support of your ERP/SAP system. Please contact us to learn about possible necessary reactions to the changes – we are happy to assist you!