By Mariana Martins and Camila Friaça

On May 14, 2019, COSIT Consultation Solution No. 151/2019 was issued, through which the understanding was established that, as of November 11, 2017, bonuses resulting from liberality granted by the employer in the form of goods, services or money due to better than expected performance should not be included in the calculation basis for social security contributions.

Law No. 13,467/2017, which amended several provisions of the CLT, expressly included item “z” in § 9 of art. 28 of Law No. 8,212 of July 24, 1991, which provides for amounts that are not part of the contribution salary, including the bonus as well as allowances. Furthermore, the Law in question amended art. 457 of the CLT with the aim of defining the concept of bonus and establishing the non-incidence of labor and social security charges on amounts, even if habitual, paid under this title. In § 4 of the aforementioned article, bonus is understood as: “the benefits granted by the employer in the form of goods, services or cash to an employee or group of employees, in exchange for performance above that ordinarily expected in the exercise of their activities”.

The Federal Revenue Service states in the aforementioned Consultation Solution that the changes made to labor legislation do not change its understanding of the incidence of social security contributions on premiums in general, given that the amounts are related, as a rule, to “eventual gains” provided for in item “e”, item 7, of § 9 of art. 28 of Law No. 8,212 of 1991. Eventual gain, in the understanding of the Federal Revenue Service[1], “is one that is independent of the will of the worker and his performance, being granted by the employer's generosity without any expectation on the part of the employee, which does not occur in the case of the bonus paid due to attendance”.

The scope of supervening legislation applies only to events that occurred after its entry into force, excluding the incidence of social security contributions only with regard to bonuses paid for superior performance, as defined by the Labor Reform.

In this context, in order to avoid the levy of social security contributions on these amounts, the requirements defined by the Tax Authorities to characterize the payment as a bonus for superior performance must be observed. The first requirement to be observed is that the amount must be paid individually to an employee or collectively to a group of employees, and therefore does not reach the amounts paid to individual contributors. Furthermore, the bonuses must be paid in the form of goods, services or money at the employer's discretion, even if offered on a regular basis, so that the payment must not be made as a legal obligation or as an express agreement. Finally, the bonuses in question must necessarily be linked to the perception of superior performance to that originally expected in the performance of the employee or group of employees, that is, there must be objective proof of the expected performance and the extent to which it was exceeded.

Objective proof of expected performance and the rate at which this performance was exceeded is a requirement that must be carefully analyzed by employers, given that this metric cannot be established in an employment contract, internal regulation or collective agreement.

The Mazzucco & Mello Advogados tax team is available to provide any clarification on this topic.

[1] Given in COSIT Consultation Solution No. 126/2014.