Last Tuesday (16/07), the STF granted an extension of the deadline for the Legislative and Executive branches to agree on which measures will be adopted for financial compensation in view of the possible loss of revenue in the event of maintaining the exemption from payroll taxes until 2027 for seventeen sectors of the economy and the social security contribution rate levied on municipal payrolls.

The decision handed down in Direct Action of Unconstitutionality 7,633 granted an extension until September 11 for compensation measures to be agreed upon between the Federal Government and the National Congress. The request for an extension of the deadline was made by the Attorney General's Office (AGU) and the Senate itself, which argue that despite important and considerable progress having been made in the discussion, there is still no consensus on the topic.

It is worth noting that the payroll tax exemption allows companies in 17 sectors of the economy to replace employees' social security contributions on the payroll with a percentage of their revenue.

The Federation of Industries of the State of Paraná (“FIEP”) claimed that “The extension is an appropriate measure, as it will allow the debate to continue in a calm and detailed manner, as well as avoiding decisions that could generate legal uncertainty and negative economic impacts, especially for the 17 sectors that employ the most in the country and for the municipalities that benefit..”

The measures to be taken to compensate for the loss in revenue are of great importance, since a decrease of approximately R$18 billion in the Union's revenue is estimated, according to the National Treasury. There was consensus regarding the extension, because in the words of the Rapporteur, Minister Edson Fachin, “The tax measures affect sectors that generate the most jobs, as well as affecting the payroll of numerous municipalities. The urgency is also characterized by the sixty-day deadline granted by the rapporteur to conclude the dialogued solution that has been constructed between the Executive and Legislative Branches of the Union with the various sectors involved in the measures..”

Therefore, the possibility of maintaining the payroll tax exemption in replacement of the employer's social security contribution remains in place until 9/11.

Our tax team will monitor political developments on the topic and is available to provide any clarifications.