Summary

The INSS tax is a comprehensive social security system which provides retirement, death, illness and disability benefits.

Details

Contributions

Contribution rates for individuals are between 7.5% and 14%, but the individual contribution is capped at around $170 per month. The employer contribution usually ranges from 26.8 percent to 28.8 percent (20 percent is allocated to the National Social Security Institute, or INSS, and up to 8.8 percent to other social security taxes). There is no cap to the employer's contribution.

Treaties

Brazil has treaties with most Latin American countries, plus, amongst others, Germany, Belgium, Canada, Spain, France and the US. Given the high cost of social security in Brazil, particularly for employers, most inbound assignees take advantage of the treaties to remain exempt from Brazilian INSS contributions. FGTS contributions (see below) remain payable even if a certificate of coverage is obtained for inbounds to Brazil.

Exemptions

There are a range of income types which are exempt from tax and social security, and as such the contributions payable by an employer can be materially reduced through the use of a carefully constructed remuneration package.

Administration

Aside from the INSS contribution, employers with workers in Brazil pay a wide range of ancillary contributions, for example for the monthly administration of the INSS system and the General Registry of Employment. Brazil has one of the administratively most burdensome payroll regimes in the world.

Benefits

Employees who have contributed to the social security system may begin drawing benefits once they reach the designated age or minimum length of service. This can vary depending on where the beneficiary lives (rural workers are generally able to draw benefits at a younger age)

Other

Employers must also make a mandatory contribution equivalent to 8% of the employee’s total monthly salary (inclusive of overtime, 13th month salary, vacation pay) into the Brazilian Government Fund for Employees (FGTS). The FGTS (also used as a pension fund) covers the severance indemnity that an employee is entitled to when their employment is terminated without cause. If a company fires an employee without cause, it must pay an additional 40% of the total sum on the employee’s FGTS account to the employee.

Employee contributions to INSS are tax deductible.

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