Brazil’s lower house approves extension of payroll tax exemption until 2027

BRASILIA (Reuters) – Brazil’s lower house of Congress approved on Wednesday the main text for a project that extends a payroll tax exemption for 17 economic sectors for another four years.

The base text was approved by 430 votes against 17. The bill can still be tweaked by an amendment.

The exemption, which would expire Dec. 31, covers many of the most labor-intensive sectors, such as civil construction, textile and footwear producers, transportation and communications firms, reducing their labor costs in order to retain jobs.

The payroll tax relief replaces the employer’s social security contribution of 20% of payroll with rates ranging from 1% to 4.5% of gross revenue.

The proposal now returns for Senate consideration due to modifications introduced reducing municipalities’ pension contributions to 8% to 18% of each city’s Gross Domestic Product (GDP) from 20%.

The Senate’s version had put forward an 8% rate, applicable solely to smaller cities, a change that the Finance Ministry had opposed.

(Reporting by Maria Carolina Marcello; Writing by Carolina Pulice; Editing by Marcela Ayres and Cynthia Osterman)