Taking your company to the next level and expanding into Brazil can be a highly beneficial decision. As the largest country in South America with a flourishing economy, Brazil is a great place to establish a subsidiary. However, you must first understand Brazil’s payroll options and complex tax system.
Taxation Rules for Payroll
Brazil is known for its high tax rate that impacts both employers and employees. As an employer, you contribute about 80% to social security or statutory benefits on top of your employee’s total salary. For example, hiring someone for $100,000 per year in the US would cost about $180,000 in Brazil when you add on taxes.
Employers also need to pay a corporate income tax, which is 15% of taxable company profits. If you make more than BRL 240,000, you must pay an additional 10% surtax on your annual income. Additionally, you’ll be required to make pension plan contributions to a Severance Indemnity Fund known as Fundo de Garantia por Tempo de Servico (FGTS).
Brazil Payroll Options
Several payroll options are available for companies looking to expand their business into Brazil:
- Larger companies often choose to pay employees themselves by creating a subsidiary, registering their business, and hiring human resources personnel. While this approach works for some companies with a large team, it can be expensive and requires extensive knowledge of Brazil’s payroll regulations.
- Other companies choose to work with a Brazil payroll processing company. A payroll provider in Brazil will understand the country’s laws, but you will still be liable for all employment compliance as the employer of record.
- You can also work with a global PEO such as Globalization Partners for full Brazil payroll outsourcing. We handle payroll while also acting as the employer of record to place your company’s liability on our shoulders.
What Is Required to Set up Payroll in Brazil?
Before you set up payroll in Brazil, you’ll need to understand the different tax rates. All payroll transactions must be in Brazil’s currency — the Brazilian real (BRL).
If you do not outsource your payroll, you will need to set up bank accounts in the country. Prepare to spend a significant amount of time, money, and travel to Brazil so that you can set everything up and officially hire employees.
Necessary Entitlement/Termination Terms to Set up Brazil Payroll
A best practice in Brazil is to create a clear employment contract in Portuguese — the country’s native language. Since Brazil has strong employee protections, termination terms should be spelled out early in the agreement. Common severance pay entitlements to set up in the contract include:
- Payment for any remaining vacation time
- Christmas bonus payment relative to the number of months worked in the calendar year
- 50% of the remaining balance of the employee’s FGTS
Instead of setting up Brazil payroll on your own, contact Globalization Partners to help. As a Brazil payroll outsourcing option, we will help you pay your employees, understand entitlement and termination terms, and act as the Employer of Record so that you are not liable. Contact us today to learn more about our services.