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 grow your team. However, you must first understand Brazil’s payroll options and complex tax system.

Taxation rules in Brazil

Brazil’s tax rate impacts both employers and employees. Employers typically budget about 36% to 40% of gross salary for mandatory employer social charges. The exact rate varies by employer activity, risk classification, and payroll regime, and excludes broader employment costs such as 13th salary, vacation bonus, benefits, and severance risk.

Employers also need to pay corporate taxes on taxable company profits. The standard combined burden is generally 34%, made up of 15% Corporate Income Tax (IRPJ), a 10% IRPJ surtax above the applicable threshold, and 9% Social Contribution on Net Profit (CSLL). Additionally, you’ll generally be required to make monthly employer-funded deposits to the Severance Indemnity Fund known as Fundo de Garantia por Tempo de Servico (FGTS). The standard deposit is 8% of the employee’s monthly remuneration.

Brazil payroll options for companies

Several payroll options are available for companies looking to expand their business into Brazil:

  • Some companies often choose to pay employees directly 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 should understand the country’s laws, but you will still be liable for all employment compliance as the employer.
  • You can also work with an employer of record to support your hiring needs in Brazil, which enables you to hire and pay employees without setting up a subsidiary.

How to establish a payroll in Brazil

Before setting up payroll in Brazil, it is essential to understand the different tax rates. Payroll salary payments should generally be made in Brazil’s currency, BRL. If compensation is referenced in another currency, it should be converted and paid in BRL through Brazilian payroll.

In order to set up an entity in Brazil, you will need to open bank accounts in the country. Keep in mind that it is a process that takes a significant amount of time, money, and travel to Brazil before your company can begin hiring.

Termination terms

A best practice in Brazil is to create a clear employment contract in Portuguese — the country’s national language. In addition to providing prior termination notice, the final payment to an employee terminated without cause should include:

  • Salary balance owed through the termination date (saldo de salário)
  • Payment for accrued unused vacation and proportional vacation, plus the constitutional 1/3 vacation bonus
  • 13th-month salary paid proportionally to months worked in the calendar year, generally 1/12 per qualifying month. A month usually qualifies after 15 days worked.
  • Prorated for all bonuses, overtime, or benefits (if applicable) calculated up to the date of termination
  • FGTS penalty equivalent to 40% of total employer deposits into the employee’s FGTS account for termination without cause

Streamline global payroll management with G-P.

G-P streamlines each step of the payroll management process with our market-leading Global Growth Platform™. Pay your team with confidence anywhere in the world in 150+ currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.

Contact us to learn more about how we can support you.