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 contribute about 80% to social security or statutory benefits on top of the employee’s total salary.
Employers also need to pay a corporate income tax, which is 15% of taxable company profits. 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 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. All payroll transactions must be in Brazil’s currency — BRL.
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.
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 until the termination date
- Payment for any remaining vacation time and vacation bonus
- 13th-month salary payment relative to the number of months worked in the calendar year
- Prorated for all bonuses, overtime, or benefits (if applicable) calculated up to the date of termination
- FGTS penalty equivalent to 40% of the total of deposits made by the employer to the employee’s individual account
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.