End of PIS/Pasep on Payroll: Understanding the impacts of the Tax Reform

The Consumption Tax Reform introduced several changes, including the elimination of certain existing forms of taxation. Among these changes is the elimination of the PIS/Pasep (Social Integration Program) contribution levied on payroll, which will no longer be due as of January 1, 2027.

The measure will affect certain entities that currently pay the contribution at a rate of 1% on payroll.

It is important to note that, although this change takes place in the same context as the introduction of the Contribution on Goods and Services (CBS), the elimination of PIS/Pasep on payroll does not represent its replacement by a new contribution levied on employee compensation.

Rather, this specific form of taxation is being effectively eliminated.

Which entities are currently subject to PIS/Pasep on payroll?

• religious organizations;
• political parties;
• educational and social assistance institutions (Law No. 9,532/1997);
• philanthropic, recreational, cultural, and scientific organizations and associations (Law No. 9,532/1997);
• trade unions, federations, and confederations;
• autonomous social services created or authorized by law;
• professional regulatory councils;
• private-law foundations and public foundations established or maintained by the government;
• residential or commercial property owners’ associations;
• the Brazilian Organization of Cooperatives (OCB) and State Organizations of Cooperatives (Law No. 5,764/1971).

What changes in practice for these entities?

For entities currently subject to PIS/Pasep on payroll, the main change is the discontinuation of the assessment of the contribution as of January 2027.

In practice, it will be necessary to review the processes that currently apply the 1% rate to payroll, including:

• Review of payroll and tax bookkeeping system settings, preventing the continuation of improper calculations after the contribution is discontinued;
• Update of internal controls and tax procedures related to the payment of the contribution;
• Assessment of the impacts on monthly closing processes, especially for entities with automated procedures;
• Review of any ancillary obligations related to the tax, considering the new tax structure in effect as of 2027.

Support for adapting to the Tax Reform

The Tax Reform brings a series of impacts and developments that companies must incorporate into their routine. To define the actions required throughout the transition, count on the support of the specialists at Domingues e Pinho Contadores. Contact the advisory team at dpc@dpc.com.br.