Federal Supreme Court: injunction suspends extension of payroll tax exemptions

Justice has suspended portions of the law that extended exemptions for 17 sectors until 2027, but ruling may still be overturned by the full Supreme Court

Justice Cristiano Zanin of the Brazilian Federal Supreme Court (STF) issued an injunction on April 25 that temporarily suspends articles 1, 2, 4, and 5 of Law No 14,784/2023. These provisions had extended payroll tax exemptions until 2027 for 17 sectors with a high potential for job creation in Brazil and had reduced the social security contribution rate for municipalities to 8%.

The injunction arose from Direct Action for the Declaration of Unconstitutionality (ADI) No. 7,633, filed by the Presidency of the Republic. The challenge was prompted by the law’s effective nullification of Provisional Presidential Decree No. 1.202/2023, which had proposed a gradual reinstatement of payroll taxes. 

Citing concerns about potential imbalances in public finances, the justice suspended the relevant sections to ensure budgetary sustainability until the matter can be reviewed by the full bench of the Supreme Court.

The ruling took immediate effect from its publication date on April 25, 2024. However, it is important to continue monitoring the situation as the Senate has appealed to the full Supreme Court to overturn the injunction.

It should also be noted that other aspects of the law remain in effect, such as the 1% increase in the Cofins-Import rates for goods classified under the Industrialized Products Tax (TIPI). 

Companies are advised to consult with their legal counsel to stay informed about the developments and assess the potential impacts on their operations.