Accounting impacts of payroll exemption
Enabling the implementation of strategies and actions that boost turnover, improve profitability and provide tax savings, as well as contributing to the organization of finances, are some of the main functions that make accounting an essential discipline in the context of business growth.
In this sense, the measures adopted by accounting professionals play a fundamental role in enabling a precise and agile analysis of companies' needs, as well as identifying the tax benefits and incentives available to them.
If you want to deepen your knowledge of how to take advantage of the payroll tax exemption for the benefit of your company, this article will cover everything you need to know about this topic and its impact on the accounting area. Learn more about payroll.
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What does the payroll tax exemption involve?
According to information from the Chamber News Agency, a law came into force in January 2022 that extends the payroll tax exemption until 2023, since this benefit was scheduled to end in December of the previous year.
As is well known, companies are obliged to fulfill their tax obligations and make the appropriate payments to the tax authorities. In the context of payroll exemption, this responsibility is no different.
In this scenario, companies must pay a tax to the National Social Security Institute (INSS), known as the Employer's Social Security Contribution or CPP.
However, it is important to note that, according to current legislation, the INSS offers companies the option of choosing between two payment systems. This choice is optional and it is up to the company to opt for the most advantageous method. Here are the options available:
- Payroll contribution (conventional method): this is a traditional type of contribution, in which the company pays 20% on the amount of each employee's remuneration.
- Contribution on gross revenue (exemption): in this method, the amount paid is determined based on a percentage of the company's gross revenue, ranging from 1% to 4.5%, depending on the sector in which it operates.
Therefore, in the context of payroll exemption, it is possible to replace one type of tax with another. This means that the Employer's Social Security Contribution (CPP) can be exchanged for the CPRB, a tax levied on the company's gross revenue.
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How does the collection process take place?
As mentioned above, the payroll tax exemption involves the use of the tax known as CPRB. The tool used to send the tax payment form to the government is the DARF (Documento de Arrecadação de Receitas Federais).
The DARF codes relevant to this process are as follows:
- 2985: Social Security Contribution on Gross Revenue - Art. 7 of Law 12.546/2011.
- 2991: Social Security Contribution on Gross Revenue - Art. 8 of Law 12.546/2011.
The DARF can be issued by an accounting firm, which will help the entrepreneur make the CPRB payment, which must be made by the 20th of each month.
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How important is exemption for companies?
Within the context of payroll tax exemption, it is essential to understand that the existing taxation models have a direct impact on the percentage of payroll tax exemption that companies must pay. But how does this happen?
Companies that use the presumed profit tax system and those that use the actual profit system are obliged to contribute a rate of 20% to the Employer's Social Security Contribution (CPP). This contribution takes into account all salaries paid during the month.
It is important to note that even companies that opt for Simples Nacional are not exempt from contributing to the CPP. However, the contribution is made through the DAS (Documento de Arrecadação do Simples Nacional) at a much lower rate. This rule applies to companies taxed in annexes I, II, III and V.
The CPP, or Employer's Social Security Contribution, has a negative impact on the maintenance and creation of companies. It is at this point that the payroll tax exemption can provide a significant reduction in contributions.
This is because this advantage allows organizations to contribute to Social Security at a lower rate, ranging from 1% to 4.5% on gross turnover, instead of the 20% contribution on payroll.
Within this context, the payroll tax exemption becomes important for companies, as it helps to minimize the impact of contributions on the financial area of the business.
However, it's important to note that the payroll tax exemption may or may not be beneficial for companies. It is therefore essential to have the support of an accounting professional to assess whether the tax benefit is economically and legally advantageous for your company.
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Find out which companies are entitled to payroll exemption
Earlier this year, Law 14.288/21 was passed, extending the payroll tax exemption until 2023 for specific sectors of the economy. This extension came about as a result of Bill 2541/21, presented by deputies Efraim Filho (DEM-PB) and Dagoberto Nogueira (PDT-MS).
The payroll tax exemption plays an important role in making it possible to hire more professionals, since the legislation allows companies belonging to 17 benefited sectors to pay lower rates on gross revenue instead of the 20% on payroll.
The aim of this legal measure is to reduce the impact of the tax burden on specific companies. But which sectors benefit from this extension? Here are some of them:
- Footwear sector;
- Call center;
- Communication, clothing and apparel;
- Construction;
- Construction companies and infrastructure works;
- Leather industry;
- Manufacture of vehicles and bodies;
- Machinery and equipment;
- Animal protein and textile industry;
- Information Technology (IT) and Communication Technology (ICT);
- Integrated circuit design;
- Metro passenger transport;
- Collective road transport; and
- Road freight transportation.
It is important to note that the rates vary according to the sector, ranging from 1% to 4.5% on gross revenue, depending on the economic activity.
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What is the effect of the payroll tax exemption on accounting?
Now that you have an understanding of what the payroll tax exemption involves and why it is important for companies, it's time to understand how this measure impacts accounting in practice. Let's follow an example that explores the calculation of the Employer's Social Security Contribution (CPP) and the Social Security Contribution on Gross Revenue (CPRB).
From this, it will be clearer to understand how the exemption affects the payroll.
The calculation takes place as follows: the rate to which the company is subject is applied to its calculation base.
When the calculation involves mixed activities, i.e. when a company carries out two types of activities - one covered by the payroll exemption law and the other not - the calculation becomes a little more complex.
In this situation, the revenue from the activity that enables the exemption is used as the basis for calculating the CPRB. The CPP is calculated on the basis of the revenue from the activity not covered and the payroll. Consider the following example:
Let's suppose a company with a monthly turnover of R$1 million. Of this amount, R$400 thousand comes from the activity that qualifies for exemption, and the payroll for the month totals R$210 thousand.
The CPRB is calculated based on the R$400 thousand of the exempted activity, with a hypothetical rate of 2.5%, resulting in R$1 thousand.
Given that the organization carries out exempt activities that represent 40% of turnover, this percentage is applied as a reduction in the value of the CPP. Follow up:
- Note the calculation of the CPP when the company is not authorized to exempt: R$210 thousand x 20% = R$42 thousand CPP;
- Check the calculation of the reduction due to the existence of exempt activities, using the percentage of representation in revenue: R$42 thousand x 40% = R$16.8 thousand.
As a result, the CPP to be paid is R$42 thousand - R$16.8 thousand = R$25.2 thousand.
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Conclusion
Now that you have a better understanding of payroll exemption and its importance for companies, don't miss the opportunity to learn how your accounting department can stand out when it comes to dealing with payroll exemption and much more!
If you need to rely on experienced accounting advice, capable of providing the best strategies for your company to improve its financial performance, get to know CLM Controller's solutions now.
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