The INSS in Brazil is the institution responsible for managing social security benefits. If your company is planning to expand into Brazil or hire Brazilian employees, understanding INSS Brazil tax is crucial for ensuring compliance with local regulations.

The acronym INSS stands for National Social Security Institute, which oversees the payment of pensions and other benefits to Brazilian workers who contribute to Social Security.

In this article, we’ll explore what the INSS is, the purpose of Social Security, and who is eligible for its benefits.

INSS in Brazil: what is it?

The INSS is the body responsible for paying social security benefits such as pensions, unemployment insurance, sick leave, death pensions,  among others.

Since 1990, Brazilian workers have contributed to the INSS Brazil tax monthly, ensuring their entitlement to these benefits. Contributions are calculated based on the worker’s salary, with specific variations outlined by law.

According to the Continuous National Household Sample Survey (Pnad Contínua), 14.7% of the Brazilian population receives benefits such as retirement or pension.

Below is a list of benefits that Social Security offers to insured workers:

• Retirement for contribution time;
• Age and disability pensions;
• Death pension;
• Sickness benefit;
• Accident benefit;
• Imprisonment allowance;
• Maternity allowance;
• Family allowance;
• Professional rehabilitation.

The INSS ensures that workers and their families receive the necessary income in the events listed above. Its primary role, as outlined by law, is to manage and guarantee that all workers’ rights, as provided by the General Social Security System (RGPS), are upheld.

How does the INSS in Brazil work?

The INSS is responsible for enforcing the rights of those insured under the General Social Security System. It operates on the basis of monthly contributions from Brazilian workers, including individual taxpayers and micro-entrepreneurs. 

In essence, the INSS functions as the managing body for Social Security benefits. It collects contributions and ensures that these funds are redistributed to pay for various benefits, such as pensions, sick leave, and other entitlements, thereby safeguarding the social security rights of its contributors.

INSS payment 

INSS contributions are determined based on the worker’s job category and salary, with rates ranging from 8% to 11%. The contribution is deducted directly from the employee’s payroll, and it is the employer’s responsibility to ensure these payments are made to the government.

It is important to note that this contribution applies not only to employees working under formal contracts—referred to as CLT in Brazil—but also to self-employed individuals, who can contribute voluntarily.

The failure to comply with this obligation and pass on the amounts to the agency can be considered a felony. Fines may be imposed on those responsible for the company. 

This penalty also applies to companies that do not pay the INSS on time, do not pay the benefit due to the insured or fail to pay contributions due to the Social Security system.

INSS in Brazil 2024: how to calculate it?

The INSS is a tribute charged both to the employer and the employee.

Company Contribution

The company contributes a fixed percentage on the payroll, which varies according to the type of activity and the number of employees. 

The contribution rate:

• Varies based on the company’s size, type of activity, and tax regime.
• Can be as high as 20% for companies under the Lucro Presumido and Lucro Real regimes.
• Is not applicable for companies registered under the Simples Nacional regime.

Calculation basis:

• The total amount of remuneration paid to employees, including salaries, bonuses, commissions, and other income.

If you are looking for more specific information, we advise you to consult with a tax advisor or a specialized consultancy like Europartner.

Employee Contribution

Since 2020, the INSS calculation has considered a progressive calculation based on the salary range. The rate is used within each band, considering the salary installments, and then each installment is added together to arrive at the final deduction amount. 

To calculate it, let’s consider the updated table below, published on January 1, 2024, in the Federal Official Gazette.

You will find below how to use each rate, according to the progressive calculation, to arrive at the correct INSS deduction amount.

In previous years, the calculation was based on the employee’s gross salary and the percentage of each salary band was considered to make the deduction, now it is done by a progressive deduction.

Not to mention that the company also needs to consider the 13th salary, additional salaries, vacations, bonuses and so on, all of which are subject to INSS.

Read also: How to manage human resources in Brazil?

INSS in Brazil and retirement

Although retirement is one of the benefits from INSS, many Brazilians – and foreign entrepreneurs – don’t know how the retirement rule works, especially since there have been changes to the legislation since the 2019 Pension Reform.  

Currently, for Brazilian workers to apply for retirement, they need to fit into one of the following five models:  

Points system

Under the points system, workers need to achieve a score, which corresponds to the sum of their age and contribution time, while respecting 35 years of contributions for men and 30 years for women. 

The score for applying for retirement under the new system is 98 points for men and 88 for women. Each year, however, in this transition, there will be an increase of 1 point. In other words, in 2022 the points system was 99 for men and 89 for women. 

With 15 years of contributions, women are entitled to 60% of the full amount of the pension and men need 20 years of contributions. This percentage increases by 2% for each additional year of contribution, with a retirement limit of BRL 7,507.49. 

Contribution time + minimum age

In this model, the minimum age requirement starts at 61 for men and 56 for women, with an annual increase of half a point until it reaches 65 for men and 62 for women. The minimum contribution period is 35 years for men and 30 years for women.

The transition period lasts 8 years for men and 12 years for women. Pension payments are calculated based on the average of all salaries, following the rule of 60% of the full amount, with adjustments according to contribution time, similar to the points system.

Retirement by age

To retire by age, men must be at least 65 years old and women must be 62, if they started working after the reform. Those who started working before are covered by the transition rule. 

Men: 65 years and 15 years of contributions;

Women: 60 years + 6 months (half a point every year until reaching 62) and 15 years of contributions; 

The retirement amount follows the same rule as the points system: average of all salaries, 60% of the full amount, contribution time for men and women and a 2% increase each year. 

Read also: How to register a company in Brazil?

Incidence of INSS in Brazil

INSS is levied on the employee’s gross salary. However, HR needs to understand the rules on the incidence of INSS on bonuses, 13th salary and vacations. After all, these additions and discounts are part of the employee’s final remuneration. 

13th salary

The 13th salary is subject to the INSS, but it requires extra attention from HR professionals. As it can be divided into two installments, the company should only deduct the second installment, which can be paid until December 20th of each year. 

In other words, the first installment must be paid in full and the second installment is subject to INSS. 

Additional

INSS is also levied on the additional benefits that employees are entitled to receive. In this case, it is possible to highlight the following benefits among the main ones that will be deducted: 

• Overtime; 
• Additional for length of service;
• Hazardous duty pay;
• Unhealthy working conditions bonus;
• Night-time bonus;

Bonuses 

Gratifications in Brazil are additional payments made to employees beyond their regular salary. They can be categorized into two main types:

Regular Gratification

The purpose of it is to award employees for meeting or exceeding performance expectations.

It can be paid periodically, but not monthly. It impacts all relevant taxes and labor costs.

Award

This bonus must be specified in the contract and is awarded to employees who demonstrate exceptional performance beyond the standard expectations. It is typically tied to specific time periods, such as semesters or years.

The bonus is only subject to personal income tax and is exempt from INSS contributions.

Vacation pay

In vacations, INSS is levied on “traditional” vacations, i.e. when ⅓ is added to the calculation. The same rule applies to collective vacations. In both cases, the employment contract is in force.

Frequently Asked Questions about the INSS in Brazil

The INSS is always a topic of discussion in companies among HR and the employees.

That’s why below you’ll find answers to the main questions on the subject. 

Where can I consult my INSS statement? 

The INSS statement can be consulted in three ways: 

1. Going to an INSS unit; 
2. Digitally, through the “My INSS Portal””; 
3. The branches or home banking of Caixa Econômica Federal or Banco do Brasil – both are important financial institutions linked to the government. 

How does the INSS form work and what is it for? 

The Social Security Form (GPS) is the document used by companies to pay social security contributions. This document contains information on each taxpayer and also the amounts earmarked for the INSS. It is due every 5th of the following month.

It is through the GPS that this money is collected, which will later pay for and guarantee INSS benefits for its insured members. 

Social security contributions are made automatically by employees who work under the CLT regime, and the company then pays the GPS. In the case of self-employed workers, they need to register as individual contributors on the INSS website.

Who can contribute to the INSS in Brazil? 

All people who carry out a paid activity must contribute to the INSS, whether they are Brazilian or foreign workers. Whether they are salaried professionals, freelancers or temporary workers.

People who fit this profile, who do some kind of paid work in the country and are over the age of 16, are entitled to INSS, or are insured under the Social Security system. Below this age, the guardian, attorney-in-fact or legal representative is entitled to the benefit.  

How can you optimize the HR department? 

It is the company’s obligation under labor legislation to pay its employees’ INSS, and the HR department is essential in this process.

Therefore, the company’s main role is to have trained the HR department or even hire specialized consultants with expertise in the area and knowledge of labor legislation – since any error or failure to pay the INSS is considered social security misappropriation. 

If your company is planning to expand business to Brazil, it’s highly recommended to count on the expertise of seasoned professionals. This important step can help your business to develop faster while you focus on your main activity.

The most accurate option is Europartner: a company that has been serving business and entrepreneurs from all around the world since 2009.

Contact them now, the experts are waiting for your call.