ARTICLE
17 November 2015

Federal Superior Court Will Judge The 10% Additional FGTS Amount

D
Demarest

Contributor

Supplementary Law no. 110 published on 6/30/2001 established two new social contributions, one of them payable by employers in case of termination without cause at the rate of 10% of total amount
Brazil Tax
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Supplementary Law no. 110 published on 6/30/2001 established two new social contributions, one of them payable by employers in case of termination without cause at the rate of 10% of total amount deposited in the Length-of-Service Guarantee Fund (FGTS) while the employment contract was in effect, and the other, at the rate of 0.5% of the monthly compensation of employees, effective for 60 months and that, therefore, stopped to be charged as of the January 2007 month of accrual.

Considering the enactment of this law, the rates that were 8% and 40%, were increased to 8.5% and 50%, respectively. Concerning the 0.5% percentage, the law had established a term of 60 months and it was effect from January 2002 to December 2006. However, the law did not establish a term for the effectiveness of the additional 10% contribution, which is charged until today.

It should be mentioned that both contributions were established to settle the supplements of the inflation adjustment payable by the "Fund" that resulted from the cumulative application in April 1990 of the 16.64% and 44.08% percentages on the balances of the FGTS accounts held, respectively, in the period from 12/1/88 to 2/28/89, stemming from adjustments based on understated inflation under the "Summer" and "Collor 1" Economic Plans.

The fact is that the purpose for the establishment of the contributions has already been met, considering that the Federal Government itself informed that it has been allocating the collected amounts to social projects, what renders the enforcement of the contribution still in effect unconstitutional.

Based on this fact, many taxpayers have been looking for the judiciary to attempt to cut this cost and have been filing lawsuits that, in their majority, have been seeking the suspension of the collection of said social contribution, considering that the purpose of the rule has already been fully met.

In this regard, the Federal Superior Court (STF) acknowledged the general repercussion of the matter, which will be judged in the future in order to secure a uniform case law on the matter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
17 November 2015

Federal Superior Court Will Judge The 10% Additional FGTS Amount

Brazil Tax

Contributor

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