The 1st Ordinary Panel of the 2nd Chamber of the 2nd Section of the Administrative Council of Tax Appeals (Conselho Administrativo de Recursos Fiscais -“CARF”) by Judgment nº 2201-004.072, published on February 23rd 2018, decided, unanimously, not to levy a social security contribution on amounts credited to employees to the title of Profit Sharing (“PLR”) and prize for ideas approved and implemented by the company due to the lack of remuneratory nature of these funds, in the following sense:
“PARTICIPATION IN THE PROFITS AND RESULTS. COMPLIANCE WITH THE APPLICABLE LEGAL REQUIREMENTS.
The amounts paid as Profit Sharing (“PLR”) are not part of the contribution salary when the requirements of the institute governing law are observed. Failure to comply with any of the clauses of the legal rule removes its incentive, reestablishing the tax incidence on the amounts paid to the insured. Article 176 of the National Tax Code (Código Tributário Nacional -“CTN”).
PAYMENT OF VALUES AS A PRIZE FOR THE IDEAS OF THE INSURED APPROVED BY THE COMPANY. ABSENCE OF REMUNERATORY ASPECT OF THE REMUNERATION.
It is not included in the contribution salary the amounts paid by the company to the insured persons, for ideas considered to be good and useful regarding the environment, industrial and work processes, material and / or raw material wastage, due to the lack of counter- charge, time available or because it does not refer to cases of interruption of the effects of the employment contract, and therefore does not include the remuneration paid by the insured.”