Performance awards and legal certainty: new position of the Brazilian Federal Revenue Service
The Brazilian Federal Revenue Service (Receita Federal do Brasil) has provided important clarification on a matter that has long created uncertainty in payroll management. On 30 January 2026, Consultation Ruling (Solução de Consulta) Cosit No. 10/2026 was issued, consolidating the Tax Authority’s understanding regarding the non-incidence of social security contributions on amounts paid as awards for performance exceeding expected standards.
The ruling reaffirms the interpretation of the concept of awards introduced by the Labour Reform, set out in Section 457, paragraph 2 of the Consolidation of Labour Laws (CLT), recognising that such payments, when properly structured, do not form part of the basis for calculating social security contributions. This represents a relevant development, as it aligns the tax interpretation with the legal nature of this type of payment already established in labour law.
According to the Federal Revenue Service, for a payment to qualify as an award and therefore be excluded from the incidence of social security contributions, certain requirements must be met simultaneously. The award must be granted exclusively to employees, whether individually or collectively, and does not extend to payments made to individuals classified as independent contributors. In addition, it may take the form of payments in cash, goods or services, thereby expanding the possibilities for structuring incentive programmes.
Another key element is the employer’s discretion, meaning that the payment must not arise from a legal, contractual or negotiated obligation that would remove its voluntary nature. Finally, the award must be linked to performance that effectively exceeds the standard level ordinarily expected, which must be objectively demonstrable through clear and verifiable criteria.
The Consultation Ruling also addresses relevant practical issues commonly faced by companies. It clarifies that the existence of internal policies establishing parameters and targets for the granting of awards does not, in itself, eliminate the voluntary nature of the payment, provided that such policies do not originate from collective bargaining. If the criteria are set out in a collective agreement or collective bargaining convention, the payment assumes a salary nature. Likewise, the recurring nature of the payment does not prevent the exclusion of social security contributions, since the legislation expressly allows awards to be granted on a recurring basis. The Federal Revenue Service also distinguished performance awards from so-called occasional gains, making it clear that the former require a direct link to the exceeding of previously established targets, whereas occasional gains are granted without expectation or measurable performance criteria.
Another relevant aspect addressed in the ruling concerns the period during which Provisional Measure No. 808/2017 was in force. Between 14 November 2017 and 22 April 2018, the exclusion of awards from the contribution base was subject to a maximum limit of two payments per year. For periods before and after this interval, such restriction does not apply.
Consultation Ruling Cosit No. 10/2026 represents an important step towards strengthening legal certainty on this matter, providing objective parameters both for tax authorities and employers. In light of this scenario, particular attention should be paid to the structuring and formalisation of award policies, with clear definition of targets, assessment criteria and proper documentation.
In addition to ensuring legal compliance, such organisation is essential as evidentiary support in the event of tax audits or administrative and judicial disputes.
FAS Advogados remains available to assist should you have any questions.
