Misuse of profit sharing may result in social security liabilities

Brazil’s National Institute of Social Security (INSS) has been assessing corporate taxpayers that have implemented profit sharing programs to their employees. The INSS argues that companies have misuse the programs, which often do not follow the legal requirements contained in Law No. 10,101/2000. For INSS, misuse of profit sharing programs may result a recharacterization of payments hereunder as salaries and subject to social security taxes.