The recent Cosit Ruling No. 10/2026 issued by the Brazilian Federal Revenue Service provided important clarifications on the social security treatment of amounts paid as performance bonuses for superior results.
The ruling reinforces the possibility for companies to use results-based recognition programs as a strategic people management tool, with the additional benefit of exemption from social security contributions, provided that the legal requirements are met.
What is a “performance bonus”?
The performance bonus, introduced into the Brazilian Labor Code (CLT) by the Labor Reform, is an amount paid by the employer, in cash, goods, or services, to an employee or group of employees for performance that exceeds expectations. It does not have a salary nature and, therefore, does not integrate salary for labor or social security contribution purposes.
What has changed?
The Brazilian Federal Revenue Service consolidated the understanding that, as of November 11, 2017, bonuses granted at the employer’s discretion, whether in goods, services, or cash, do not integrate the calculation base for social security contributions when paid due to performance that exceeds what is ordinarily expected.
This position confirms the spirit of the Labor Reform: to allow companies to reward extraordinary results without those amounts being treated as salary, thus avoiding impacts on INSS, FGTS, and other payroll charges.
Essential requirements
For a bonus to be considered exempt from payroll charges, some key points must be observed:
- Recipients – Payment must be made to employees (individually or as a group), and does not apply to independent contractors.
- Form of payment – The bonus may be paid in cash, goods, or services.
- True employer discretion – The bonus cannot arise from a legal obligation, employment contract, or collective bargaining agreement that removes the employer’s autonomy.
- Proven superior performance – The company must objectively demonstrate what the expected performance was and how it was exceeded.
Opportunity for companies
The ruling represents an excellent opportunity for organizations that wish to:
- Encourage productivity and innovation;
- Recognize talent through merit-based criteria;
- Structure variable compensation policies with a lower social security burden.
When properly designed, a bonus program aligns business objectives with employee motivation, reducing labor costs without increasing tax risk.
Practical considerations
It is essential that internal policies be built with clear performance criteria, measurable metrics, and robust documentation. Poorly structured rules or bonuses tied to ordinary performance targets may lead to the loss of the discretionary nature of the payment and trigger labor and social security charges.
The Drummond Advisors team is ready to assist your company in creating or reviewing bonus programs, ensuring compliance with Brazilian legislation and the safe use of available tax benefits.
Want to know how to implement this strategy in your business? Talk to our specialists.
Written by Daniel Rangel, Senior Associate at Drummond Advisors