BRAZIL LAW AND PRACTICE Contributed by: Alan Campos Elias Thomaz, Juliana Sene Ikeda, Ricardo Barretto Ferreira da Silva and Camila Sabino Del Sasso, Campos Thomaz Advogados
10. Employment and Labour 10.1 Employment and Labour Framework The Constitution guarantees several fundamental labour rights, including minimum wage and limits on working hours, for example. Nonetheless, employ - ment relations in Brazil are primarily governed by the consolidationoflabourlaws (CLT), which sets out the core framework for individual employment contracts, working conditions, termination rules and employ - ee benefits. The CLT applies to nearly all employ - ees working under subordination, regardless of the employer’s nationality. Complementary legislation and case law provide further guidance on specific topics such as health and safety, discrimination and remote work. Certain sectors are also subject to specific regu - lations issued by the Ministry of Labor or professional regulatory bodies. In addition to traditional employment, many com - panies, particularly in the technology, services, and creative sectors, engage professionals under the so- called pessoa jurídica (PJ) or independent contrac - tor regime. This model allows individuals to provide services through their own legal entities, offering tax efficiency and contractual flexibility. However, it also raises classification risks when the relationship presents characteristics of subordination. The STF is currently examining cases related to the status of app-based drivers and delivery workers, which may redefine the legal boundaries between employment and independent contracting in Brazil. Collective bargaining plays a central role in Brazilian labour relations. A trade union must represent employ - ees, and employers belong to an employers’ union for their economic sector. Collective agreements or con - ventions negotiated between these unions commonly address topics such as salary adjustments, benefits and working hours. While works councils, as known in some European jurisdictions, do not exist in Brazil, employee representation at the company level may occur through a union or the Internal Commission for Accident Prevention ( Comissão Interna de Prevenção de Acidentes CIPA). Foreign investors entering the Brazilian market should be aware that local employment relationships are gen -
subject to a higher flat rate, reflecting anti-avoidance and transparency policies. Double-taxation treaties may reduce or eliminate Bra - zilian taxation on capital gains, although most preserve the right to tax gains derived from real estate or sig - nificant shareholdings in Brazilian companies. Trans - actions executed on the B3 stock exchange may be exempt for eligible foreign investors registered under Brazil’s foreign portfolio investment regime, provided the investor is not resident in a low-tax jurisdiction. 9.5 Anti-Evasion Regimes Brazil enforces a combination of specific and general anti-avoidance measures. The so-called General Anti- Avoidance Rule (GAAR), provided in the National Tax Code, authorises tax authorities to disregard artificial transactions that conceal the true nature of opera - tions. However, its practical application remains lim - ited and subject to interpretation, as no implementing regulation has been issued to define procedural safe - guards or criteria for its use. Transfer-pricing regulations, now fully aligned with OECD standards under Law No 14,596/2023, require documentation and benchmarking for all related- party cross-border transactions. Accepted methods include the comparable uncontrolled price (CUP), transactional net margin method (TNMM) and profit split approaches. Controlled foreign company (CFC) rules require Bra - zilian shareholders to recognise profits of foreign subsidiaries on an accrual basis when the subsidiary is located in a low-tax jurisdiction or benefits from a privileged regime, with similar provisions to individuals holding offshore entities or trusts. Thin-capitalisation rules restrict interest deductions. Penalties for tax evasion or fraud may reach 150% of the unpaid tax, in addition to interest and potential criminal liability.
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