Profit and Results Sharing (PLR) is one of the most common ways of attracting and retaining talent that Brazilian companies can offer and, as it does not characterize workers' remuneration, their payment is not subject to social security and labor contributions on payroll, such as: FGTS, vacation, 13th salary and weekly paid rest. Additionally, PLR payments by legal entities are deductible expenses for Corporate Income Tax (IRPJ) and Social Contribution on Net Profits (CSLL) purposes.

Law No. 10,101/2000 described the criteria that employers should observe when preparing PLR plans so that such payments could enjoy the benefits described. However, that law employed hardly descriptive and largely subjective requirements for its criteria and countless PLR plans ended up being questioned by the Tax Authority as disguised salary payments (only from 2015 onwards, over 320 judgments on the subject were published - most with unfavorable decisions to companies*).

In November 2020, Law No. 14,020/2020 came into force to simplify the requirements in Law 10,101/2000, by excluding the mandatory participation of unions (but not their invitation to participate) and establishing that the criterion of “clear and objective rules” is now assessed by the contracting parties (and not by the Tax Authority).

* According to research carried out on the CARF website.