In a recent opinion issued by the General Counsel for the Federal Government (AGU), the levy of social security contribution on food allowance received by the employee was ruled out. The opinion aims at settling the controversy arisen from the labor reform approved in the year of 2017. According to the reform text, the amount paid by the employer by way of food allowance is not part of the employee compensation and is not incorporated into the employment contract, i.e., has no compensatory nature and, therefore, there can be no levy of social security contribution on such installments.
Since 2017, both the Labor Courts and the Administrative Tax Appeals Board (CARF) have been ruling out the taxation on food allowance, however, the matter had not yet been settled. Therefore, the new AGU opinion puts an end to the controversy, ruling out such taxation. In a preliminary survey conducted by the AGU, it was estimated that the total amount of credits of that nature disputed in court amounts to R$1.45 billion.
Thus, the consolidation by the AGU of the exclusion of tax on food allowance, in addition to settling a matter still discussed in forensic practice, has certainly and directly benefited the employee and ensured their right to the full benefit without the need for social security contribution.
Written by Clara Couto, Paralegal at Drummond Advisors