Pró-Labore Líquido

Pró-labore: partner compensation in Brazil

Pró-labore is the salary a partner pays themselves for actively working in their own company. Profit distributions are currently income-tax exempt for individuals in Brazil, but pró-labore works differently. It counts as labor income, so it triggers INSS (an 11% employee share plus a 20% employer share on the gross amount) and IRRF at the progressive tax table. Take a R$ 5,000 pró-labore: it generates roughly R$ 550 in employee INSS, R$ 1,000 in employer INSS, and IRRF on top of that. Under LC 123/2006, MEIs are exempt from mandatory pró-labore, while Simples Nacional companies may or may not pay it. The classic optimization is to set pró-labore at the legal minimum (the federal minimum wage) and pay out the rest as a dividend distribution, which is tax-free for the individual partner. The 2024 tax reform proposals could change that, since the taxation of dividends is under review.

Applications and context

This shows up in PJ accounting, corporate structuring, partner compensation policies and tax planning. It matters most for IT professionals, doctors, lawyers and consultants operating as PJ. Get the pró-labore versus distribution split right and you can save thousands of reais a year.

FAQ

Is pró-labore mandatory? For most LTDA and SA partners who actively work in the company, yes. MEIs are off the hook. The Receita Federal expects at least one partner to draw pró-labore so that INSS contributions are justified.

What's the minimum amount? The federal minimum wage, R$ 1,412 in 2024. Some accountants suggest staying a touch above it to avoid drawing scrutiny.

Pró-labore vs dividend — which pays less tax? Dividends, for as long as they stay exempt. Pró-labore carries INSS and IRRF, whereas dividends only hinge on the company's regime (Lucro Real, Presumido or Simples).