Undue restriction on the deductibility of expenses related to the Worker Food Program

Decree No. 10,854/21, published to regulate labor issues, restricted the tax incentive provided by law for companies enrolled in the Worker’s Food Program – PAT. Check out the newsletter prepared by our tax law team and learn more about the changes and their illegalities.

Undue restriction on the deductibility of expenses related to the Worker Food Program

Published on December 13, 2021

In November, a decree was published regulating a few labor issues, including the Worker’s Food Program – PAT. Check out the newsletter prepared by our tax law team and learn more about the changes proposed by the decree.

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On 11.11.2021, Decree No. 10,854/21 was published to regulate a few labor issues, among them the Worker’s Food Program (“PAT”), but it changed rules regarding the tax incentive provided for companies registered in the PAT.

Law No. 6,321/1976 established this tax incentive to benefit companies that feed its employees, allowing them to deduct twice the expenses incurred with the food of workers from the tax base of the Legal Entities Income Tax (“IRPJ”), subject to the taxable profit regime and registered in the PAT, limited to up to 4% of the IRPJ due.

The objective of the benefit is to improve the employee’s nutritional condition and consequently increase their resistance to fatigue and illness, as well as to reduce work accidents.

It turns out that since the publication of Law No. 6,321/1976, several rules have been issued, such as regulatory decrees and ordnances, restricting the application of this tax incentive, which cannot stand in tax matters.

Decree No. 10,854/21 followed the same trend, limiting said deductibility only in relation to employees who receive up to five minimum wages, except for the cases where the employer provides the meals or distributes food themselves by means of collective food providers.

The limitation brought by Decree No. 10,854/21 will culminate in an increase in the tax burden, especially in relation to companies that have expenses in feeding their employees who currently receive more than R$1,100.00 in meal and grocery vouchers.

Given that any restrictions on the tax incentive related to the PAT could only exist if by means of a Law, both panels of the Superior Court of Justice have been recognizing the illegality of decrees or ordnances that unduly impose maximum limits of deductible expenses for the calculation of the PAT benefit.

Additionally, Decree No. 10,854/21, by providing that the new rules become effective as of the date of their publication, violates the principle of annuality provided for in art. 150, III, “b” of the Federal Constitution, which determines that changes in tax legislation that imply an increase in the tax burden of the IRPJ can only become valid in the year following the rule that stipulated it, which, in this case, would be January 2022.

Thus, Decree No. 10,854/21 is another attempt by the executive branch to unduly limit a tax incentive granted by law and this may be challenged by taxpayers.

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