Brazilian Federal Revenue Reinforces Scrutiny of Corporate Innovation and Idea Reward Programs – COSIT Ruling No. 91/2026

The Brazilian Federal Revenue Service (Receita Federal) has issued COSIT Ruling No. 91, dated June 16, 2026, providing important guidance on the characterization of awards granted to employees under corporate idea, innovation, and continuous improvement programs.

The ruling complements the interpretation previously established in COSIT Ruling No. 10/2026 and reinforces that excluding such awards from the calculation basis of social security contributions requires not only compliance with the applicable legal requirements but also clear evidence, supported by adequate documentation, that the payment results from performance exceeding what is ordinarily expected.

The consultation was submitted by a company that maintains a voluntary employee suggestion program designed to encourage ideas aimed at improving processes, products, and services. Under the program reviewed, employees’ proposals undergo an internal evaluation process, and only ideas that are approved and effectively implemented may qualify for an award.

After analyzing the case, the Federal Revenue Service acknowledged that, in principle, programs of this nature may result in awards exempt from social security contributions, provided that the requirements established under Brazilian labor and tax legislation are satisfied.

COSIT Ruling No. 91/2026 reaffirms the interpretation set forth in COSIT Ruling No. 10/2026 that awards excluded from the social security contribution base must:

• Be granted exclusively to employees;
• Result from the employer’s voluntary initiative (act of liberality);
• Not arise from any legal, contractual, or collective bargaining obligation that would undermine their discretionary nature;
• Be linked to performance exceeding what is ordinarily expected; and
• Be supported by objective evidence demonstrating both the expected level of performance and the employee’s achievement beyond that benchmark.

The most significant aspect of the new ruling is its emphasis on the need for a case-by-case factual analysis, supported by documentary evidence, to determine whether a payment genuinely qualifies as an award.

In this context, the Federal Revenue Service identified several factors that may be considered in this assessment:

(a) Voluntary Participation

Employees’ voluntary participation in the program is a favorable element in demonstrating the employer’s discretionary intent and supporting the non-remunerative nature of the award.

(b) Compatibility with Job Duties

The Federal Revenue Service cautioned that, for certain positions, proposing process improvements may already fall within the employee’s regular duties, which may prevent the contribution from being characterized as extraordinary performance.

According to the ruling, where developing improvements, innovations, or enhancements already forms part of the employee’s ordinary responsibilities, the resulting award may not represent performance beyond what is ordinarily expected, thereby undermining its qualification as an exempt award.

(c) Merit-Based Evaluation

The tax authority placed particular importance on the existence of mechanisms for evaluating the merits of submitted proposals.

According to the ruling, merely submitting an idea should not automatically entitle an employee to a financial award. Instead, any award should be conditioned upon an assessment of the proposal’s merits, its impact, and, preferably, its actual implementation.

(d) Other Relevant Factors

The Federal Revenue Service also highlighted circumstances that may indicate the payment has a remunerative nature, including: frequent or systematic payments, awards granted without regard to the actual quality of the employee’s contribution, payments triggered merely by completing forms or formally participating in the program and the absence of objective criteria demonstrating the value added by the proposed idea.

COSIT Ruling No. 91/2026 signals increased scrutiny of corporate recognition and innovation programs.

Although the Federal Revenue Service acknowledges that employee suggestion programs may generate awards not subject to social security contributions, it makes clear that its analysis will not rely solely on the terminology adopted by the company or the mere existence of an internal policy or program.

Nesse cenário, recomenda-se que as empresas que pretendam implementar programas de premiação, bem como aquelas que já possuam iniciativas dessa natureza, avaliem se seus programas estão adequados ao entendimento da Receita Federal, em especial assegurando:

• Objective eligibility and evaluation criteria;
• Evidence of employees’ voluntary participation;
• Proper documentation of the evaluation process and the benefits generated by approved ideas;
• Demonstration that the rewarded contribution exceeds the employee’s ordinary job responsibilities; and
• Concrete evidence of implementation or measurable business results.

The new ruling reinforces that robust documentation and sound governance of award programs will be critical to supporting the non-remunerative nature of these payments in the event of a tax audit.

BVA has extensive experience in structuring and reviewing employee award and recognition programs, assisting companies in aligning these initiatives with Brazilian labor, social security, and tax requirements, while mitigating legal risks and enhancing legal certainty.