Pejotization – hiring individuals through legal entities (PJ) that they themselves are part of – has come to occupy a central place in tax discussions. At the same time that it responds to the transformations in the labor market, the model raises doubts about the incidence of social security contributions, Withholding Income Tax (IRRF) and other charges, especially when the tax authorities understand that there is simulation to mask an employment collateral. The aim hereof article is to map, from an administrative and judicial perspective, the main aspects of the theme.

It is worth remembering that, in case of mischaracterization of the legal entity, the Federal Revenue Service requires social security contributions and Income Tax in acknowledged and agreed with the applicable tax regime for payment to individuals, which, in general, is more onerous.

Within the scope of the Administrative Council of Tax Appeals (Carf), the issue of pejotization has been fully debated. A recent survey, based on 60 rulings handed down between 2017 and 2024, reveals a scenario of divided decisions: 27 unfavorable to the taxpayer, 9 partially favorable and 24 favorable.

This means that 45% of the judgments resulted in full success for the tax authorities, while 55% presented totally or partially positive results for the taxpayer. Examining the rulings in detail, it is observed that the current majority position, rank, status in Carf is that the piercing of the corporate veil is only justified in the face of robust proof of fraud, simulation or the unequivocal presence of the requirements provided for in article 3 of the CLT.^[1] 

Among these rulings, it is worth mentioning I Owe You – IOU informal the ruling 9202-011.423, judged by the 2nd Panel of the Superior Chamber of Tax Appeals (CSRF), which analyzed the hiring of health professionals to work in hospitals, under the model of hiring made directly with legal entities.

In the judgment, the 2nd Panel decided that, once the presence of the elements characterizing the employment collateral (personality, habituality, subordination and onerousness) is proven, the inspection may disregard the legal entity and classify the professionals as insured employees, maintaining the requirement of social security contributions.

The taxation, therefore, was maintained, because it was understood that, de facto, there was an employment relationship between the professionals and the hospital, notwithstanding the existence of contracts with legal entities

From the prospect of taxpayers, two arguments stand out. First, the lawfulness of outsourcing and pejotization itself, recognized by the Federal Superior Court (STF) in Theme 725 of the general repercussion, in ADPF 324 and, more recently, in ADC 66. It is invoked that the freedom of business organization – article 170 of the Constitution – allows choosing the most efficient corporate model, including for hyper-sufficient professionals, as provided for in ruling 2101-002.830.

The second argument deals with the reversal of the evidential burden: it is up to the inspection to demonstrate the presence of habituality, onerousness, personality and, mainly, subordination. The simple contractual analysis is insufficient, acknowledged and agreed with Ruling 2102-003.478.

The tax authorities, on the other hand, maintain that the interposition of a legal entity constitutes abuse, when control of working hours, exclusivity, typical employee benefits or a history of structural subordination are evidenced.

In the records that resulted in rulings 2101-002.982 and 2402-012.848, Federal Revenue Service was successful in to substantiate, prove the existence of existence of companies without employees, sequential issuance of invoices and reimbursement of personal expenses, which reinforced the thesis of collateral employment.

The analysis of the arguments, based on judgments of the 2nd Panel of the CSRF, shows that Carf attaches great sum to the body of evidence and that its decisions are based on the concrete analysis of the circumstances presented in each case.

In situations where there is decision-making autonomy, plurality of clients, absence of controls and prior constitution of the legal entity, favorable decisions prevail. However, when elements of direct or structural subordination arise – such as productivity reports, participation in internal meetings, cost reimbursements – the Carf tends to hold the infraction notice and apply the qualified fine of 150%.

In this context, it is noted that, in partially favorable rulings (such as 2102-003.465), the issue receives two treatments: the requirements and responsibilities related to directors or officers are maintained, while the tax credit system on liberal professionals, especially doctors, is ruled out due to the lack of subordination.

Guideline given to the subject in the Judiciary

In the scope of the Judiciary, the guideline established by the STF is even further comprehensive. The Court consolidated its understanding of the lawfulness of any format of division of task between legal entities – notwithstanding the corporate purpose – and preserved the subsidiary liability of the borrower.

Emblematic examples of this position, rank, status can be found in Complaints 60.454 (Casas Pernambucanas) and 64.608 (Sigma Credit), in which the STF demonstrated firmness in overturning administrative and Labor Court decisions that, without concrete evidence, disregarded legitimate civil contracts.

This logic is strengthened by ADC 66, which recognizes the constitutionality of the rendering of services of intellectual services on a very personal basis through a legal entity and submits it exclusively to the laws and regulations applicable to legal entities for tax and social security purposes. Thus, a requalification requires unequivocal demonstration that the "civil" agreement was used to conceal an employment relationship.

The STF has repeatedly decided that the mere existence of a services agreement by a legal entity, even in core activities, does not constitute, in itself, fraud or an employment collateral. The exception occurs if the requirements of the collateral bond (subordination, personality, habituality and onerousness) are formatted proven.

The STF pointed out the direction to be followed, including in a recent decision rendered by Minister Gilmar Mendes, in the Extraordinary Appeal with Interlocutory Appeal 1.532.603/PR, by recognizing the general repercussion of the constitutional matter and giving provenance to Topic 1.389.

In this matter, the "competence and burden of proof in proceedings that discuss the existence of fraud in the civil/recorded spot agreement for the rendering of services; and the lawfulness of hiring a legal entity or self-employed worker for this purpose".

For this ground, reason, the reporter ordered the suspension, throughout each such country, of all proceedings in the Labor Courts that deal with these issues by __% on inflow the final judgment of Topic 1,389. The aiming is to standardize the understanding and ensure legal certainty in the face of the repeated refusal of the Labor Court to apply the guidance of the STF. It should be noted that the cases pending before Carf were not affected by this decision.

Considering this scenario, three conclusions are imposed:

• First, the hiring counterpart legal entity remains a legitimate option, provided that reflects the reality of the services and is supported by a reputable documentation. This includes individualized contracts, clauses that emphasize technique autonomy, lack of exclusivity, and freedom in the definition of task hours and locations.

• Secondly, the inspection has been improving its methods of proof. Economically fragile structures, created in a hurry or devoid of collaborators continue to come under strong ballot and tend to be disregarded.

• Thirdly, the dialogue with the Judiciary indicates that the discussion has shifted from the abstract level – the lawfulness of outsourcing – to the evidentiary level. Thus, those who intend to change and therefore no longer to be subject to pejotization need to demonstrate, on a case-by-case basis, the existence of fraud or subordination.

The era of hybrid, remote, and high-skilled task challenges traditional models, and pejotization proves to be a tool for innovation. Carf judgments have required objective evidence of collateral in order to hold infraction notices. For companies, the message is clear: a solid corporate structure, compliance with tax compliance rules,  and evidence of effective autonomy are the best defense against tax assessments. For the tax authorities, the challenge continues to be to individualize conducts and remove generic presumptions.

This relevant and further nuanced issue leads us to think that the non-suspension of the processes in progress at Carf, even in the face of the STF's resolve to standardize the understanding in the Labor Courts, evidences the existence of a vacancy of legal certainty and equal treatment. A scenario that keeps taxpayers shrouded in uncertainty and makes it difficult to consolidate a stable regulatory environment.

For more information never plural, contact one of Machado Meyer's specialists.

^[1]CLT, article 3 – An employee is considered to be any individual who provides services of a non-occasional kinds to the employer, under the hereof dependence and for a salary.