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New Rules for Tipped Employees in Brazil and How They Affect the Hospitality Industry
On March 13, 2017, Brazil's President Michel Temer signed into law new regulations concerning the payment, distribution, tax withholdings, and reporting of tips, whether voluntarily given by customers or charged by employers as a service fee. With the new law, employers that use the general tax system and charge customers a service fee may lose the opportunity to recoup some of their expenses for payroll taxes and other costs associated with the distribution of the tip. For example, in São Paulo, the hospitality industry is entitled to a 35% withholding under the current CBAs, which the new law will cap at 33%. However, these employers will at least have their obligations based on actual tips paid. The law will become effective on May 14, 2017.