Expansion of exemption to pastors goes beyond the competence of the IRS, says auditors union

The National Sindifisco (Union of Tax Auditors of the Federal Revenue) is considering judicially questioning the act of the special secretary of the body, Julio Cesar Vieira Gomes, which expanded the scope of the exemption from social security contributions on the remuneration of pastors.

The measure, which was publicly cited by President Jair Bolsonaro (PL) and benefits allies of the Chief Executive, “extrapolates the competence of the Federal Revenue for normative acts”, according to an assessment by Sindifisco.

“By reducing the conditions for what is considered remuneration for social security purposes, the Federal Revenue makes more remunerations to be considered exempt. An action that harms both current collection and tax credits already constituted and produces harmful effects on security accounts social”, says the auditors’ union.

The act by Gomes was published on August 1, two weeks before the start of the electoral campaign and at a time when Bolsonaro seeks to consolidate the support of evangelicals for his re-election bid.

The secretary is close to Senator Flavio Bolsonaro (PL-RJ), the president’s son, and has direct dialogue with the Chief Executive. On Tuesday (16), Bolsonaro declared that the measure meets a request made by pastors to end what they call the “persecution” of the Federal Revenue.

In practice, the measure expands the cases of exemption from the prebend (as the remuneration of pastors and religious leaders is known) and puts a stop to the inspection processes still in progress.

For the president of Sindifisco, Isac Falcão, the rule was published “at an electoral moment”, without discussion with society and without respecting the competence of the National Congress, which is responsible for approving the laws.

“The secretary signs an act modifying the meaning of the law. He placed several possible criteria for differentiating remuneration to say that it does not fit [como parcela tributável]”, he stated.

“Sindifisco is studying the impacts of this measure and also ways to have jurisdictional control”, said Falcão.

The Federal Revenue Service says that the act consolidates an “understanding that is already in force”, although it recognizes that the “diversity of documents” on the subject “end up, until then, to generate internal differences”.

“The consolidation of the understanding in a single normative made it possible to optimize advertising, both for tax auditors and for taxpayers, bringing gains in legal certainty, reduction of litigation and compliance”, says the Tax Authorities.

Technicians interviewed privately by the report, however, also have the assessment that the administrative rule extends the scope of the exemption to pastors.

In the public list of debtors enrolled in the Active Debt of the Union, religious entities maintain a debt of R$ 1.02 billion, of which R$ 951 million are related to Social Security. The IRS, in turn, said it did not have a survey on inspections at the administrative level.

According to Falcão, the act of Gomes makes room for all these credits to be deconstituted, that is, extinguished, freeing the debtors of any charge.

The focus of the controversy is the prebend, as the remuneration paid to the pastor or religious ministry leader for his services is called.

The law exempts the amount from the payment of social security contributions, as long as it is related to religious activity and does not depend on the nature or amount of work.

The IRS, however, detected in recent years that some churches used the prebend to circumvent inspection and distribute a kind of profit sharing to pastors who brought together the largest groups of believers (benefiting leaders of temples in large cities or neighborhoods, for example) or the largest tithing collections.

The tax authorities applied millionaire fines and demanded the payment of a social security tax of 20% on the amounts paid to pastors, directors and religious leaders. The auditors’ understanding was that the exemption did not apply to variable compensation mechanisms.

From then on, the search for tax forgiveness and the flexibilization of the rules became a priority agenda of the evangelical bench in the National Congress.

In 2015, a first law stipulated that differentiated amounts, paid in cash or as allowance for housing, transportation and educational training, would also be exempt from taxation.

The tax authorities reacted by demanding receipts for these expenses and fined those who could not prove the nature of the expenses. The IRS also adopted the understanding that the new law was not retroactive, that is, the fines issued before its publication continued to be valid.

In 2020, Bolsonaro sanctioned a law that expressly provided for the retroactivity of the broader pension exemption on the prebend, approved five years earlier. The intention was to overturn the fines that still hung over allied pastors.

However, controversy within the scope of enforcement continued as, according to government sources, auditors saw no change in the scope of the exemptions.

In September 2021, for example, a query solution published by the General Taxation Coordination stated that, if the payment by the institution takes place with characteristics inherent to remuneration for services provided by the minister of religious confession, the amount received should be considered in the basis for calculating the social security contribution.

The same understanding would apply to amounts paid “in excess of what is necessary for the person’s subsistence purposes”.

The act of Gomes, in turn, says that the payment of differentiated amounts, in the amount or in the form, “does not characterize these amounts as remuneration subject to contribution”. In the text, “seniority in the institution, level of education, irreducibility of values, number of dependents, hierarchical position and place of domicile” are cited as differentiating factors.

The rule also says that only the portion paid in conditions “proven” related to the nature and quantity of the work performed will be considered taxable remuneration.

As it is signed by the special secretary, the document supersedes any solution of divergent consultation on the subject.

The insertion of the place of residence is pointed out by technicians critical of the measure as a key factor for pastors, since churches located in large cities or upscale neighborhoods tend to have better results in terms of faithful and revenue. The hierarchical position can also open up gaps for more significant transfers to religious leaders, who will be exempt from taxation.