Productivity Bonuses, Profit Sharing and Balance Sheet Bonuses

What are they and how do they differ?

As the end of the financial year approaches, many companies seek to remunerate their employees based on individual or overall organizational performance. This is where the question frequently arises: are we dealing with a productivity bonus or a profit sharing/balance sheet bonus?

These are distinct concepts with equally distinct accounting and tax treatments:

Productivity and performance bonuses - awarded based on individual employee performance, with objectives defined at a personal or team level.

Profit sharing and balance sheet bonuses - amounts awarded as a reward for good results achieved by the entity itself, generally associated with the existence of profit.

Accounting treatment (NCRF No. 28)

From an accounting perspective, these amounts are treated as short-term employee benefits, under NCRF No. 28, as they will be payable within twelve months after the end of the period in which the employees rendered the service.

Regarding profit sharing, the standard establishes that recognition of the expected cost should only occur when:

The company has a present legal or constructive obligation to make such payments; and

A reliable estimate of the obligation can be made.

A constructive obligation may result from habitual and repeated practices of the entity that create an expectation in employees - so-called "labor customs", recognized as a source of Labor Law under Article 1 of the Labor Code.

What if the company has a negative result?

This is one of the most debated questions among accountants and tax consultants. The Tax Authority (AT), through Binding Information No. 27927, ruled that in the absence of profit, there is no legal basis for any distribution.

However, this position is not absolute. When payment of these amounts is a repeated practice of the entity, regardless of the result obtained, it may constitute a constructive obligation, regardless of the existence of formal profit.

Balance sheet bonuses at general meeting

When there is no legal or constructive obligation, shareholders may, at a general meeting, resolve to allocate part of the results in favor of employees - the so-called balance sheet bonuses.

IRC tax limitations (Article 23-A)

From an IRC perspective, the limitations on deductibility applicable to these amounts are found in paragraphs n) and o) of paragraph 1 of Article 23-A of the IRC Code:

Paragraph n) - Expenses with profit sharing are not deductible if the respective amounts are not paid or made available to beneficiaries by the end of the following tax period.

Paragraph o) - Expenses with profit sharing attributed to members of corporate bodies who hold, directly or indirectly, at least 1% of the capital, are not deductible in the part exceeding double the monthly remuneration earned in the period in question.

Tax Informative No. 6/2026 · Based on Binding Information No. 27927

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