Brazil: Is Your Brazilian Company Prepared For eSocial?

Last Updated: 13 October 2015
Article by Fredson Justo

Brazil's single digital reporting system is imminent; see what the program is, and how you can make sure your company is ready.

With its digital bookkeeping tax, social security and labour obligations system (eSocial: http://www.esocial.gov.br/Leiautes.aspx), Brazil's federal government aims to unify employer communications for employees.

The measure, in addition to increasing company control over employer obligations, seeks to ensure social security and labour rights, and improved labour, social security, and tax regulations. In practice, eSocial is similar to the income tax declaration programs that have become part of business processes; in both, users complete forms with data and then transmit them electronically to the government.

The issue is that, until recently, use of the electronic portal version eSocial was optional and used only for household employers. Starting in September 2016, eSocial's scope will broaden and will pertain to all companies that had revenues of at least R$78m in 2014. This single system will replace separate reporting to Social Security, the Internal Revenue Service and the Ministry of Labor and Employment. The timeline with mandatory dates for using the system was published in the Official Diary (DOU) on 25 June 2015, through Resolution No 1 of 24 June 2015 of the eSocial Steering Committee.

  • Companies that had revenues of at least R$78m in 2014 must use eSocial starting from September 2016 to report data such as registration, social security contributions and payroll, among others. However, these companies will be required to use the platform to convey information regarding workplace – like worker health, workplace safety, and workplace accident information – starting from January 2017.
  • Other employers, such as small businesses, must send information about their employees in January 2017. Workplace information will be required starting from July 2017.

In addition to the timeframe established for the implementation of eSocial, a new version of its Guidance Manual (2.1 version), approved by Resolution No. 002/2015 of the Steering Committee, was published in the Official Diary (DOU). This update included a few modifications, such as inclusion of totalising events and utilisation of CAEPF (Register of Economic Activity of Individuals) in a similar way to the establishment of a legal entity.

The program

The goal of the federal program is to assist the employer in meeting labour, social security and tax obligations via a single channel. The integration of companies' computer systems with the eSocial national system will enable automated communication with employers, with standardisation and integration for registration of individuals and legal entities under the participating agencies.

Information related to employees - such as hiring, salary change, termination, employee exposure to harmful agents, among others - will also be unified in a system accessible to certain national country agencies and institutions.

In practice, eSocial does not entail additional obligations. There will be a change in the way that information is delivered – the decentralised delivery model, with reporting obligations to several different bodies, will give way to delivery of a single file, with standardised data and updated records, facilitating monitoring and accelerating clearance processes for the FGTS (unemployment fund).

eSocial is a joint project by federal government agencies and entities, such as the Federal Savings Bank, National Institute of Social Security (INSS), Ministry of Welfare, Ministry of Labor and Employment (TEM), the Internal Revenue Service of Brazil (RFB).The expectation is that it will reduce bureaucracy and increase corporate responsibility in providing information. In addition, the system will have great impact on company management and governance, as eSocial will make labour regulation both clearer and more individualised.

It has been in the works for several years. In January 2007, Decree 6022 the Public Digital Bookkeeping System (Sped) was first started for the tax area. Through Sped, companies were required to provide, in a digital and unified form, accounting and tax information previously recorded in separate programs, books and forms.

Initially known as Social Sped, eSocial is a Sped module applicable to employers of any size. It will be a single system for information regarding not just payroll, but also occupational health, labour litigation, accounting and tax. With the new system, the government hopes to generate a complete view of the employment relationship. To adapt, companies will have to change the way such data is treated.

The employer is expected to generate a digitally signed, electronic file containing the information in pre-set forms. The employer is legally liable for the information provided. The electronic file is transmitted by internet in the e-Social system, which will issue a receipt for the delivery of information.

For the government, eSocial will facilitate relations between employers and employees. The single delivery system is also intended to help various institutions find irregularities such as missed deadlines, miscalculations and inconsistent declarations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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