ESOCIAL: A NEW PROPOSAL TO DECREASE CORPORATE BUREAUCRACY IN BRAZIL

The System of Digital Bookkeeping of Tax, Social Security and Labor Obligations (eSocial) is a project of the Brazilian Federal Government. Its objective is facilitating the exchange of worker-related information between employers and public agencies in a unified Virtual National Environment.

As a result of this action, private institutions will no longer have to submit information separately to different organizations. Currently, employers must separetely submit all sort of information to the Social Security, the Federal Revenue Service, the Federal Savings Bank and the Ministry of Labor.

WHAT ARE THE BENEFITS OF THE NEW ESOCIAL SYSTEM?

The great advantage is that this system collects and summarizes a wide range of information (labor, social security and tax). It allows the participating bodies of the project to consult and use such information in a single environment whilist reducing bureaucracy.

In practice, companies will have to periodically send information online for the eSocial Empresas platform. Through this channel, employers will communicate to the Federal Government, in a unified form, 15 obligations. Payrolls, the Work and Social Security Portfolio (CTPS in Portuguese), the Statement of Federal Tax Credits and Debts (DCTF in Portuguese) and the Withholding Income Tax Return (DIRF in Portguese) will all be informed through eSocial.

WHAT ARE THE IMPLEMENTATION STEPS?

The new system will be mandatory as from July 2018. However, to facilitate compliance, the government divided the due date into two steps, taking into account the company’s turnover:

 Beginning January 1, 2018 – eSocial will be mandatory for companies with an annual turnover of more than R $ 78 million.

 As from July 1, 2018 – the obligation will be extended to other employers and taxpayers with annual revenues of less than R $ 78 million.

The implementation schedule for each service will also be divided into five phases:

Phase 1: Only company information, ie employer records and tables.

Phase 2: At this stage, companies are forced to send information about workers and their links with companies (non-recurring events), such as admissions, removals and dismissals.

Phase 3: It is mandatory to send payrolls.

Phase 4: Replacement of GFIP (Social Security Information Guide) and cross compensation.

Phase 5: In the last phase, the worker’s health and safety data should be sent.

Right away, the main measures that companies must adopt to comply with eSocial is the registration qualification, the review of administrative processes and focus on the integration between the areas.

Companies that fail to send the information through the software will be subject to penalties and fines. The estimated fine is R $ 1,500 for not sending the digital bookkeeping. However, this amount can be accumulated with the penalties provided for the omissions of the declarations that will be replaced by eSocial.

WHAT IS THE IMPACT ON LEGISLATION?

The main goal of this project is to reduce the bureaucracy for companies when it comes to sending information.

By replacing the delivery of several obligations with just one fully standardized operation, companies will reduce the time and expense currently dedicated to performing these tasks. In addition to simplifying the life of companies, eSocial Empresas will bring significant benefits to the employee. It will allow to ensure, in a much more effective way, compliance with labor and social security rights.

Thus, this new system will only consist of a new way of providing and gathering information in a simplified form by companies. It will not change the specific legislation of each area.