eSocial Is Coming – Is Your Brazilian Company Ready?

Following an extension to the original implementation timeline, Brazilian companies should now be preparing to use eSocial – the country's digital reporting tool.

What is eSocial?

eSocial is the Brazilian government's project to unify the sending of employer and employee data. It's a digital bookkeeping tax, social security and labor obligations tool. This single system will replace the need to send separate reporting to Social Security, the Internal Revenue Service and Brazil's Ministry of Labor and Employment.

eSocial is a joint project by federal government agencies and entities such as the Caixa Econômica Federal bank (responsible for FGTS – unemployment fund - maintenance), National Institute of Social Security (INSS), Ministry of Planning, Ministry of Labor and Employment (MTE) and the Internal Revenue Service of Brazil (RFB).

The expectation is that eSocial will reduce bureaucracy and increase corporate responsibility in providing information. The system is set to impact greatly on company management and governance, as eSocial will make labor regulation both clearer and more individualized.

History

eSocial has been in the works for several years. In January 2007, its first incarnation was announced through Decree 6022, and applied to tax reporting. Known as the Public Digital Bookkeeping System (Sped), companies were required to provide, in a digital and unified form, accounting and tax information that had previously been recorded in separate programs, books and forms.

Along with increasing government control over employer obligations, eSocial seeks to ensure social security and labor rights and improved labor, social security and tax regulations. In practice, eSocial is similar to the income tax declaration programs that have become part of business processes. Users input employment information including incomes and activities, and then transmit them electronically to the government.

Integration of companies' computer systems with the eSocial national system will also enable automated communication with employers; with standardization and integration for registering individuals and legal entities under the participating agencies. The single delivery system is also intended to help various institutions find irregularities such as missed deadlines, miscalculations and inconsistent declarations.

Who needs to comply with eSocial and when?

Until recently, use of the eSocial portal was optional and it was used mostly by domestic...