eSocial is a digital bookkeeping system first implemented in Brazil in 2018 as a way to unify and simplify work-related reporting obligations for employers across the country. The digital reporting system is part of the Brazilian government’s Public System for Digital Bookkeeping (SPED) initiative and was introduced in phases throughout 2018 and 2019.
eSocial was conceived as a way to enhance the government’s ability to enforce employment laws, reduce fraud, promote administrative transparency, and make the reporting process smoother for both employers and the tax authority. The eSocial system replaces Brazil’s previous reporting process which required employers to report separately to the National Institute for Social Security (INSS), the Brazil Revenue Service, and the Ministry of Labour and Employment.
eSocial Tax and Social Security Reporting
All companies in Brazil are required to submit employee labour, tax, social security, and payroll information to the Brazilian government via the eSocial platform. Information that employers must report on eSocial includes:
- Withholding income tax
- Contributions to Brazil’s unemployment compensation fund (FGTS)
- Unemployment insurance
- Family allowance
- Sickness, temporary and holiday leave
eSocial Key Highlights
The eSocial platform involves the following key features, requirements and obligations:
Registration: Employers must complete the eSocial registration process for all new employees at least one business day before the start of their employment. The process includes submission of identifying information and pre-employment documents such as medical examinations. Similarly, when an employee is dismissed from or leaves their employment, that change must be registered on eSocial no more than 10 days after the date of departure. Employers that fail to meet eSocial submission deadlines may be subject to a fine.
Fines: Beyond late eSocial registration, employers may also be fined for other forms of noncompliance with eSocial requirements including discrepancies, inaccuracies, or omissions in the information submitted to the platform.
DCTFWeb: The Declaration of Federal Social Security Debits and Tax Credits and Other Entities and Funds - known as DCTFWeb - combines information submitted to eSocial, along with other tax data, to calculate social security contributions.
Digital Workbook: All employees registered on eSocial have access to the Digital Workbook, which contains all the information that they have submitted to the platform. The Digital Workbook can be accessed via the Brazilian Ministry of Labour and Employment (MTE) website or, alternatively, can be downloaded as a smartphone app.
In order to make the reporting process easier, and ensure ongoing compliance, employers in Brazil are encouraged to become familiar with the relevant eSocial requirements. To optimise eSocial compliance, employers should consider digitising as much of their tax and payroll process as possible: the eSocial platform and its associated processes are exclusively electronic and by dealing in electronic information, employers can add speed and efficiency to their tax and social security reporting obligations.
Employers in Brazil are advised to contact their payroll providers in order to ensure their payroll infrastructure is compliant with eSocial requirements.
For more information on tax and social security compliance in Brazil, browse activpayroll’s dedicated Global Insight Guide.