The challenges of being in compliance with the disruptive eSocial Obligations

By Pedro Ackel and Alessandra D’Elia, WFaria Advogados

According to the Federal Brazilian Government Decree No. 8.373/2014, companies are enforced to declare to the Brazilian Federal Revenue Office all of its data regarding labor, social security and payroll taxations by way of the new system named as "eSocial".

Due to the huge ammount of information required to prepare and process, eSocial is been implemented gradually. Companies were divided into two groups. In the Group 1 remain companies that in 2016 had gross revenues of more than BRL 78,000,000.00. For this Group eSocial started on January 2018, according to a timetable previously defined. In the Group 2 are inserted other Companies, including the small ones. This Group are set to enter eSocial on July, 2018. See chart below:






Such system will completely overhaul the way the Brazilian companies and the Brazilian Federal Revenue Office handle such data. In fact, companies now must internalize the intelligence and management of that knowledge, which, more often than not, was outsourced to companies specialized on labor, social security and payroll business process outsourcing (“BPO”).

Indeed, it is strongly recommended that companies take the leading role in this entire process, assessing its internal and external service providers (i.e., payroll, lawfirms, HR, accounting, medical and IT) to get prepared to process and transfer the data in accordance with the system requirements, whitin the short time the system demands for each event.

Conversely, if companies undermine this advice and prefer to act as a supporting role in its own eSocial obligation, they will rely on third parties that neither have the company’s information and intelnor have the capability to assess properly the information provided. Upon choosing this path, companies may be susceptible to mistakes, wrong pratices, fines, tax issues, etc.

In fact, from now on companies will be constantly monitored through data cross-checking. Any inaccuracies in the systems may trigger labor and tax authorities to promptly identify non-compliance practices, start remote inspections and issue notices of infraction for labor and tax debts collection and for imposing heavy fines. Therefore, a thorough review of labor and payroll taxation are highly recommended for companies that have compliance as a rule.

In this context, it is of utter importance that companies start preparing themselves for attending the forms related to the employee health and safety, which will become mandatory for both Groups of Companies on January, 2019.

Moreover, it is important to highlight that despite all eSocial complexity, the system have some inconsistencies in comparison to the Brazilian legislation. For that reason, Brazilian companies are taking the bull by their horns using it, right up to the point to file lawsuits to grant an injunction that sets up the avoidance of risks of issuance fines and infraction notices.

In conclusion, the sooner companies decide to dedicate efforts to comply thoroughly with eSocial, the better and cheaper it will be.


Alessandra D’Elia

Alessandra D’Elia

WFaria Advogados, Sao Paulo, Brazil
T: +55 11 3018 7878
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WFaria Advogados is a law firm specialising in corporate law, headquartered in São Paulo, with operations in the main states of Brazil, which focuses mainly on legal assistance to major companies in the domestic and international markets from different economic sectors
. Alessandra D’Elia is full lawyer at WFaria Advogados, specialist in Labor Law. Alessandra holds a law degree from the Pontifical Catholic University of Sao Paulo (PUC-SP) and a post-graduate degree in Material and Procedural Labor Law from the same institution.
Pedro Ackel

Pedro Ackel

WFaria Advogados, Sao Paulo, Brazil
T: +55 11 3018 7878
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Pedro Ackel is the Coordinator of the Human Capital section at WFaria Advogados, which comprises Advisory and Litigation in Payroll Tax Law. He received his degree and post-graduate degree in Tax Law from Pontifical Catholic University of São Paulo and is a Legal Director of the Brazilian Association of BPO Companies.


Published: June 2018 l Photo: diegograndi - Fotolia.com

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