Brazil: e-Social is challenged in court

In brief

Under the terms of the updated eSocial Manual and Executive Declaratory Act CORAT 13/2023, Employers are obliged to declare in the Federal Revenue Digital Bookkeeping System (“eSocial”) and DCTWFWeb final and unappealable Labor Court decisions as of October 1, 2023, with the consequent payment of social security contributions via Federal Revenue Collection Form (DARF). Until then, the declaration was made in Social Security Information Collection Form (GFIP) and the payment in GPS (Social Security Form).

In more detail

The current limited parameterization of eSocial and DCTFWeb has generated DARF forms for the payment of social security contributions, with the addition of a 20% late payment fine, as well as SELIC interest, even though the labor court decision has determined otherwise.

In fact, item V of Precedent No. 368 of the Superior Labor Court (TST) states that the late payment fine in respect of the social security contribution resulting from a labor conviction is only due if the defendant fails to pay it within the legal period or as determined by the judge.

Therefore, the flawed parameterization of eSocial itself is subjecting taxpayers to undue payments when declaring the labor amounts determined by the Judiciary in the eSocial system, thus generating the undue collection of fines, in addition to increasing the company’s contingency of its labor liabilities.

The issue was recently addressed in court and in an injunction granted by the 24th Federal Civil Court of Sao Paulo. The applicant companies were exempted from the obligation to include the information in the eSocial system until the necessary adjustments are made to the system, given that eSocial brings together labor, social security and tax information, but does not create new obligations, so the system must be corrected to allow the accurate operationalization of the effects of the labor court decision.

In a nutshell, it is referred in the decision that “the Administration cannot illegally impose a burden as a result of a systemic flaw, nor can it subject taxpayers to undue payment to then subject taxpayers to a new procedure, whether extrajudicial or judicial, to claim the repetition of unduly paid amounts”, authorizing, for the time being, declarations to be made using the FGTS and Social Security Information Collection Form (GFIP) and the Social Security Form (GPS) until the federal government corrects the eSocial system.