Small Business Owner Responsibilities
Understand the obligations that an Individual Entrepreneur must fulfill when running a small business in Brazil...
The Individual Entrepreneur (EI) may have one employee, earning (at least) the minimum wage.
The Cost of Hiring an Employee
The total cost of the employee to the EI is 11 percent of the wage (or R$51.15 if the employee is paid the minimum wage).
These staff tax and social security payments are made automatically through the GFIP system, which can be downloaded from the IRS section of the government's Recita Fazenda website.
The EI has until the 7th of the month to pay, using the Conectividade Social da Caixa Economica Federal system. By using this system to make payment, the EI is free from any potential labor complaints and their employee is entitled to all the benefits of social security, such as retirement benefits, unemployment insurance, accident or illness cover or maternity leave.
The Individual Entrepreneur is not required to maintain full books and do business accounting. However, they should keep receipts of all goods bought for the business, documents relating to any employee and copies/details of any invoices issued.
The EI makes an annual tax declaration of the revenue of the previous year. The first declaration will be filled out by the accountants providing this service for free. The declarations of the following years can be made by entrepreneur.
The accountant also provides guidance on recoding an employees pay and the payment of other taxes.
Taxes for Individual Entrepreneur
The Individual Entrepreneur is liable for the Simples Nacional tax and exempt of all other federal income taxes.
The EI will just pay a fixed monthly amount for:
- Social Security: R$51.15 a month (re-adjusted annually) - 11% of a minimum wage
- State: R$1.00 a month - ICMS (fixed) if the activity is trade or industry
- Municipal district: R$5.00 a month- ISS (fixed) if the activity is services
This is a Social welfare and ICMS or ISS payment.
With those contributions, the EI will have access to benefits such as maternity leave, illness benefits and retirement benefits, amongst others.
How to pay taxes
Taxes are paid using a DAS form, which is generated on the Portal do Empreendedor website.
The payment should be made at a bank or Agencias de Lotería by the 20th of each month.
Late payment of taxes
Late or unpaid taxes are subject to interest and fines. The fine charged is 0.33 percent each day that payment is delayed, until 20 percent of the payment is reached. Interest will be charged at one percent for the first month of non-payment.
After the deadline for payment expires, a new DAS form must be generated through the Portal do Empreendedor website. The new DAS form will automatically contain the revised totals due (including the fine and interest).
- A Declaration of Revenue must be made annually (this can only be done via the Internet) and must be made by 31 January for the previous year's income.
- Total incomes must be registered monthly using a simple form.
The EI should also keep records of all receipts for products and services bought by the business, so as to help them control and monitor their finances.
Canceling the CNPJ (Cadastro Nacional de Pessoas Jurídicas) and Registration
The procedure to close a small business and end trading as an EI is fairly simple. It is done at the Portal do Empreendedor website and there are no fees or taxes payable.