DIRF 2024: last submission requires attention from employers

Tax return is set to be discontinued but submissions must still be made this year

The days of the Withholding Income Tax Return (DIRF) will soon come to an end, with its discontinuation set for 2025. The Federal Revenue Service has been implementing normative changes aimed at gradually replacing this obligation. Since January 2024, information related to it has been required to be reported monthly through the Digital Bookkeeping System for Tax, Social Security, and Labor Obligations (eSocial) and the Digital Tax Bookkeeping of Tax Withholding and Other Information (EFD-Reinf).

However, the report pertaining to the calendar year 2023 must still be filed, and this submission is due by February 29.

Therefore, the situation demands careful attention from employers, who should not only plan ahead for the final DIRF submission but are now also required to file this year's information on a monthly basis.

Below are a few key points to learn more about this tax report and its replacement:

Who is required to file the DIRF?

According to the regulations issued by the Brazilian Federal Revenue Service, the DIRF must be submitted by individuals or companies that have paid earnings subject to Income Tax Withholding (IRRF), including salaries, fees, and commissions. Therefore, employers and those responsible for making payments to workers must file the tax report, even if retentions were recorded in a single month of the corresponding year.

In addition, certain taxpayers are also legally mandated to comply with this requirement, even if they did not withhold taxes in 2023. This includes general partners in Limited Partnerships (SCP) and taxpayers residing in Brazil who have transferred funds to individuals or entities abroad, on account of payments such as rent or leases, for instance.

What information must be included?

Companies must provide information pertaining to the calendar year 2023 on all earnings paid to employees, contractors, and beneficiaries based in Brazil, including those not subject to tax withholding.

Other details must also be included, such as payments made to group health plans, withholding tax offsets, as well as exempt and non-taxable income, such as pensions, per diem payments, profit sharing, and dividends.

Due date

The general deadline for filing the DIRF is 11:59 p.m. on February 29, 2024. However, companies disestablished in January 2024 due to liquidation, incorporation, merger, or spin-off are required to make the corresponding submission by the last working day of March of the same calendar year.

Fines for non-compliance

Individuals or entities failing to submit the DIRF or submitting it past the deadline will be subject to a fine of 2% per calendar month or fraction thereof. This penalty is applied to the total taxes and contributions reported in the document, even if they have been fully paid, and can reach up to 20% of the total amount.

The minimum penalty is BRL 200.00 for individuals, inactive companies, and entities operating under the Simplified Tax Scheme (Simples Nacional). For all other cases, the minimum fine is BRL 500.00.

How does the provision of information change with the end of the DIRF?

Information about taxable events occurring as of January 1, 2024, must be reported through the eSocial and the EFD-Reinf, both of which are monthly obligations.

The eSocial will be utilized to report information regarding the payment of salaries and wages, including tax retentions on such payments, as well as exemptions and deductions. Conversely, the EFD-Reinf will be used to report income tax withholdings on services rendered, social contributions withheld at source (PIS, Cofins, and CSLL), and other payments, such as rents, pensions, and profit sharing.

Compliance with reporting requirements

DPC has a team dedicated to assisting its clients in the fulfillment of ancillary obligations, ensuring full compliance. Reach out to us at: dpc@dpc.com.br.