The Brazilian Government has enacted Decree No. 9,422/2018, which introduced into Brazilian law the Agreement on Social Security between the United States and the Federative Republic of Brazil, originally signed on June 30, 2015.
The Agreement was enacted in late June 2018; its enforceability shall commence on October 1, 2018 and shall be applicable to (i) individuals currently or previously covered under US or Brazilian laws, and/or (ii) individuals who, under the laws of either contracting state, may derive rights by virtue of their relationship to an individual subject to the laws of the US or Brazil.
Pursuant to Section 5 of the Agreement, as a general rule an individual employed within the territory of one of the contracting states shall, with respect to that employment, be subject to the laws of only that contracting state. However, when a worker who is normally employed in the territory of one contracting state, by an employer located in that same jurisdiction, is sent to work in the territory of the other contracting state for a temporary period, such worker shall be subject to the laws of only the first contracting state, provided that the period of employment in the territory of the other contracting state is not expected to exceed five years.
In this sense, if a worker of a US-based company, originally domiciled in the US, is sent to Brazil to work, for a period not expected to exceed five years, such worker shall remain subject to the applicable laws of the US – defined in Section 2 of the Agreement as (i) Title II of the Social Security Act and regulations pertaining thereto, except sections 226, 226A and 228 of that title, and regulations pertaining to those sections; and (ii) Chapters 2 and 21 of the Internal Revenue Code of 1986 and regulations pertaining to those chapters.
On the other hand, if a worker of a Brazilian incorporated legal entity, originally domiciled in Brazil, is sent to the US to work, for a period not expected to exceed five years, such worker shall remain subject to the applicable laws of Brazil – defined in Article 2 of the Agreement as (i) the laws governing the General Regime of Social Security regarding old age, survivors and disability insurance programs; and (ii) the laws governing the military’s and the civil servants’ social security regimes regarding old age, survivors and disability insurance programs.
Please note that such rule also applies when an employer in the territory of a contracting state sends an employee to an affiliated company (as defined under the laws of the employer’s contracting state), in the territory of the other contracting state. In this case, the employer and the affiliated company shall be considered one and the same, provided that the employment would have been covered under the laws of the employer’s contracting state in the absence of this agreement.
Moreover, as provided in paragraph 4 of Section 5 of the agreement, an employee concluding a 5 (five) year exemption from a contracting state’s laws, shall only qualify for an additional exemption upon completing a 6 (six) month absence from such contracting state’s territory.
The agreement also provides on the entitlement to benefits under both the US and the Brazilian legislation, appeals of a determination made by a competent institution of one contracting state as well as confidentiality of exchanged personal data, including of the employer’s.
Finally, we highlight that Brazil has already entered into similar totalization agreements with Germany, Belgium, Canada, Cape Verde, Chile, France, Greece, Italy, Japan, Korea, Luxembourg, Portugal, Quebec and Spain. Brazil has also entered into Multilateral Totalization Agreement within the MERCOSUL (Argentina, Paraguay and Uruguay), and the Multilateral Ibero-American Social Security Convention (Argentina, Bolivia, Chile, El Salvador, Equador, Paraguay, Peru, Portugal, Spain and Uruguay).
FOR MORE INFORMATION PLEASE CONTACT THE AUTHOR
Renato Lopes da Rocha
PartnerSão PauloT: +55 11 3077-3593F: +55 21 3262 3011