In December 2013 the Brazilian authorities published amendments to the submission of the Declaration of Economic and Fiscal Information (DIPJ), which is to be replaced by the Tax Accounting Return (ECF, by its acronym in Portuguese).
What is the ECF?
The ECF is a new obligation for legal entities resident in Brazil. On December 20, 2013, the Brazilian Federal Revenue (RFB) published Normative Instruction (IN) No. 1422/2013 which created the Tax Accounting Return (ECF). The new rules govern the accounting changes necessary to calculate the bases for Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL).
Why is this changing?
In accordance with Normative Instruction RFB No. 1422/2013, all legal entities and similar organizations must submit the ECF on a centralized basis, through their head offices.
This extends the oversight of the tax authorities in respect of taxpayers’ procedures, provides better control and avoids potential tax frauds. With this new return, and in order to eliminate duplication and to avoid an increase in the time spent on ancillary obligations, the normative instruction does away with the need to register the Real Income Calculation Journal (LALUR) and to submit the Declaration of Economic and Fiscal Information for Legal Entities (DIPJ).
Who does the ECF apply to?
It applies to all taxpayers, irrespective of how IRPJ and CSLL are calculated – real or deemed income – and they must change to the ECF for all accounting events as from January 1, 2014, with the exception of taxpayers under the Simples National regime, inactive companies, public bodies, government agencies and public foundations.
What do taxpayers need to do?
The taxpayer must list in the ECF all the transactions involved in calculating the base for IRPJ and CSLL.
The ECF must be signed digitally, using a valid digital certificate. If an entity ceases to exist, or is subject to partial or total spin-off, merger or takeover, they (and the company exercising the takeover, if appropriate) must submit the ECF up to the last business day of the month after the event.
When will these new requirements come into effect?
The ECF is to be submitted annually, in the layout approved by the tax authorities (currently, this is Executive Declaratory Act COFIS No. 20/2015). Unlike the DIPJ, which had to be submitted by June 30, the ECF for calendar year 2014 must be submitted by September 30, 2015 at 11:59:59 p.m. (i.e. before midnight) Brasília time. It is important to note that the submission deadline for the ECD (Digital Accounting Return) for calendar year 2014 is unchanged, i.e. it is June 30, 2015 at 11:59:59 p.m. (before midnight) Brasília time.
Failure to submit the ECF, or submitting it incorrect or incomplete, will subject the taxpayer to the penalties provided for in Article 57 of Provisional Measure No. 2158-25/2001, and in Article 8-A of Decree Law No. 1598, of December 26, 1977, which, depending on the type of violation and the taxpayer’s tax regime, can range from R$500 per calendar month to a fine of three percent (3%) of the value of the transaction omitted or incorrectly declared.
How can TMF Group Brazil help?
The ECF filling requires significant changes in the current accounting and tax processing systems, and in procedures and deadlines. TMF Group Brazil already developed and implemented these changes and is ready to help you be in compliance with this new legal requirement.