Rectification of ancillary obligations: when, how and why?

The rectification of ancillary obligations becomes imperative upon the identification of any failure in the provision of information

By Cristiano Gonçalves

When errors, inconsistencies, or omissions are found in ancillary statements that have already been submitted to tax authorities, it is usually necessary to rectify them.

While the submission of information to tax authorities should ideally prioritize compliance, the intricate nature of Brazil's tax system can sometimes lead taxpayers to inadvertent errors. In such cases, rectification emerges as the optimal course of action.

What is an ancillary obligation?

In accordance with Article 113, paragraphs 2 e 3 of the Brazilian Tax Code (CTN):

“Ancillary obligations arise from tax legislation and encompass the positive or negative services stipulated therein, serving the interests of tax collection or inspection.

The ancillary obligation, by the mere fact of its non-compliance, becomes a primary obligation with respect to pecuniary penalties”

These obligations involve documents containing fundamental information on a company’s operations, which must be submitted to the relevant authorities, on a monthly, quarterly, or annual basis.

Failure to comply with these obligations results in fines. For this reason, the CTN provision outlined above defines non-compliance as a primary obligation.

In essence, ancillary obligations serve as the mechanism through which tax authorities at each level—federal, state, and municipal—ascertain a taxpayer's tax liabilities and ensure compliance.

Companies are legally required to fulfill numerous ancillary obligations, each corresponding to the operations that give rise to their respective primary obligations (tax payment).

For instance, the Public Digital Bookkeeping System (Sped) comprises various reporting modules containing virtually all federal tax information. These modules include the Digital Tax Bookkeeping for Contributions (EFD Contribuições), the Digital Tax Bookkeeping (EFD ICMS IPI), and the Tax Accounting Bookkeeping (ECF).

Check out a list of important ancillary obligations here.

When should ancillary obligations be rectified?

If you find that a statement you have sent contains incorrect data or does not contain all the required information, you should rectify it as soon as possible in order to prevent potential fines.

The procedure for performing a voluntary rectification does not incur penalties; on the contrary, it prevents them. For all intents and purposes, "voluntary" means (i) that the rectification has not been requested by tax authorities; (ii) that the company is not undergoing tax proceedings related to the tax associated with the ancillary obligation, even if a tax audit has not identified the error or omission in the return.

In cases where a tax review indicates an overpayment of taxes, it becomes possible to apply for credit recovery. This procedure also involves rectifying the corresponding ancillary obligations so that an administrative request can be filed.

Further reading:

Tax review: how it works and what benefits it entails

Tax offsets and refunds: from tax review to PER/DCOMP

It is crucial for companies to regularly conduct tax reviews and take proactive measures when necessary to carry out corrections as accurately and efficiently as possible.

How to rectify an ancillary obligation?

To ensure the effectiveness of the correction, a few steps should be taken. Once an error has been identified, you should:

• Prepare the necessary supporting documentation to justify the corrections, including invoices, accounting documents etc.;
• Ensure that the new data is transmitted properly;
• Monitor the progress of the rectification until all required actions have been completed.

Attention should also be given to cases where other related obligations are required. For instance, when rectifying information on EFD-Reinf events that have already been submitted, the corresponding DCTFWeb must also undergo rectification.

Support for tax management

The specialized team at Domingues e Pinho Contadores provides clients with comprehensive solutions for the tax management of their businesses. From preparing ancillary obligations, through making submissions and rectifications, all the way to performing tax reviews and filing applications for credit recovery, you can rely on our support: dpc@dpc.com.br.