ECF 2024: Rules for this year and requirements for companies carrying out foreign transactions

 

Companies carrying out foreign transactions must be mindful of specific requirements to comply with their ECF submissions

 

By Renata Goldoni

 

At this time of year, companies turn their attention to the submission of the Accounting Tax Bookkeeping – ECF 2024. This annual return is notably complex, as it requires detailed information about an entity's transactions throughout the year. 

For companies engaged in foreign market transactions, completing the form is especially challenging due to specific ECF requirements for reporting common scenarios in these legal entities, such as information on international transactions between related parties. The ECF is where operations involving a parent company and its subsidiaries must be documented.

 

 

As a result, businesses should adapt their accounting practices and internal controls to meet the procedures and details required by the Brazilian Revenue Service, ensuring compliance with tax regulations and the proper layout.

 

ECF 2024: deadline and entities required to file

 

Taxable entity	Due date*
All legal entities taxed on actual profit, deemed profit, or arbitrated profit, as well as those that have been granted tax immunity.	Submissions must be made by the last business day of July of the year following the reporting period. 2024 deadline: July 31.

 

*For certain situations including corporate spin-off, merger, incorporation, or dissolution that took place between January and April, the deadline is the last business day of July of the same year. If these events occur between May and December, the deadline is the last business day of the third month following the corresponding event.

 

ECF: points for consideration

 

The ECF is a tax return that consolidates accounting information from the Digital Accounting Bookkeeping (ECD), such as data pertaining to the calculation of the Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL), and details on related-party transactions. Essentially, the ECF ‘aggregates’ data already provided by the company when meeting other compliance requirements. 

This return is pivotal for validating the financial information of foreign companies operating in Brazil. It records data on financial statements, receipts and payments abroad through a detailed itemization of foreign exchange agreements to which the company is a party, as well as information on profits and losses related to the calculation of IRPJ and CSLL.

Multinational enterprises (MNE) must provide information on their global structure, business activities, profits, and taxes paid in each country where they operate, including Brazil.

Attention must also be given to shareholdings in companies based abroad.

 

International transactions

The ECF is used for reporting data from subsidiaries and details transactions carried out with the parent company or other international affiliates.

 

Transfer pricing

Transfer pricing must be calculated in compliance with Brazilian legislation to prevent adverse tax implications and penalties.

In the "Economic Information" block, detailed data must be entered for transactions between the parent company and its subsidiaries (e.g.: imports, exports, services provided etc.)

It should be noted that in January of this year, the ECF was adjusted to align with the new transfer pricing rules established by Law No. 14,596/2023.

 

Country-by-Country Report (CBC)

A Brazilian enterprise that operates as the ultimate parent company of a multinational group is required to file the Country-by-Country (CBC) report. This requirement must be fulfilled using the ECF, providing detailed information on the entity’s business activities, profits, and taxes paid in each country.

Keep in mind that the permanent establishments of these entities based in other tax jurisdictions are also considered constituent entities in MNE groups and must be reported in the CBC with reference to their domicile jurisdiction.

When completing their ECFs, companies should take the necessary precautions to ensure that:

• The calculation of IRPJ and CSLL accurately reflects the business’s operations, according to established controls and guidelines;
• The entries in Part A of the Taxable Income Journal (LALUR) are properly linked to the ECD and are consistent with the accounting entries;
• The Reference Chart of Accounts is accurately mapped to align with other data for calculation purposes (i.e., the information provided must match the data included in the entity’s audited financial statements);
• The report layout matches the latest ECF version, as determined by the Federal Revenue Service.

 

Reviewing information

Because the ECF gathers information from multiple sources, it is essential to review it thoroughly before transmission.

 

See also: ECD 2024: check out the deadline and rules for this year's submission

 

This review should be conducted using software that is set up and updated according to the latest version of the bookkeeping so that the numerous blocks comprising the ECF are accurately checked.

By identifying flaws, preventive action can be taken, and necessary adjustments made, ensuring a submission free of tax risks.

 

Expertise and technology

DPC has a specialized team dedicated to addressing any inconsistencies in the information provided to the tax authorities. 

In addition to offering routine support to its domestic and multinational clients, DPC also advises companies on a one-off basis. In these cases, our experts review the documents to be submitted or already submitted to the Federal Revenue Service, identifying any necessary corrections.

To benefit from our unique analytical approach and ensure that your ECF 2024 submission complies with the regulations, contact DPC: dpc@dpc.com.br.