Reporting in the Brazilian ECF (Tax Accounting Bookkeeping) is Approaching
The Brazilian Tax Accounting Bookkeeping (ECF) for calendar year 2025 must be filed by July 31, 2026. This filing requires the disclosure of information under Brazil’s Worldwide Taxation Regime (TBU), which governs the taxation of results from foreign investees, both direct and indirect, in accordance with Law No. 12,973/2014.
What is the Worldwide Taxation Regime?
- Concept: Brazil’s Worldwide Taxation Regime requires Brazilian legal entities with ownership interests in foreign companies to recognize those entities’ results in their IRPJ (Corporate Income Tax) and CSLL (Social Contribution on Net Profit) tax bases.
- Documentation: In addition to including positive results in the annual tax calculation, detailed information about the foreign investee must be reported in Block X of the ECF. This includes balance sheets, income statements, active and passive income, accumulated losses, among others. The Brazilian entity must also maintain the financial statements of its subsidiary and proof of income taxes paid abroad.
- Individualized Tracking: Results must be calculated individually and recorded in subaccounts, proportionally to the direct or indirect ownership interest. These results must exclude income derived from companies controlled directly or indirectly by the Brazilian parent, meaning intercompany equity results must be eliminated.
- Losses: Losses incurred by the foreign investee may be offset against its own future positive results, provided they are properly tracked in the ECF (Block X and Part B).
- Consolidation: Results may be consolidated at the level of the Brazilian parent company, regardless of the corporate structure, when the investees:
(i) are located in jurisdictions without tax treaties or information exchange agreements;
(ii) are located in (or controlled by entities located in) low-tax jurisdictions or subject to privileged tax regimes;
(iii) have active income representing less than 80% of total income.
• Foreign Tax Credit: Income taxes paid abroad may be offset in Brazil against the results of the respective investee. In consolidation scenarios, results may be aggregated for offset purposes.
Drummond Advisors Support
The Drummond Advisors team is prepared to support your company at every stage:
• Organizing required documentation
• Performing calculations in accordance with Law No. 12,973/2014
• Preparing or reviewing ECF records
Contact us via our available chat or by email at info@drummondadvisors.com to ensure your company’s tax compliance is properly structured.
Written by Hanna Lauar, Senior Associate at Drummond Advisors