The Brazilian Federal Revenue Service (RFB) recently issued notices to more than 3,000 companies, urging them to regularise discrepancies relating to PIS and Cofins contributions for 2021. These notices were sent both by post and through the e-CAC Portal, detailing discrepancies between the amounts reported in the Digital Tax Bookkeeping (EFD) - Contributions and in the Declaration of Federal Tax Debts and Credits (DCTF). Companies have until 30 November to correct these pending issues, avoiding the so-called "ex-officio assessment", which implies fines and interest on the amounts owed.

Understanding the Divergences: What Are PIS and Cofins and Why Are They Important?

PIS (Social Integration Programme) and Cofins (Contribution to Social Security Financing) are essential taxes that finance social security in Brazil, covering areas such as health, social security and social assistance. Brazilian companies are obliged to regularly report these amounts to the Receita Federal, and divergences occur when there are inconsistencies in the amounts reported between the EFD-Contribuições, which details the monthly calculation of contributions, and the DCTF, which reports total tax debts.

Common causes of disagreement

Divergences between PIS and Cofins declarations are generally attributed to three main factors:

1. Operational errorsSmall errors in calculations, typing or failure to update accounting systems are common causes of discrepancies.
2. Outdated legislation: Brazilian legislation is complex and undergoes frequent changes, requiring companies to be constantly up-to-date to avoid errors in calculation.
3. Systems Integration FailuresThe lack of synchronisation between companies' accounting and tax systems can result in inconsistencies in the amounts reported.

Regularisation and Official Release: How Does It Work?

If companies fail to regularise by the deadline, they may be subject to an ex-officio assessment, a process in which the IRS collects the amounts owed directly. This involves a fine of 75% on the amount owed, which can be increased to up to 225% in the event of proven fraud or tax evasion. In addition, companies with outstanding tax debts can face restrictions on taking part in tenders and difficulties in accessing credit lines.

Importance of Tax Compliance for Companies

Tax compliance is an essential factor for any company wishing to remain competitive and sustainable in the market. Failure to fulfil tax obligations can not only result in high costs, but also damage the company's image in the eyes of investors and clients. Companies in regulated sectors, in particular, need to ensure compliance as part of their risk management strategy.

How does the Revenue identify inconsistencies?

The Federal Revenue Service uses advanced technologies such as big data and artificial intelligence to automatically cross-check data between different tax returns. This system makes it easier to identify inconsistencies between EFD-Contribuições and DCTF, allowing for more effective and accurate inspection.

How TWS Consultancy Can Help

TWS Consultoria offers comprehensive support for companies seeking to regularise their PIS and Cofins contributions. See how our services can help your company:

• Tax Compliance DiagnosisWe review your company's tax obligations, identifying and correcting inconsistencies before they become major problems.
• Guidance for Self-RegulationOur team helps you respond to notifications and adopt effective practices to ensure regularity.
• Tax Risk PreventionWith our guidance, your company can correct discrepancies before the deadline, avoiding fines and other penalties.
• Training and updatingWe offer training so that your company's team is always up to date with tax legislation.

Good Practices to Avoid Future PIS and Cofins Divergences

To maintain constant compliance, companies must adopt the following practices:

1. Monitoring legislation: Monitor changes in tax rules and update systems as necessary.
2. Process AutomationImplement software that integrates information between different tax returns, reducing the margin of error.
3. Regular Internal Audits: Regularly check tax information to identify possible problems before they are notified by the tax authorities.

Consequences of Not Regularising Pending Payments

The consequences of ignoring notices from the IRS include:

• High fines: The ex-officio launch includes fines of up to 75%, and up to 225% in serious cases.
• Interest and Monetary CorrectionThe amount owed is updated at the Selic rate, increasing with the length of default.
• Restriction of Negative CertificatesCompanies with outstanding debts lose access to regularity certificates, which affects their ability to take part in tenders and obtain credit.
• Risk of Tax AuditsCompanies with a history of inconsistencies could be the target of stricter inspections in the future.
• Impact on Reputation: Tax compliance is crucial for a company's credibility on the market.

Most Impacted Sectors

Some sectors are more likely to face divergences due to the complexity of their operations:

• Retail and Wholesale
• Industry and Manufacturing
• Service Sector
• Construction and Infrastructure
• Finance and Banking

Main errors that cause divergences

Among the most common errors are incorrect calculation of credits, misalignment between EFD-Contributions and DCTF, errors in recording sales and purchases, inadequate classification of products and failures in system updates.

Conclusion

The call for self-regularisation is an opportunity for companies to correct their pending issues without facing severe penalties. TWS Consultoria is ready to assist your company in this process, ensuring tax compliance and strengthening your position in the market. Contact us to find out more about how we can help.