Fixed Asset ICMS Control to be integrated in the Public Digital Bookkeeping System (SPED)

Number 2, 2010

As from 2008 many companies are required to have a Public Digital Bookkeeping System (SPED). Through this system the tax authorities have access to companies’ digital bookkeeping. As from January 2011 (current target date) it will also be required to integrate the Fixed Asset ICMS Control (CIAP) in SPED.

CIAP is a document suitable to control the calculation of a company’s ICMS credit when purchasing fixed assets (and that is eligible for recovery based on Brazilian regulations). CIAP is currently already applied by companies. However, its content is currently only available to the tax authorities in so far it concerns audit procedures. As from July 2011 its content will be part of the SPED archives, and should therefore be made available to the authorities on a regular basis. The tax authorities may consult the CIAP content electronically, without the need to physically be at a company’s premises.

The inclusion of CIAP in the structure of the fiscal SPED undoubtedly will facilitate the cross checking of the ICMS credit calculated on the values of purchase invoices for goods, and with a company’s accounting records. As a consequence, the State Tax Administration will be able to identify any inconsistencies and irregularities accurately and quickly. Therefore, we recommend our clients to be increasingly cautious and careful with transactions involving fixed assets. In this sense, the following processes are deemed to be reviewed more carefully:

1. Registration of fixed assets;
2. Determination of ICMS eligible for recovery (a distinction should be made between productive and administrative fixed assets);
3. Control of assets disposed / downloaded;
4. Calculating the portion of the monthly credit, considering the proportion of taxed output in the relevant month, etc.

Especially note that all these files should contain the history of acquisitions over the last four years.

This new requirement should not be viewed only as a risk or compliance burden. As it will be required to transcribe the information from former CIAP to an electronic format, companies can take this opportunity to map and review their end-to-end ICMS administrational processes.

Mapping and reviewing the end-to-end ICMS administration significantly improves a company’s ability to control their tax risks. During the process potential tax opportunities may even be identified, such as retroactive recovery of ICMS credits (i.e. on acquisitions that are no longer considered in the past and therefore enable recovery). Moreover, it may improve business efficiency.

Concluding, due to the required integration of CIAP into SPED, companies should pay close attention to their ICMS administration. The necessity of integrating CIAP into SPED creates an opportunity for companies to map and review their end-to-end ICMS administration processes by which they can better anticipate and prevent tax risks, and potentially also identify tax opportunities that would otherwise have not been identified.

For further information, please contact our team:

Indirect Tax & Customs

KPMG no Brasil