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14.1. Books and Records

Books and records, as well as all supporting documentation for a tax return,  should be kept for a period of at least five years.

A Public System of Digital Bookkeeping ( Sistema Público de Escrituração Digital, or SPED) has been introduced. This is a unified electronic storage of accounting and tax bookkeeping. It is intended to replace bookkeeping prepared on paper and to unify the preparation, storage, and certification requirements of the Board of Trade and of the tax authorities at the municipal, state and federal levels. Most companies are now required to comply with the SPED.

Law 11,638/07 introduced changes to the Brazilian Corporate Law (Law 6,404/76) with respect to the preparation of financial statements for corporations as well as for large companies, regardless of whether they are organized as corporations. This law represents a major step in the process of harmonization of Brazilian GAAP with IFRS. Under this law, which took effect on 1 January 2008, large companies must prepare their financial statements under new Brazilian GAAP, which is consistent with IFRS principles.

This harmonization process is not intended to generate any tax consequences in Brazil. Consequently, the Brazilian IRS has issued guidance on achieving tax neutrality under a so-called transitional tax regime (RTT).

Pursuant to the RTT, all accounting changes related to the introduction of IFRS in Brazil are neutral for tax purposes if these changes created a different methodology or criteria for the recognition of revenue, costs and expenses. New legislation ending the RTT and regulating which IFRS methodologies are to remain neutral for tax purposes is expected to be enacted in the near future..