Frequent Asked Questions

SPED BLOCK K – PART I

SAP-Q

With so many questions to be answered, and different sources of information (contributor guide, tax experts forums, company’s experts understanding), I decided to compile a list of the most Frequent Asked Questions.

Some of those questions may be duplicated, sorry about that, and if you see any mistake, I want remind you that sometimes the requirement is not that clear and the company has a different interpretation).

1) Who is required to present the block K when reporting the SPED EFD?

The requirement applies to industrial establishments or assimilated (equivalent) by federal law and wholesalers, and may, at the discretion of the tax authorities, be required by taxpayer’s establishments in other industries.

As a rule, companies required to report Block K must comply with art. 4o. of IPI Regulation: companies that performs the transformation of raw materials, processing, assembling, packaging or repackaging, refurbishment or reconditioning. Companies that fits the art. 5 of the IPI Regulation do not report the Block K, because they are not considered industrial establishments.

2) Is the PVA (Government validation program) available with the Block K registers?

Yes, since the version PVA 2.1.0. The PVA will allow fulfilling the Block K only after January 1st, 2016.

3) Block H (Inventory) will still need to be reported once the Block K starts?

Yes, the Block H and their rules will not change.

4) How will Production Order confirmation posting need to be performed? Individual? Grouped? How will those production confirmation postings be handled in the Block K?

All components withdraw must necessarily be related to their respective production orders, assigning their consumption to each product manufactured. This component withdraw must be between start date of the Production Order and the date of completion. It can’t be done grouping the Production Orders since there is no trace-ability of consumption with the products produced.

5) How to report a Production Order when part of the process is done using own manufacturing and part of the process is done by 3rd partner’s manufacturing?

Block K layout requires having an intermediate product to the 3rd partner’s industrialization returns, then the Production Orders must be different to internal and external manufacturing.

6) Packaging material, shrink and label material should be part of the product’s Bill of material? How will they be reported in the block K?

Yes, all components used in a product’s manufacturing, including packaging, labels and etc, should be reported in the SPED. Those inputs will be reported as production confirmation posting in the production order.

7) How will Kit information be reported? It is required to have a new Production Order to them?

A kit product doesn’t need to be structured in a production order to report the components consumed by it. The information generation the block K structure comes from those products Sales Nota Fiscal, these products will be designated as products produced in the period, linked to the Sales NF number which is to the block K a production document. Since the components consumed in this production will be made by the outgoing stock movements linked to the Kit item in the Nota Fiscal, that will consider to the block K as if it were a production confirmation posting.

8) How BOM adjustments will have to be handled?

The BOM valid to present in the Block K is the active BOM to the tax appraisal period reported. The BOM can’t change while there is a Production Order to the BOM. If there are changes in the production, the production orders created before the change, but within the same period, the replacement of components must be indicated when that occurs. If changes occur only in quantity, there is no need to display these substitutions.

9) How products listed in the Bill of Material that is set to not withdraw with the Production orders is handled in the Production Order?

Components that are not listed in the production order movements will be in the block K by their quantities indicated in the total component movement, and this amount will be apportioned as the standard consumption indicated in the BOM of the products produced.

10) What is considered internal movements to the K220 register?

The internal movements to report in the register K220 are all movements not reported in the register K230 and K235.

11) What are other examples of internal movements to report in register K220?

Reassignment of a product in another material number/SKU due to the customer destination: A given product’s production order confirmation is posted to product ABC. This product when assigned to customer XYZ gets another Material Number “CBA”. In this situation it is required to control the inventory by customer. Then the company will have to report the K220 with the output of product ABC and Receipt of CBA.

Reassignment of a product due to Quality Inspection:The company post the quantity produced of a product, for example, material number 1234. This product has part of the production rejected by quality control. The product that does not comply will have another material number, for example, 4321. In the register K220 the company will record the output in the stock of the product 1234 and receipt of the stock of the product 4321. Thereafter the product 4321, nonconforming, can be consumed in the production process, can be sold as defective product or Sub-product, etc.

12) Can the internal movements reported in K220 result in a new item?

Yes, like in the reassignment of a product to another material number due to the quality control.

13) Is there a limit to report the difference between Standardized Consumption Specific (0210) and the real consumed quantity (K235)? Is this difference analysis by Production Order or Period?

It is up to the contributor informing the standardized specific consumption (0210). To the differences allowed between the actual specific consumption and standardized consumption specific and the method (by Production Order or reported period), are methods of tax audit that fit only to the tax authorities.

14) It is necessary to report a Bill of Material (all inputs and quantity required) in register 0210?

This register refers to the expected consumption to manufacture a product (finished or in process) that is listed in the 0200 register.

15) In the industrialization process (manufacturing by 3rd partners), should the 3rd partner’s bill of material be reported in the 0210?

No, only components and inputs that belongs to the taxpayer.

16) Loss of products or inputs due to obsolesce or stolen should be reported in register K220?

No, those lost stocks should be reported on Block C via Nota Fiscal posting.

17) Loss of products or inputs due to loss in production and product losses over per claim should be recorded in the K220 register?

No, those kind of losses are reported in the Register C via Nota Fiscal Posting

18) What to do if the company is using inputs that are not in the BOM?

The consumption of inputs and raw material (K235) that are not in 0210 should be reported as substituted input identifying the input that was substituted (K235)

19) The Bill of Material will be reported complete to meet the legal requirements; however one product can’t have the components listed due to industrial secrets. How to deal with this situation?

To tax law purposes, it is not applicable any exclusion or restrictive legal provisions on the right of tax authorities to examine goods, tax books, files, documents, papers and commercial or tax purposes of traders, industries or producers, or the obligation of these displaying them, pursuant to art. 195 of the CTN – Law 5.172 / 66. The standard composition of the resulting product (0210) or the actual composition (K235) refers to a physical and not chemical composition (formula), much less the technology used in the industrial process. Therefore, it is not the claim of industrial secret.

20) To manufacture a finished product we have many bill of materials, how should it be reported in the register 0210 since the PVA allows only one BOM per product?

The Standard Consumption Specific of the inputs/components of a resulting product (0210) should be unique. Alternative BOMs must be handles as inputs/substitute components when effectively consumed (K235/K255), reporting the input/component that was substituted and it was going to be used in the 0210.

21) The company is industry equivalent as it imports part of the stock. Due to that should we report in the block K only the Stock Bookkeeping? The stock to be informed should be only of what was imported, which characterized the company as an industry?

Companies that are industry equivalent or wholesaler should report the stock bookkeeping (K200) and if internal movements occurs (K220). Considering that the SPED Contributor Guide in the register K200 defines that has to be reported the stock bookkeeping of products type 00 (Resale Goods) among others, the company industry equivalent and wholesaler should report ALL products type 00.

22) How to report in register K230 the Production Orders partially completed? Should be created 2 registers, one to the finished and other to the in process production? For example, to a given product it was planned to manufacture 500 pieces, however in the end of the month, only 400 were completed.

No. In this situation only one register K230 will exist with the Production Order Completion date (Field 03 DT_FIN_OP in register K230) in blank, with finished quantity of 400 pieces since the production order was not finished until the end of tax recording period.

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