Keywords: Brazilian Federal Revenue, Transition Tax Regime, RTT, tax treatment, accounting rules
On 11/13/2013, Provisional Measure No. 627/2013, enacted by the Brazilian Federal Revenue, which repeals the Transition Tax Regime ("RTT") was republished in the Official Gazette.
This measure establishes the tax treatment to be imposed on the new Brazilian accounting rules, introduced by Laws 11,638/2007 and 11,941/2008, whose main goal was to integrate the BRGAAP with the international accounting rules (IFRS).
Long-awaited by taxpayers, the measure brings modifications to the ascertainment of Corporate Income Taxes (IRPJ and CSLL) in cases of goodwill on the acquisition of shareholdings in subsidiaries or associates, and treatment of goodwill on merger and acquisition operations. Among the changes made in the treatment of goodwill, it is worth highlighting the difference between the goodwill, surplus value and capital loss on a disposal of assets, and the gains from advantageous purchases. However, the possibility of amortizing the goodwill paid on the purchase of investments for tax purposes, with the observation of a minimum five-year term, was maintained, subject to new rules and requirements, which differ from those previously published in the sense that taxpayers may not deduct the goodwill from the calculation basis of income tax and social contribution as of the edition of new rules on the subject.
Among the modifications on ascertainment of Corporate Income Taxes (IRPJ and CSLL), are the adjustment to the fair valuation in the investee;adjustment to present value; pre-operating or pre-industrial expenses and commercial leasing.
In accordance with the Provisional Measure, the taxpayer may choose to adopt the new rules for the calendar year 2014. However, for the calendar year 2015, the application of the rules will be mandatory, it no longer being possible to adopt the RTT.
Furthermore, the introduction of the Special Installment Regime, for the payment of IRPJ and CSLL liabilities should be noted, with reduction of fines and interest and the possibility of offsetting tax losses, the profits accrued by subsidiaries and affiliates located abroad and not taxed in Brazil, as well as PIS/PASEP and COFINS liabilities, due from financial institutions and insurance companiesby December 31, 2012.
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