Answer ... Brazilian indirect taxes are levied at different federative levels. At the federal level, a corporate taxpayer may be subject to:
- contribution to the Social Integration Programme (PIS);
- contribution to the Social Investment Fund (COFINS);
- import tax;
- export tax; and
- federal excise tax (IPI).
At the state level, the taxpayer may be subject to value added tax on goods and services.
At the municipal level, the taxpayer may be subject to service tax.
Answer ... In case of a direct share acquisition, none of the Brazilian transactional taxes apply (eg, ICMS, IPI, PIS/COFINS, real estate transfer tax). However, the acquisition of shares may trigger income tax on any capital gain at a combined rate of 34%. If the capital gain is registered by an individual resident in Brazil or a foreigner, the tax rate will range from 15% to 22.5%.
Due to this difference in tax rates, sellers commonly reorganise the corporate structure of the target pre-closing, to ensure that individuals are the entities selling the shares, rather than a holding company.