• Service: Tax, Mergers & Acquisitions, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/29/2014

Brazil - Tax accounting rules aligned with IFRS 

May 29:  With recent steps that finalize the enactment of a law in Brazil, tax accounting rules are aligned with IFRS-based accounting rules.

Law 12,973 was published in Brazil’s official gazette (14 May 12014) and with that action, Provisional Measure 627/2013 is converted into law. The “transitory tax regime” is also repealed.


In November 2013, Provisional Measure (MP) 627/2013 was issued, in order to repeal the transition tax regime method and to establish new tax rules that would align Brazil’s tax accounting rules with the current IFRS-based accounting environment.

Read TaxNewsFlash-Americas.

In Brazil, a provisional measure (Medida Provisória) is an “act” issued by the president, with the authority of law until later approved by Congress. The provisional measure is effective as from its date of publication for 60 days, and may be extended for an additional 60-day period (for a total of 120 days).

Law 12,973

Law 12,973 enacts a new set of rules that align tax accounting to IFRS rules. In general, taxable income will be based on accounting income calculated under the IFRS rules—but with several significant adjustments.

Some changes introduced to the tax law concern:

  • Goodwill and a step-up in the tax basis of assets (tangible and intangible) from M&A transactions
  • Computation of interest on net equity
  • Corporate restructuring (i.e., mergers, spin-offs, etc.)
  • Controlled foreign corporation rules
  • Tax basis (concept of gross revenue) of PIS/COFINS (social contribution tax on revenues)
  • Financial and operating leasing
  • Subsidy for investments
  • Premium and gain in the issuance of bonds
  • Impairment tests
  • Fair value of assets and liabilities
  • Stock options
  • Tax compliance obligations

Effective date

Law 12,973 is generally effective 1 January, 2015. However, taxpayers may elect to apply the rules of Law 12,973 as of January 2014 (if the election is approved by the federal tax authority).

Read a May 2014 report prepared by the KPMG member firm in Brazil: Tax News: Provisional Measure 627 converted into Law

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