The main change introduced by Law 12,973 refers to the extinguishment of RTT and the introduction of a new set of rules aiming at aligning and adapting the tax rules to the current IFRS based accounting environment in Brazil. In summary, the taxable income will be based on accounting income calculated as per IFRS rules with several significant adjustments foreseen in Law 12,973.
Some important changes introduced to the tax law refer to:
- Goodwill deduction and step up in the tax basis of assets (tangibles and intangibles) derived from M&A transactions;
- Computation of Interest on net equity;
- Corporate restructuring (i.e. mergers, spin-offs, etc.);
- Controlled foreign corporation rules (“CFC Rules”);
- Tax basis (concept of gross revenue) of PIS/COFINS (Social Contribution Tax on Revenues);
- Financial and Operating Leasing;
- Public concessions and PPPs;
- Subsidy for investment and capex;
- Premium and gain in the issuance of bonds;
- Impairment tests;
- Fair value of assets and liabilities;
- Stock Options;
- Tax compliance obligations;
Law 12,973 is applicable primarily as of January, 2015. The taxpayers though have the option to elect the adoption of Law 12,973 as of January, 2014, but this option is still to be regulated by the Federal Revenue Services.
Changes introduced to the overall tax computation are quite significant and may cause relevant impacts to the business and transactions of companies and investors in Brazil. Accordingly, KPMG strongly advises companies and investors to assess the potential impacts the new set of rules may cause to their businesses, transactions etc., and how they will impact their tax computation and compliance processes. KPMG Tax team is well positioned and has the expertise and knowledge to provide you with the necessary assistance in the development of such proactive assessment of the tax impacts derived from Law 12,973.
For more information, please contact a tax professional with KPMG in Brazil: