Guide to m&a tax 2021

BRAZIL

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b. Tax Attributes
In general terms, tax losses and other tax attributes of a target company may be carried over.
Depending on how the transaction is structured, the buyer may be able to obtain a better tax result by acquiring the relevant shares, instead of acquiring the assets 
directly. This is because acquiring shares can result in the generation of goodwill (equal to acquisition price that is in excess of net worth and fair value of target’s 
assets) which can result in a tax deduction for corporate income tax purposes. The legislation establishes a set of rules to allow the tax amortisation of goodwill.
c. Tax Grouping
In Brazil, establishments or business units are generally treated as independent taxable entities for purposes of imposing indirect taxes. For corporate taxes and other 
financial purposes, each Brazilian legal entity (formed by its relevant establishments and business units) is considered on a stand-alone basis. Consolidated tax returns 
are not allowed in Brazil.
In addition, if the Brazilian entity has subsidiaries abroad, the Brazilian Controlled Foreign Corporation - CFC rules introduced by Law nº 12,973/2014 are applicable. 
This legislation provides for the consolidation (until 2022) of positive and negative adjustments derived from foreign subsidiaries, if certain conditions are met.
d. Tax Free Reorganisations
In general, tax free reorganisations are possible in Brazil when based on book values. However, the characterisation of reorganisations for Brazilian tax purposes is 
determined on a case-by-case basis, considering all the relevant facts and circumstances.
e. Purchase Agreement
There is no specific format for a share purchase agreement, other than the ordinary commercial conditions typically included in a share/asset sales agreement.
The purchase agreement cannot determine tax matters or result in any changes to the application of tax law. Any language that contradicts the applicable tax 
legislation will not be binding.