Guide to m&a tax 2021

a. General Comments
As mentioned previously, the sale of assets may generate a taxable capital gain to the seller in Brazil equal to the excess in Brazilian currency of the sales price in 
relation to the acquisition cost (or basis) of the assets held by the seller. The gain is subject to corporate income taxes with the corresponding combined nominal rate 
of 34%, for a seller that is a Brazilian legal entity.
If the capital gain is realised by a foreign investor (i.e the seller is a non-resident), or by a Brazilian resident individual seller, it is subject to income tax at progressive 
rates of 15% up to 22.5%, and would be collected as a withholding tax.
It is also important to note that where an investor acquires assets in Brazil which constitute a trade or business, and continues to operate such business 
following the acquisition, then the acquiror could be liable for potential tax contingencies related to the business / assets being acquired.
TAXAND GLOBAL GUIDE TO M&A TAX 2021
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BRAZIL

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b. Purchase Price Allocation
For tax purposes, the Purchase Price Allocation (“PPA”) is important because it determines the breakdown of the purchase price on the financial books, which directly 
impacts the CIT basis.
It is generally accepted for tax purposes that the PPA is determined in accordance with the purchase agreement and accounting regulations that are in line with the 
IFRS rules. The PPA would provide the portion of the purchase price that is classified as “goodwill”, subject to amortisation, which in most cases result in additional 
deductions for CIT purposes. As a condition for the tax deduction of the goodwill, a PPA report must be prepared by an independent expert and filed with the 
Brazilian Federal Revenue Service or the Registry of Deeds and Documents within 13 months. Realisation of the investment (via a merger, for example) is also a 
requirement to allow tax amortisation.