Guide to m&a tax 2021

BRAZIL

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g. Transfer Taxes, VAT
Assets deals can be taxed for VAT purposes in Brazil and the recovery of relevant VAT can occur, depending on the applicable legislation, as well as on the relevant 
facts and circumstances.
VAT taxes can be applied at Federal or State level. At Federal level, PIS and Cofins would be applied, depending on the nature of asset that is being sold (for example, 
these contributions are not applied on the sale of fixed assets and intangibles).
The IPI is applicable on the transfer/sale of products manufactured or imported by the seller. The IPI paid is creditable by the purchaser.
At State level, the ICMS is also applicable on the transfer/sale of products, and the tax paid would become a credit to the purchaser.
If the transaction includes the sale of real estate, at the municipal level, the transaction would be subject to ITBI, and the buyer would be responsible for paying the tax 
to the Municipality.
h. Asset Purchase Advantages
Advantages of an asset acquisition include:
• 
The acquiror usually obtains a step-up in the book value of the assets;
• 
If the acquired assets constitute a going concern or establishment, the acquiror may benefit from the use of tax credits and certain other tax attributes, especially 
those associated with indirect taxes, such as IPI and ICMS;
i. 
Asset Purchase Disadvantages
Disadvantages of an asset acquisition include:
• 
Asset acquisitions tend to result in more burdensome taxation when compared to a share deal (especially regarding Brazilian indirect taxes – IPI, ICMS, PIS, Cofins 
and ITBI);
• 
Asset acquisitions may prevent the buyer from acquiring the target’s tax losses and other tax attributes;
• 
Depending on the assets or businesses being acquired, new registrations for tax, labor and other regulatory purposes may be required;
• 
If the assets being transferred constitute a going concern or establishment, potential tax, legal and labour contingencies related to such asset are normally 
transmitted to the acquiror.
5. ACQUISITION VEHICLES