Law No. 12,973/14 – New rules on goodwill
Por Rodrigo Lara
Law No. 12,973/14 – a spinoff of Provisional Measure No. 627/13 (also known by the acronym MP 627/13) – recently brought deep changes to the rules on the amortization of the premium paid in case of acquisition of equity (goodwill) for tax purposes.
Due to strong criticism from the business sector regarding the rules laid down by MP 627/13 on goodwill, certain controversial topics have been changed or simply deleted from the original MP text.
Before, the appraisal report independently prepared to justify the calculation of the goodwill could be disregarded whenever “it was incorrect or was not worth believing.” The MP text in this regard was changed because it granted excessive authority to the Brazilian IRS. Now, that report can only be rejected if “it presents material defect or inaccuracy.”
Another provision that was deleted from the original MP text concerns the prohibition to amortize the goodwill in case of substitution of quotas or shares, i.e., when no money is actually paid for the acquired quotas or shares.
Moreover, Law No. 12,973/14 give companies two more years to adopt the rules on the calculation and amortization of goodwill, provided that the acquisition of shares takes place by the end of this year and the spin-off or merger occurs by 12/31/2017.