By Ed Taylor (Bloomberg BNA – International Tax Monitor)
A Brazilian tax appeals court has upheld a major tax assessment against brewery giant AmBev, rejecting a goodwill amortization claimed by the company.
In its May 16 ruling, an administrative court of the revenue service’s Administrative Council of Fiscal Appeals (Carf) overturned a second, smaller assessment against AmBev, according to the online judicial service Jota. The ruling hasn’t yet been published by the court.
The case resulted from the 2004 merger of AmBev with Belgium’s Interbrew GmbH and the resulting incorporation by the new company of InBev Holding Brasil. In 2011, the revenue service rejected AmBev’s goodwill amortization from the merger that claimed a deductible expense on the calculation of Brazil’s corporate income tax and the social contribution tax on net profits.
In addition, tax officials applied a 150 percent fine, claiming the operation, which occurred outside of Brazil, was fraudulent and designed merely to escape Brazilian taxation.
Second Claim
The revenue service also rejected a second goodwill claim related to a public offering in Brazil of shares in InBev. The total amortization claimed by AmBev for these two operations was $2.3 billion, according to Jota, with $1.9 billion resulting from the Belgium operation and $400 million from the Brazil public offering.
In its May 16 decision, the Carf court upheld both the tax assessment and the fine on the operation conducted in Belgium but rejected the assessment on the sale of shares in Brazil.
“In this case, the heavy fine was maintained based on the argument that the goodwill claim was registered abroad and the company manipulated its societal structure to bring this into Brazil,” attorney Daniela Cristina Ismael Floriano of the law firm Rayes & Fagundes told Bloomberg Tax May 21.
Though the court’s ruling maintained the larger assessment, without the text of its decision, the Jota site said it couldn’t estimate the final value. AmBev, a division of Anheuser-Busch InBev NV, declined to comment on the ruling, saying it doesn’t discuss court cases.
Floriano said both sides can now appeal the court’s decision to the superior Carf court. She added that it is likely AmBev will file an appeal based on a superior court ruling in January in favor of the Brazil unit of Johnson & Johnson in a similar goodwill amortization case. Johnson & Johnson also faced a 150 percent fine, which was thrown out by the court.
“What we can expect for the AmBev case is that the Superior court, which is supposed to unify its positions, will maintain the same position it took in the Johnson case,” she said.
