Originally published in the April 15 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s Securities and Exchange Commission (Comissão de Valores Mobiliários, or CVM) and Accounting Standards Board (Comitê de Pronunciamentos Contábeis, or CPC) are expected to soon issue regulations on corporate accounting that should guarantee the tax neutrality of the provisions of Law 11,638/2007.
It has been more than three months since Law 11,638/2007, which amends several articles of the Corporations Act (Law 6,404/76), was published in the official gazette, and experts still cannot agree on the law’s tax implications.
The law introduces a set of complex requirements that change accounting rules and financial statements for Brazilian corporations and large companies not formed as corporations.
The Federal Revenue Department (FRD) has not yet made any official statement on its position concerning the tax implications of the new law, not even to say that the issue is under review.
That silence is making the accounting and tax communities anxious because of inquiries from their clients.
However, some relief may come in the near future, when the CVM and the CPC issue the regulations on corporate accounting.
A special auxiliary accounting book (LALUC), the creation of which is provided for in Law 11,638/2007, should assist in confirming the tax neutrality of the law. LALUC would act as a bridge between the new accounting rules and the existing tax accounting regulations issued by FRD to guarantee that no additional tax is paid by corporate taxpayers because of the new law.
But LALUC also concerns auditors, tax experts, and accountants, as there are no official Brazilian tax accounting rules on which LALUC can be expressly based.
Tax rules and regulations make reference to general accounting rules set forth by the Corporations Act.
It seems that the controversies and concerns will be solved only when the FRD finally issues its official position. Until then taxpayers, auditors, and accountants will continue to debate the tax impact, if any, of the new law.
David Roberto R. Soares da Silva