The Ministry of Finance has decided to change the terms on Brazilian multinationals that have been fined for not paying taxes related to their affiliates and subsidiaries abroad. In addition to forgiving penalties and interest of those who agree to pay the debt in cash, the government will also allow companies to use accumulated tax losses on their balance sheets as a way to repay their debt with the Union.
In a meeting with the economic team last week, it was agreed that 30% of the amount due may be offset by companies. The tax credit will be deducted from the amount due after already discounted penalties and interest. Only the remaining balance will be settled in cash.
In a meeting with the economic team last week, it was agreed that 30% of the amount due may be offset by companies. The tax credit will be deducted from the amount due after already discounted penalties and interest. Only the remaining balance will be settled in cash.
The new benefit will have significant impact for companies and their market value. Instead of using funds from their cash, companies may pay part of their debts with credits.
It is estimated that the tax dispute already amounts to R$70 billion. By reducing charges, the government calculates it has R$25 billion to receive from Brazilian companies that operate abroad. The portion in cash, however, will be reduced in proportion to losses that companies use to cut their debts.
Source: Valor International
