BRAZIL Law and Practice Contributed by: Caio Ferreira Silva, Thiago Braga Junqueira, Vinícius Pimenta Seixas and Rodrigo Vieira, Pinheiro Neto Advogados
replacement of five taxes by two new value-add- ed taxes within a seven-year transition period: • the Tax on Goods and Services ( Imposto sobre Bens e Serviços , or IBS); and • the Contribution on Goods and Services ( Contribuição sobre Bens e Serviços , or CBS). The current taxes on consumption that will be replaced by IBS and CBS are: • the Tax on Distribution of Goods and Services ( Imposto sobre Circulação de Mercadorias e Serviços , or ICMS); • the Tax on Services ( Imposto Sobre Serviços , or ISS); • the Tax on Industrialised Products ( Imposto sobre Produtos Industrializados, or IPI); • the Social Integration Program (PIS); and • the Contribution for the Financing of Social Security (COFINS). Taxpayers will be entitled to financial tax credits on all acquisitions, and the new taxes (IBS and CBS) will be levied in favour of the municipal- ity where the buyer is located. Constitutional Amendment No 132 also allows the imposition of a selective tax on goods and services that are harmful to health and/or the environment, such as alcohol, smoking items, petrol fuelled vehicles, etc. On 16 January 2025, Congress enacted Supplementary Law No 214/25, pro- viding general standards for the imposition of IBS and CBS, including the circumstances of incidence and calculation bases for these taxes. The revenue earned from services qualified as “financial services” by Supplementary Law No 214/25 (such as credit transactions, foreign exchange and securities) will be subject to the specific regime of financial services, which has its own tax base, with certain deductions (eg,
financial expenses related to financing, foreign exchange expenses, and losses from transac- tions with securities). In certain cases, taxpayers subject to the regu- lar regime who contract financial services may benefit from IBS and CBS credits. In the case of credit transactions contracted by taxpayers under the regular regime, for example, it will be possible to appropriate IBS and CBS credits at the same rate due on these transactions, applied to the financial expenses effectively paid and calculated based on the deduction of: • the principal amount; and • the corresponding amount of the application of the Selic rate on the principal, calculated based on the average interest rate practised in repo transactions with federal government bonds with a term of one business day. Most types of regulated entities are subject to strict control of their equity interests and, as a rule, any changes to the corporate structure or control depend on the prior approval of the rel- evant regulatory bodies. The prevailing laws in Brazil also set limits on the percentage of equity interest that may ultimately be held by foreign entities in certain regulated companies. Moreo- ver, companies engaged in selected industries (especially those deemed key for the national economy or sovereignty) cannot receive foreign capital investments unless the Brazilian execu- tive branch grants prior approval. In terms of general restrictions applicable to the financing of banks, apart from the prevailing Basel Standards adopted in Brazil, Brazilian law 9. Takeover Finance 9.1 Regulated Targets
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