Brazilian Tax Challenges: Understanding the Impact of Convergence on Your Business

As Brazil implements its convergence plan, companies are facing a complex and challenging tax environment. The Transitional Tax Regime (RTT) aims to neutralize the impacts of significant accounting changes, but limited guidance from local tax authorities is making it difficult for businesses to determine how and to what extent the RTT applies.

A Deloitte Perspective

As a member firm of Deloitte Touche Tohmatsu, we have extensive experience assisting clients with their IFRS implementations across various industries in the US, Brazil, and globally. Our dedicated team of professionals is ready to help you navigate these challenges and provide broad multi-disciplinary assistance.

The Challenges Ahead

Companies are facing a range of challenges, including:

Determining how to apply the RTT, which requires companies to use old BR GAAP accounting methods in determining taxable income
Adapting to new public digital accounting and electronic tax reporting rules, which include new requirements for determining taxable income and temporary differences
Limited guidance from local tax authorities on key issues such as book and tax depreciation methods, transfer pricing models, and determination of goodwill in future business combinations

Preparing for the Changes Ahead

To mitigate these challenges, Brazilian subsidiaries of US companies should consider taking the following steps:

Understand the impact of adopting new BR GAAP standards or IFRS for SMEs on accounting and tax perspectives
Assess and address short-term implications on distributable reserves and cash repatriation strategies
Plan to ensure a cost-Effective implementation

Key Considerations

Our experts recommend considering key stakeholder questions regarding potential impacts, analyzing process and system implications, providing training and working sessions to identify challenges and implications of this transition, developing resource estimates and a plan of attack, and monitoring the Brazilian financial reporting environment.

Deloitte’s Expertise

We offer broad assistance, including:

Accounting
Financial Reporting
Tax
Systems
Technology Consulting Services

Our team is ready to help you better understand these requirements and provide multi-disciplinary assistance. Contact us today:

Nick Difazio, Partner, +1 313 396 3208, ndifazio@deloitte.com
Renee Bomchill, Partner, +1 212 436 6836, rbomchill@deloitte.com
Alfred Popken, Principal, +1 212 436 3693, apopken@deloitte.com
Sam Doolittle, Partner, +1 415 783 4343, sdoolittle@deloitte.com

Leveraging the Opportunity

By adopting IFRS-equivalent standards, companies can develop practical experience and tools and templates to apply to subsidiaries in other jurisdictions and broader IFRS efforts. Our experts are ready to help you seize this opportunity and achieve long-term benefits.