Pinheiro Neto Advogados has helped US consumer credit agency Experian keep the goodwill tax amortisation it claimed when acquiring Brazilian counterpart Serasa in a 1 billion reais dispute with local tax authorities.
Brazil's Superior Chamber of Tax Appeals ruled in March that Experian had fairly claimed goodwill tax amortisation on 1 billion reais worth of the costs associated with its acquisition of Serasa for 2.3 billion (US$1.2 billion) in 2007. The ruling cannot be appealed.
The dispute emerged when Brazil's tax authority accused Experian of unduly creating an acquisition vehicle and basing its goodwill claim on an appraisal report prepared after the acquisition. It argued that Experian's holding company should have conducted the acquisition directly.
Experian's lawyers responded by arguing that that acquisition vehicle was necessary to pay Serasa's different shareholders and control for currency exchange rate fluctuations. "The acquisition involved 57 different sellers and it would have been very difficult to conduct using a non-resident company," says Pinheiro Neto partner Luciana Rosanova Galhardo, who led the case.
The team also provided evidence that Experian's goodwill evaluation was based on internal studies, which were validated by a third-party specialist, and prepared before the acquisition rather than afterwards. These studies projected Serasa's value according to its balance sheets. Experian, using these findings as the basis for its evaluation, concluded that Serasa was worth more than its actual net equity value and paid extra for the acquisition. This later generated the goodwill it amortised and claimed for tax purposes.
Goodwill tax amortisation is a disputed benefit in Brazil. Pinheiro Neto alone reports more than 150 cases where the tax authority is challenging its use.
Tax authorities have come down hard on goodwill claims because they can be used to reduce a company's tax obligations illicitly. Rulings are often on a case-by-case basis rather than specific precedent.
Counsel to Experian
Pinheiro Neto Advogados
Partners Luciana Rosanova Galhardo and Jorge Lopes Jr, and associate Pedro Augusto Asseis