Knowing all legal and tax aspects that permeate any business activity is a constant challenge for managers and shareholders, given the complexity and specificities that the topic has. And when it comes to companies that include in their plans the possibility of going through a merger or acquisition, attention to the matter needs to be redoubled.
Continue reading the article and see how you should proceed to carry out a merger and acquisition transaction respecting the legislation and all fiscal and tax nuances .
Is tax and tax compliance really important?
Companies that do not have their fiscal and tax issues well aligned may be subject to penalties, especially after the approval of the Anti-Corruption Law .
In merger and acquisition processes, tax and tax compliance can make a difference, as it will identify problems and best practices for adapting the company’s accounting and tax processes to the laws of the sector, avoiding penalties.
Tax compliance is still important to identify possible impediments that need to be resolved before or that even make the merger or acquisition operation unfeasible. For example, the legislation presents a series of restrictions for companies that need to maintain commercial relations with public authorities , such as those that provide services to governments. If they have not yet established a compliance program that adopts internal control procedures, this will need to be done as soon as possible.
Compliance in merger and acquisition operations
Compliance acts directly in the assessment of all aspects of the business that may be an obstacle to operations. In other words, every company that goes through an M&A process will live with a stage called due intelligence , whose prerogative is to carry out a complete survey of the company that will be acquired, from accounting and legal information to corporate issues.
In this way, compliance will have important subsidies , mainly from the fiscal and tax point of view , to facilitate that any decision involving a merger and acquisition operation is as safe and accurate as possible.
In addition, a compliance program in a mergers and acquisitions process can also mean more savings and appreciation for the business in question. With the proper tax and tax study, it is possible to identify tax benefits not seen before and avoid costs from being above what is really necessary.
Why does a Mergers and Acquisitions operation need tax planning?
The definition of tax planning in an M&A transaction allows for a broader and deeper look at the financial outlook of the company to be acquired, which will be decisive in reaching its real value . This process, known as valuation, assesses how much a company is worth, considering, in addition to the profit it generates from selling products and services, its market position and the possibility of return on top of what is invested.
Carrying out tax planning in a merger and acquisition operation will also help in choosing the tax regime that is best in line with the needs of the business, such as Simples Nacional or Presumed Profit.
It is always important to remember, too, that all legal and tax aspects are always undergoing changes, therefore, there is a need for constant monitoring so that the existence of risks is practically null. The combination of a strong due diligence process with accurate tax planning is a pillar of support that should guide all M&A operations.
In order for the M&A process to be successful, it is necessary to resort to the assistance of a tax professional, who will be assigned the role of evaluating the adopted financial model and even signaling possible programs of tax incentives and credits, which will certainly make the most streamlined M&A operation.
How does goodwill influence tax issues in a merger and acquisition transaction?
Goodwill in the M&A market means a payment above market value. If a company is estimated at 200 thousand reais, but the buyer has allocated the amount of 250 thousand to acquire it, the amount paid in excess is precisely the Goodwill.
From a tax point of view, this amount can be reversed as a tax benefit. Let’s explain why: if it is foreseen within a perspective of income in the company that is constituted after the acquisition of the participation in the business, the referred amount can be used to amortize and deduct taxes over the years.
Although it seems simple, it is necessary to understand all the fiscal and tax nuances that are included in this concept of Goodwill. A crucial piece of information to be taken into account is that Law No. 12,973/14 brought restrictions on the use of Goodwill. For this to occur, it is mandatory that the two parties involved in the acquisition of the company do not have any relationship.
In general terms, we can better understand Goodwill in the mergers and acquisitions market with the explanation below:
- Goodwill for capital gains : when the amount paid for the transaction is greater than the book value, but does not exceed the fair price.
- Goodwill : when the value allocated to the business is above fair, taking into account the perspective of what it can yield in the future.
- Gain on advantageous purchase : as the name implies, it corresponds to the purchase of a company for a value below fair.
The process of mergers and acquisitions from a legal perspective.
In the legal field, when two companies are extinguished and a new corporate composition is formed , this new incorporated company assumes all the liabilities and assets of the companies participating in the merger process . Who says that is the Constitution itself, supported by Article 228 of Law No. 6,404 of December 15, 1976.
Now, in the case of an acquisition , when a company incorporates another with the objective of expanding its operations, who should base the operation is Article 227 of Law nº 6.404 of December 15, 1976 , which is very clear in stating that when a society absorbs the other, the latter succeeds it in its rights and obligations .
As you can see, the merger and/or acquisition process requires the involvement of a specialized team that knows all the legal, tax and fiscal aspects, for the success of the operation.
That’s why having expert advice is the most important step for your M&A process to be successful.
