Under the analysis of tax expert Leonardo Manzan, tax planning in mergers and acquisitions—and how it is affected by the tax reform—emerges as one of the most sensitive topics for the Brazilian business market. M&A transactions involve not only corporate strategies and complex negotiations but also tax considerations that can determine the success or failure of a deal. The proposals currently under discussion in the tax reform have the potential to significantly alter the cost and structure of these operations.
Historically, Brazil is known for having a complex tax system, which imposes multiple federal, state, and municipal taxes—often cumulative—creating additional challenges for corporate reorganizations. The promised simplification brought by the tax reform is welcomed by the market but raises concerns about new costs, transition rules, and impacts on existing legal structures.
Tax Planning in Mergers and Acquisitions: What Changes with the Tax Reform?
Leonardo Manzan highlights that one of the main issues is the tax treatment of corporate reorganizations such as mergers, spin-offs, and incorporations. Currently, the legislation allows for tax neutrality in certain cases, ensuring that such operations do not trigger immediate capital gains. However, the reform may eliminate this neutrality, turning internal operations into taxable events, particularly with regard to retained earnings or asset revaluation adjustments.
In addition, there is ongoing debate about possible restrictions on the use of accumulated tax losses in incorporated companies, which could increase the tax burden in M&A processes. Companies planning mergers or acquisitions must therefore reassess their models, as the reform could reduce or eliminate benefits currently provided by law.
Effects on Contracts and Company Valuation
According to Leonardo Manzan, the changes proposed in the tax reform could also significantly affect company valuation. Modifications to the tax base or increases in rates levied on certain revenues may reduce the attractiveness of some deals, requiring renegotiation of values, payment terms, and contract clauses.
Another critical point involves the drafting of tax liability clauses. In a transitional legislative scenario, sellers and buyers will need to clearly define who will be responsible for potential tax liabilities arising from differing interpretations of the new rules. This increases the complexity of due diligence processes and may extend negotiations.
Impacts on Foreign Investment and International Structures
Leonardo Manzan notes that the impact of the tax reform is not limited to domestic companies. Foreign investors, who traditionally view Brazil as a promising market, may reconsider their plans if they perceive an increase in the tax burden or a reduction in legal certainty for corporate transactions. Changes in the rules for taxing capital gains, profit remittances, or international reorganizations could discourage foreign capital inflows.
Furthermore, international structures used for tax optimization—such as holding companies in countries with double taxation treaties—may lose effectiveness if Brazilian legislation begins to disregard certain transactions or applies stricter anti-avoidance rules. As a result, multinationals will need to review their financial flows and corporate ownership chains.
Strategies for Adapting to the New Scenario
According to Leonardo Manzan, companies involved in M&A operations should adopt a cautious approach and invest in impact assessments for different tax reform scenarios. Detailed financial simulations can help anticipate cost variations and avoid surprises that could compromise the economic viability of transactions.
Another important step is to strengthen tax compliance, maintaining thorough documentation to support each stage of corporate operations. Developing legitimate, well-structured, and substantiated legal strategies will be essential to mitigate the risk of audits or future tax disputes.
Leonardo Manzan notes that while the tax reform poses challenges, it can also represent an opportunity to make Brazil’s business environment clearer and more competitive. The key will be ensuring legal certainty, well-defined transition rules, and the preservation of tax neutrality in corporate reorganizations, thereby allowing the M&A market to continue contributing to the country’s economic growth.
Author: Clodayre Daine
