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August 06, 2014

InFOCUS: Brazil's scenario from a tax expert perspective

This InFOCUS interview captures the scenario of Brazil from the perspective of a tax expert

Interviewed Bio

Sergio André Rocha is a tax consulting partner at Andrade Advogados Associados, a tax law boutique with thirty years of history and offices in Rio de Janeiro, São Paulo, and Brasília. Before joining Andrade he was an international tax partner at a Big Four auditing firm.
Mr. Rocha has more than 15 years of experience as a tax advisor, working primarily with direct taxes, M&A and corporate restructuring, cross-border taxation, and tax litigation. He is a board member of the Brazilian Association of Finance Law (Brazil’s International Fiscal Association Branch) and the Brazilian Institute of Tax Law in São Paulo. He is also a member of the Brazilian Bar Association.
With a PhD on Law and Economics, Mr. Rocha is a Professor of Tax Law at the prestigious Rio de Janeiro State University. He also teaches international taxation and tax planning at several postgraduate and professional courses. Mr. Rocha has several books on taxation, including his thesis on Interpretation of Double Taxation Conventions, which was published in Kluwer’s Series on International Taxation.
 
1. How do you see the investment landscape in Brazil today?
SA: Brazil is not showing the same growth it had four or five years ago, but it is still the destination of a large volume of foreign direct invest. The country will host the 2016 Olympic Games and has a growing oil and gas industry. Its economy is solid and there is still room for expansion of the domestic market. Brazil is a consolidated democracy, in a region that often favors all types of populist regimes. All in all, Brazil is still an interesting country to invest in.
 
2. Will the upcoming elections have any impact in the scenario you described?
SA: Election years always trigger some uncertainties in the market. The current pools show that today President Dilma Rousseff would be reelected, but the campaign is only beginning.
 
3. You are a tax expert. Do you think that Brazil's tax system has a negative impact in foreign investment?
SA: Brazil has a complex tax system, that in many ways differ from what you have in other countries. For instance, indirect taxation is extremely important in the country and the State VAT tax ("ICMS") is number one in tax revenues. Tax compliance is also a very important issue in Brazil. Brazil's tax system is not a "blocker" to foreign direct investment, but it cannot be considered a "facilitator". The most important advice to a newcomer or a seasoned investor is to be properly assisted by a trusted advisor in the country.
 
4. Brazil just enacted an important reform in Income Tax Regulations. What is the purpose of such changes?
SA: On December 2007 Brazil started to adapt its accounting principles to the International Financial Reporting Standards. To avoid undesired tax impacts during all this time a transitory regime has been in force. Such regime basically established the neutrality of all accounting changes for tax purposes. Law 12973 extinguished the transitory regime, adapting tax regulations to the IFRS accounting principles. This law is still pending regulation, but Brazilian companies are already trying to anticipate the potential impacts on tax burden and specially on tax compliance.



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