By the Tax Team
The 1st Panel of the Superior Chamber of the Administrative Council of Tax Appeals has judged Administrative Proceedings Nos. 16682.722956/2015-69, 16682.720184/2014-40 and 16561.720017/2015-56, which dealt with the possibility of amortization (utilization) of premium with the use of a special purpose vehicle.
The Board has understood as ‘special purpose vehicle’ the one created with the exclusive purpose of investing in a company acquired during a corporate restructuring process, aiming precisely at the amortization of the premium generated in the operation.
Analyzing the aforementioned judgments, two positions of the Board are presented.
In the first case, the taxpayer was assessed after having amortized the premium generated in the transaction, on the grounds that the use of the special purpose vehicle had no business purpose. However, the Rapporteur Director Lívia de Carli Germano understood that there was no evidence of the absence of a business purpose, thus ensuring the premium amortization.
In the second case, the auditors made the assessment alleging that the taxpayer, in addition to having generated the premium from a transaction with no business purpose, created hypotheses of fraud and simulation, for which reason a heavier fine should be imposed. Therefore, it was understood that the transaction was artificial, since in the same day the special purpose vehicle was incorporated and the premium amortized. However, with regard to the heavier fine, it was understood that this was not an intentional transaction to pay less taxes, ruling out the defects of malice, fraud, or simulation by the taxpayer, necessary to justify the imposition of the heavier fine.
In light of the above, there are two scenarios: (i) the possibility of amortizing the premium generated in a transaction with a special purpose vehicle, provided that the absence of a business purpose in the transaction is not proven; or (ii) its impossibility, if the artificiality of the transaction is characterized, with the discussion on the imposition of the heavier fine (of 150%) still persisting.