The Central Bank of Brazil (BCB) published last Thursday, September 17, Resolution BCB no. 15/2020, which consolidates criteria for measurement and recognition of tax assets and liabilities of Payment Institutions and Consortium Management Companies.
Tax assets include taxes recoverable over time, such as IRPJ on tax losses and CSLL on negative basis. Tax liabilities include taxes paid, such as IRPJ and CSLL already paid or to be paid. The tax assets and liabilities referred to in the Resolution are both current (current, related to the current period) and deferred (future, related to subsequent periods).
With respect to the deferred tax assets, that is, taxes recoverable in a future period whose existence is predictable in a manner that implies their constitution, there is an even greater concern of the BCB, to the extent that it stipulated in detail when and if they should be recorded and/or written-off, informing that such facts should be carefully evaluated by the Institution, also establishing the procedures so that the Institution may, if necessary, request to BCB the exemption of the criteria for constitution or write-off, provided that it is based on a technical study of expectation of generation of future taxable income and listing the reasons that led to the non-occurrence of historical profits or expected taxable income based on the last years (3 to 5 years, as applicable).
The BCB also brought in this Resolution clarifications regarding the format and content of the notes to the financial statements for the disclosure of tax assets and liabilities.
Considering that it is not within the competence of the BCB to legislate on tax matters, but rather to guide the Financial Institutions and other institutions authorized to operate by it as to tax rules, it is relevant that the Payment Institutions and Consortium Management Companies observe the concern of the BCB in guiding them as to the need of accounting for tax assets and liabilities, reviewing the consistency of their tax-accounting records and explanatory notes of the financial statements with the provisions in the Resolution and in the tax rules in force, identifying the possible need (or not) to make any adjustment.
BTLAW's Tax Planning and Consulting team is available to assist you with further information on the subject. Contact us by e-mail: [email protected]