Fair Value Positive Surplus Deductibility after the Asset Disposal

Abstract

This article sought to analyze the possibility of deducting, for tax purposes, the fair value positive surplus (commonly referred to in Brazil as “mais-valia”) in cases involving the acquisition of an investment accounted for by the equity method, when the respective underlying asset is sold or written-off prior to the corporate reorganization events of merger, spin-off, or consolidation. The article examined constitutional principles, the applicable legislation, and relevant accounting standards, concluding that the requirements set forth in Article 20 of Law No. 12,973/2014, which disciplines the deductibility of the fair value positive surplus, are satisfied when the asset is disposed before the restructuring event. Lastly, the article concludes that a different understanding – unfavorable to the deductibility – imply violation to the tax equity and net income taxation principles, given that the positive surplus is part of the price paid by the investor.