Compatibility between the Non-discrimination Rules of Double Taxation Agreements and the Decisions in Brazil that Deal with the Deductibility of Goodwill

Abstract

In Brazil, it has been common to find rulings from the tax administration stating that the deductibility of goodwill may only occur if the merger takes place between the target company (acquired with goodwill) and the so-called “real investor” (a company not interposed for the transaction and that genuinely invested funds to acquire the target company). The objective of this article is to assess whether such an interpretation violates Article 24(5) of the double taxation agreements signed by Brazil.