Investing Today in Brazil: Addressing Recent Tax Challenges Sponsored by
Thin Capitalization
Restrictions to Deduction of Expenses Articles 24, 25 and 26 of Law 12, 249 • Restrictions to the deduction of interest expenses paid to non-resident parties (Related Parties or “Low Tax Jurisdictions or Privileged Tax Regimes”) • Restriction to the deduction of other expenses paid to non-resident parties domiciled in “Low Tax Jurisdictions or Privileged Tax Regimes”
Thin Capitalization Rules Article 24 – Concept • interest paid or credited by Brazilian sources, • to individuals or legal entities, considered related as set forth by article 23 of Law 9, 430, resident or domiciled abroad, • not incorporated in a country or territory with favorable taxation or subject to a privileged tax regime, • will only be deductible if the interest expense is treated as necessary for the company’ activities and if certain legal requirements are met.
Thin Capitalization Rules Article 24 – interest paid or credited by Brazilian sources • Only credit transactions (loans, financing) or also interest on net equity? Specific rule for INE was implicitly repealed? • Inclusion of EPP or installment sales?
Thin Capitalization Rules Article 24 – to individuals or legal entities, considered related as set forth by article 23 of Law 9, 430, resident or domiciled abroad • Article 23 – Head office, affiliate, branch, subsidiary, parent or associated company, under common corporate control; • Applicable to related parties that directly and indirectly participate in the capital or also for those that indirectly participate. • Applicable to commercial relationships
Thin Capitalization Rules Article 24 – not incorporated in a country or territory with favorable taxation or subject to a privileged tax regime • If country or dependency with favorable taxation or privileged tax regime: articles 25 and 26
Thin Capitalization Rules Article 24 – will only be deductible if the expenses are treated as necessary for the company’s activities and if the requirements set forth in Brazilian tax laws are met • Expenses paid or incurred in transactions or operations required for the company’s activities – i. e. , those that are usual and normal for the type of transactions, operations or activities of the company.
Thin Capitalization Rules Article 24 – will only be deductible if the expenses are treated as necessary for the company´ activities and if the requirements set forth in Brazilian tax laws are met
Thin Capitalization Rules UKCo 10% USCo 90% Fr. Co $20 Br. Co Loan USCo = 200 Loan Fr. Co = 200 Net Equity = 100
Thin Capitalization Rules Article 24 – Scope of the restriction • Funding of all types and terms – exception: pass on transactions by financial institutions; • Whether or not the agreement is registered with the Central Bank of Brazil; • Debt transactions in which there is a guarantor (avalista or fiador), proxy or any intervening party that is considered a related party.
Thin Capitalization Rules Article 24 – Consequences of excess expenses • expenses will not be treated as necessary • expenses will not be considered deductible for IRPJ and CSLL purposes. Formula to be issued
Thin Capitalization Rules Article 25 – Concept • interest paid or credited by Brazilian sources, • to individuals or legal entities, incorporated in a country or dependency with favorable taxation or subject to a privileged tax regime, • will only be deductible if the expenses are treated as necessary for the company´ activities and if the legal requirements are met.
Thin Capitalization Rules Article 25 – “Tax Havens” • Country or dependency with favorable taxation – does not tax income or taxes it at a maximum rate lower than 20% • Privileged tax regime: • does not tax (local or foreign) income or taxes it at a maximum rate lower than 20% • grants tax benefits to a non-resident individual or legal entity without requiring (or contingent upon) substantial economic activity • does not provide access to information on shareholding composition, ownership of goods or rights or the economic transactions carried out.
Thin Capitalization Rules Article 25 – will only be deductible if the expenses are treated as necessary for the company´s activities and if the legal requirements are met • Expenses that are treated as necessary for the company´ activities and for the maintenance of its productive source. • Expenses paid or incurred for the transactions or operations required for the company’s activities. Accepted operational expenses are those that are usual and normal for the type of transactions, operations or activities of the company.
Thin Capitalization Rules Article 25 – will only be deductible if the expenses are treated as necessary for the company´s activities and if the following legal requirement is met • the overall amount of indebtedness with all entities located in a low tax jurisdiction or in a privileged tax regime is higher than 30% of the net equity of the Brazilian company.
Thin Capitalization Rules Lux. Co 10% USCo Cayman. Co 90% $20 Br. Co Loan Lux. Co = 200 Loan Cayman. Co = 200 Net Equity = 100
Thin Capitalization Rules Article 25 – Scope of the restriction • Funding of all types and terms – exception: pass on transactions by financial institutions; • Whether or not the agreement is registered with Central Bank of Brazil; • Debt transactions in which there is a guarantor (avalista or fiador), proxy or any intervening party that is a resident or domiciled in a country or dependency with favorable taxation or subject to privileged tax regime.
Thin Capitalization Rules Article 25 – Consequences of excesses • expenses will not be treated as necessary • expenses will not be considered deductible for income tax (IRPJ and CSLL) purposes. Formula to be issued
Expenses in General Article 26 – Concept • Expenses for IRPJ and CSLL purposes are not deductible, • if they derive from payment, credit, delivery, use or remittance at any title, directly or indirectly, • to individuals or companies resident or incorporated abroad in a country or territory with favorable taxation, or subject to a privileged tax regime. • Deduction: three tests
Expenses in General Article 26 – Effective beneficiary • The individual or company not incorporated with the sole or principal purpose of tax savings, that receives payments these values for its own account and not as agent, trustee or agent on behalf of a third entity. • If the “identification” requirement is met, is the test accomplished? • If the recipient located in a country or territory with favorable taxation is just an agent, but the effective beneficiary is identified, are the requirements met? • How can the “identification” be formalized?
Expenses in General Article 26 of Law 12, 249 Expressions whose content and scope require a specification: 1) "operational ability" - which requirements should be met? 2) "tax savings" - for whom? 3) “tax savings as sole or principal purpose - how to determine?
Transfer Pricing
Transfer pricing — Overview – Brazilian transfer pricing rules are inconsistent with the internationally accepted Organization for Economic Co-operation and Development (OECD) guidelines; – Transfer pricing rules apply to the following related-party transactions: – Export of goods, services, or rights; – Import of goods, services, or rights; and – Interest bearing contracts not registered before the Brazilian Central Bank (Bacen). – TP rules do not apply to royalties/technical/scientific and administrative assistance (special rules apply to those transactions).
Transfer pricing — Comparison Imports OECD Equivalent Exports PIC Market comparison - CUP PVEX CPL (20%) Cost Plus method CAP (15%) PRL (20%) PRL (60%) Resale minus method PVV (30%) PVA (15%)
Proposed resale minus method rejected • The Brazilian Congress failed to approve two provisional measures published late last year that would have replaced the transfer pricing resale minus method (PRL) with the a new method, known as PVL from its Portuguese acronym; • Provisional Measure No. 476/09 (PM 476), published on 24 December 2009, and Provisional Measure No. 478/09 (PM 478), published on 29 December 2009, were not approved by the Brazilian Congress within the constitutionally established legal time frame, and thus lost their effectiveness as of the date of their enactment; • PM 478 introduced significant changes to Brazilian transfer pricing regulations, revoking the PRL 20%/60% (the resale minus method), and introduced a new method, known as PVL 35%. PM 476/09 was known for revoking article 61, II of Provisional Measure No. 472/09, published on 12 December 2009, which in turn revoked the margins on the resale minus PRL method;
Proposed provisional measures - summary PM 472 Main change Enactment PM 476 Article 61, II revoked Revoked article 61, II of the transfer pricing PM 472, and reintroduces margins of resale the margins set forth by minus method (PLR) article 2 of Law 9, 959/00 as set forth by article that were previously 2 of Law 9, 959/00 revoked by PM 472 12/15/2009 12/24/2009 PM 478 Introduced the new PVL method and replaces the PRL 20%/60% from January 1, 2010 onwards 12/29/2009
Proposed provisional measures - timeline • PM 472 was approved by the Brazilian Congress and converted into Law No. 12, 249/2010, published on June 14, 2010; • The wording of Law 12, 249/2010, however, did not include the article that revoked the transfer pricing margins of the resale minus method as set forth by article 2 of Law 9, 959/00. From that perspective, there is a significant controversy whether the original provisional measure (which did include the revocation of the transfer pricing margins) should be in effect in the year of its enactment, that is, 2009;
PRL 20%/60% x (proposed) PVL 35% PRL 20% Pure resale PRL 60% PVL 35% All cases Imported good with local value added
Resale minus method comparative Description Applicability PRL 20% PRL 60% PVL 35% Imported goods or rights from related parties that are resold in Brazil. Applicability of services only provided by Normative Instruction, but not in the Law. Imported goods, services. or rights from related parties resold in Brazil Imported goods from related parties subject to aggregation value and resold in Brazil Statutory margins 20% 60% 35% Profit margin basis Gross Resale Price NRP less aggregation value in Brazil Proportional NRP less proportional CGS
What changes are expected? • It is expected that the Brazilian tax authorities will try to reintroduce a “new” resale minus method this year, which would be, in principle, in force from 2011 if enacted; • There also current proposals and discussions with the Brazilian transfer pricing tax authorities in order to include different sector margins on the resale minus method, clarify some other uncertainties which where introduced by Provisional Measure 478, as well as other inconsistencies in the application of the transfer pricing methods;
Resolution 2, 689 Financial Markets
1 - General Rules • Pursuant to Resolution 2, 689, foreign investors are entitled to perform investments in the Brazilian financial and capital markets by investing in: ü fixed income instruments (bonds, certificates of deposit, debentures); ü derivative instruments (swaps, futures, forwards, flexible options); ü securities (stock, stock options, stock index, warrants); ü mutual funds; and ü other financial instruments generally available to Brazilian residents. • According to Resolution 2, 689, any investor residing outside Brazil shall comply with the following requirements: ü appointment of an agent (individual or legal entity) in Brazil for the purposes of representing such investor before third parties (who may or may not be the local representative for tax purposes) (“Agent”). If this Agent is not a financial institution duly authorized to operate in Brazil, the foreign investor should appoint a financial institution to be co-obliged for the compliance of certain obligations that should be observed pursuant to the applicable regulation with respect to investments performed under Resolution 2, 689; ü fulfillment of the application form attached to Resolution 2, 689; ü enrollment with the Brazilian Securities Commission (Comissão de Valores Mobiliários – “CVM”), and the Brazilian Taxpayers’ Registry (Cadastro Nacional de Pessoas Físicas – “CPF”, or Cadastro Nacional de Pessoas Jurídicas – “CNPJ”, as applicable); and ü registration with the Central Bank of Brazil (“BACEN”). 33
1 - General Rules • The foreign investor shall enter into a custody agreement with a financial institution authorized to render such service (pursuant to Article 5, III, of CVM Instruction No. 325). • Proceeds remitted to Brazil for the purposes of investing in the Brazilian financial and capital markets under Resolution 2, 689 should not be invested in transactions: ücarried outside stock or commodities exchange, electronic systems or organized over-the-counter (“OTC”) market of securities of publicly-held companies duly registered for negotiation on such markets; and üinvolving securities or financial instruments traded on non-organized OTC markets or on markets that are organized by entities not authorized by the CVM. • Such limitations do not include: initial subscriptions, payments of bonuses, conversions of convertible debentures into shares, indexes referenced in securities, purchases or sales of quotas of open-ended investment funds and, if previously approved by CVM, delistings, trading cancellations or suspensions, judicial agreements and the disposition of shares subject to shareholders’ agreements. • All proceeds, assets and securities held and traded by foreign investors under Resolution 2, 689 should be registered with or deposited in institutions or entities authorized to render registration and custody services by the BACEN or the CVM or be registered in clearing systems recognized by the BACEN or by the CVM. • The transfer and/or assignment of such investments abroad are not allowed, except in the case of merger, amalgamation, spin-off, corporate reorganization and succession, 34 provided that the regulation issued by the BACEN and the CVM are complied with.
2 - Special Regime for 2689 Investors • Foreign investors, not located in Low Tax Jurisdictions (“LTJs”), as provided by Brazilian Law (for further details on LTJs please refer to section 03), that invest in Brazilian financial and capital markets, pursuant to the rules ser forth by Resolution No. 2, 689 (“ 2, 689 Investors”), are subject to a special tax regime in connection with the withholding income tax (“WHT”) imposed on gains and earnings related to such investment. • In this sense, capital gains derived upon disposal of shares and other securities, such as quotas of closed-end investment funds, by the 2, 689 Investor performed in the stock exchange market or an Organized OTC are exempt from withholding tax (“WHT”). • Further, earnings derived by the 2, 689 Investors, generated by the assets composing their investment portfolio, are subject to: ü WHT at a 10% rate, in relation to investments in variable income investment funds, swap transactions and transactions in the future market, outside the stock exchange; and ü WHT at a 15% rate in all other cases, including fixed income investments. • On the inflow of funds to Brazil, in general, the exchange transaction carried out by a 2, 689 Investor in order to invest in Brazilian financial and capital markets is currently subject to the Tax on Exchange Transactions (“IOF/Exchange”) at a 2% rate. • The exchange transactions carried out for the outflow of funds from Brazil to abroad in connection with return of capital of 2, 689 Investors currently benefits from the zero percent rate of IOF/Exchange. 35
2 - Special Regime for 2689 Investors • On the other hand, if the 2, 689 Investor resides in a LTJ, the tax regime applicable to it will be the same regime applicable to Brazilian residents in connection with investments in Brazilian financial and capital markets. • Therefore, capital gains derived upon disposal of shares and other securities by the foreign investor are subject to WHT at a 15% rate. Further, earnings derived by the foreign investors resident in LTJs, including earnings from fixed income investments and investments in open-end investment funds are subject to WHT at general rates varying from 22, 5%% to 15%, depending on the type and lifetime of the investment. • The main tax advantage on the conversion of a 2, 689 Investment over a 4131 Investment is that the foreign investor can benefit from the non-imposition or reduction of the WHT in future capital gains to the extent that it sells in the future its shares in the Stock Exchange Market with gains and it is not located in a low tax jurisdiction. • Please find below the detailed taxation for 2, 689 Investor on the following types of investments: ü Direct investments in shares; ü Fixed income investments; ü Share fund – FIA; ü Private equity fund – FIP; and ü Credit Rights Fund – FIDC. 36
2. 1 – Direct Investments in Shares Tax Aspects • Acquisition of Shares in the Stock Exchange Market • Foreign Investor The inflow of funds into Brazil for the acquisition of shares is subject to the IOF/Exchange which currently is imposed at a 2%; Dividend and Interest on Equity (“IE”) (which is hybrid form of dividend distribution provided for in Brazilian law) paid by the invested company to the Foreign Investor, as well as the repatriation of the invested capital, is currently subject to IOF/Exchange at a 0% rate. • Dividends paid by the invested company are not subject to WHT; • IE paid by the invested company is subject to WHT at a 15% rate, provided that the Foreign Investor (as a 2689 Investor) not located in a LTJ (if located in a LTJ, a 25% rate applies); • Capital gains recognized upon the disposal of shares are not subject to WHT, in the event the Foreign Investor is not located in a LTJ or at a 15% rate, if the Foreign Investor is located in a LTJ. Abroad Brazil Publicly Held Corporation 37
2. 2 – Fixed Income Investments Tax Aspects • Acquisition of Bonds or other fixed income instruments • The outflow of the investment, including gains and earnings, will be subject to IOF/Exchange at a 0% rate; • Earning derived by the Foreign Investor in connection with the fixed income investment will be subject to WHT at a 15% rate, provided that such investor is not located in a LTJ; • Foreign Investor The inflow of funds into Brazil for the acquisition of shares is subject to the IOF/Exchange which currently is imposed at a 2%; If the investor is located in a LTJ, the WHT would be imposed at rates varying from 22. 5% to 15%, depending on the lifetime of the investment. Abroad Brazil Fixed Income Investments 38
2. 3 – Share Fund - FIA Tax Aspects • Subcription/ Acquisition of Quotas of a FIA • The outflow of the investment, including gains and earnings, in connection with the Share Fund will be subject to IOF/Exchange at a 0% rate. • If the Foreign Investor is located outside a LTJ, gains recognized upon disposal of the quotas of closed end funds in the stock exchange market or an Organized OTC are exempt of WHT. • Foreign Investor The inflow of funds into Brazil for the acquisition or subscription of quotas is subject to IOF/Exchange at a 2% rate. If the Foreign Investor is located in a LTJ, such gains would be subject to WHT at a 15% rate. • Earnings to be received by the Foreign Investor would be subject to WHT at a 10% rate. • In the event the Foreign Investor is located in a LTJ, such earnings would be subject to WHT at a 15%. Abroad Brazil FIA 39
2. 4 – Private Equity Fund - FIP Tax Aspects • Subcription/ Acquisition of Quotas of a FIP • The outflow of gains and earnings in connection with the FIP will be subject to IOF/Exchange at a 0% rate. • Foreign Investor The inflow of funds into Brazil for the acquisition or subscription of quotas is subject to IOF/Exchange at a 2% rate. If the quotaholders are located outside of a LTJ, gains and earnings recognized by the 2. 689 Investor as a result of the amortization of quotas of the FIP will be subject to the imposition of the WHT at a 0% (zero percent) rate. • This 0% WHT rate would not apply if (i) the foreign quotaholder holds (directly or via related parties) at least 40% of the quotas of the FIP or of the quotas that represent the right to receive more than 40% of the earnings of the FIP; (ii) the FIP has, at any time, debt bonds corresponding to more than 5% of its net worth, or (iii) the foreign investor is domiciled in a LTJ. • If the 2689 Investor is resident in a LTJ, it will be subject to the same tax treatment applicable to Brazilian investors; Abroad Brazil FIP 40
2. 4 – Private Equity Fund - FIP Tax Aspects (cont. ) • Subcription/ Acquisition of Quotas of a FIP • Foreign Investor Abroad Brazil FIP Therefore, gains and earnings recognized by quotaholders of the FIP would only be taxable on the sale or amortization of the corresponding quotas. In this context, those gains and earnings would be subject to the imposition of the WHT at a 15% rate. Such tax treatment is conditioned upon fulfilment of the following requirements: (i) the portfolio of the FIP must be composed by at least 67% of shares of corporations (S. A. ), convertible debentures and subscription bonds, and (ii) diversification limits and rules provided for in the regulations of CVM must be observed. If these two requirements were not met, gains and earnings recognized by quotaholders would be subject to WHT at aggregate rates varying from 22. 5% to 15%, depending on the lifetime of the investment in the FIP. 41
2. 5 – Credit Rights Fund – FIDC Tax Aspects • • Subcription/ Acquisition of Quotas of a FIDC Brazil If the Foreign Investor is located outside a LTJ, gains recognized upon disposal of the quotas of closed-end funds in the stock exchange market or an Organized OTC are exempt of WHT. • If the Foreign Investor is located in a LTJ, such gains would be subject to WHT at a 15% rate. • Abroad The outflow of the investment, including gains and earnings, in connection with the FIDC will be subject to IOF/Exchange at a 0% rate. • Foreign Investor The inflow of funds into Brazil for the acquisition or subscription of quotas is subject to IOF/Exchange at a 2% rate. Earnings to be received by the Foreign Investor upon redemption or amortization of quotas would be subject to WHT at a 15% rate, in the event such investor is not located in a LTJ. • In the event the Foreign Investor is located in a LTJ, such earnings would be subject to WHT at rates varying from 22, 5% to 15%, depending on the lifetime of the investment. • It is important to mention that the same tax treatment described above is applicable to Multimarket Funds. 42 FIDC
3 - Comments on the Concept of Low Tax Jurisdictions and Privileged Tax Regimes • Until December 2008, under Brazilian tax law, a LTJ was a country or location that does not impose taxation on income, or imposes the income tax at a rate lower than 20% or where the laws of that country or location impose restrictions on the disclosure of shareholding composition or the ownership of the investment. There was a list of LTJ enacted by the Brazilian Revenue Service by means of Normative Instruction 188/2002. More recently, some amendments were implemented in connection with the concept of LTJ, via Law 11, 727/08, in force as of January 2009, in order to include in said concept the provision in the sense that the country or location which imposes restrictions on the disclosure of shareholding composition or the ownership of the investment should also be considered as a LTJ. Additionally, Law 11, 727/08 also created the concept of “privileged tax regimes”. • In 2010, a new list was enacted by the Brazilian Revenue Service, via Normative Instruction 1, 037/10 (“IN 1, 037/10”), which included both the countries considered as LTJs and the locations considered as granting privileged tax regimes (“PTR”). • In our view, there are solid legal grounds to sustain that the list should be interpreted as a comprehensive list, so that only the countries and locations listed should be viewed as LTJs and privileged tax regimes, according to their specific qualification. Further, in our opinion, there are solid legal grounds to sustain that the concept of privileged tax regime only applies for the purposes of transfer pricing rules and thin capitalization rules. • Please find below the countries included in the new list.
3 - Comments on the Concept of Low Tax Jurisdictions and Privileged Tax Regimes • Andorra, Anguilla, Antigua and Barbuda, Dutch Antilles, Aruba, Ascension Island, Bahamas, Bahrain, Barbados, Belize, Bermudas, Brunei, Campione D’Italia, Canal Island (Jersey, Guernsey, Alderney and Sark), Cayman Island, Cyprus, Singapore, Cook Island, Costa Rica, Djibouti, Dominica, United Arab Emirates, Gibraltar, Grenada, Hong Kong, Kiribati, Lebuan, Liberia, Liechtenstein, Macau, Madeira Island, Maldives, Man Island, Marshall Island, Mauricio Island, Monaco, Montserrat Island, Nauru, Niue Island, Norfolk Island, Sultanate of Oman, Panama, Pitcairn Islands, French Polynesia, Queshm Island, San Cristovan and Nevis, American Samoa, West Samoa, San Marino, Saint Helena Island, St. Peter and Miguelão Island, Saint Vincent, Santa Lucia, Seychelles, St. Kitts and Nevis, Solomon Islands, Swaziland, Switzerland, Tonga, Turks and Caicos Islands, Vanuatu, American Virgin Islands, British Virgin Island Tristan da Cunha. • According to IN 1, 037/10 are PTRs: üin what concerns the legislation of Luxembourg, the regime applicable to the holding companies; üin reference to the Uruguayan legislation, the regime applicable to the Financial Investment Companies (“Safis”), until December 31 st, 2010; üin respect with the legislation of Denmark, the regime applicable to the holding companies which do not develop substantial economic activity; üregarding the Netherlands legislation, the regime applicable to the holding companies which do not develop substantial economic activity; üin relation with the legislation of Iceland, the regime applicable to the International Trading Companies (“ITC”);
3 - Comments on the Concept of Low Tax Jurisdictions and Privileged Tax Regimes üin reference to the Hungarian legislation, the regime applicable to the companies incorporated as KFT offshore; üin what concerns the legislation of the United States of America, the regime applicable to the companies incorporated as state Limited Liability Company (“LLC”), whose shareholding control is composed of non-residents, not subject to the federal income tax; üregarding the Spanish legislation, the regime applicable to the companies incorporated as Entidad de Tenencia de Valores Extranjeros (“E. T. V. Es”), and üin connection with the legislation of Malta, the regime applicable to the International Trading Companies (ITC) and the International Holding Companies (IHC). • On June 23 rd, 2010, was enacted Normative Instruction n°. 1, 045, which altered IN 1, 037/10. According to IN 1, 045, the jurisdictions mentioned on sections 1 and 2 of IN 1, 037/10 may file a request for revision of its characterization as LTJ or PTR. This request shall be forward by a representative of the countries’ government and shall be addressed to the BIRS Secretary. It shall be accompanied by proof of the content and effectiveness of tax legislation, which enables to review the classification. This request may grant suspensive effects in relation to the tax impacts involving the requestor jurisdiction, at the BIRS Secretary discretion. • On June 25 th, 2010 were published Normative Acts 10 and 11, which declare that Switzerland Netherlands have filed the referred request. During the analysis of the request, the force of the list on these two countries has been suspended. As this procedure is new, we are not able to inform how long will it take to BIRS to issue a conclusion on the matter.
4 – Recent Challenges: 2, 689 Investor included in LTJ by IN 1, 037 • According to abovementioned new list, were added to the LTJ roll: Ascension Island, Brunei, Kiribati, Norfolk Island, Pitcairn Islands, French Polynesia, Queshm Island, Saint Helena Island, St. Peter and Miguelão Island, Solomon Islands, St. Kitts and Nevis, Swaziland, Switzerland Tristan da Cunha. • Therefore, it is possible that a 2, 689 Investor, that was not incorporated in a LTJ before, due to the enactment of IN 1, 037 list, now its considered to be located in a country deemed to be a LTJ by the Brazilian Tax Authorities. • In light of the issue presented above, the following solutions are feasible : ü Liquidation of the assets. The investor would liquidated the current assets and then reinvest in Brazil as a 4, 131 Investor. In this case, the rate increase is not avoided, but it limits the costs to past operations. An alternative that can be implemented in relation to this one is withdraw of the investments, transfer of the assets abroad to a country which is not considered a LTJ and then, after the transfer is completed, reinvest from the other country; ü Merger, amalgamation, spin-off, corporate reorganization and succession abroad; ü Drop-down of the 2, 689 Investments, as this operation is considered by the CVM as a corporate reorganization abroad (past CVM rulings were in this sense); and ü Change of the company’s location abroad. It is important to bear in mind that the entity must remain the same, despite of the change of location.
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