Controversy over the taxation in tender offers continues and harms investors

In the end of July, Amec reopened the discussion about the taxation of foreign investors in tender offers. In a letter sent to Mr. Eduardo Guardia, Brazil’s Finance Minister; Mr. Marcelo Barbosa, Chair of the Brazilian Securities and Exchange Commission – CVM -; and Mr. Jorge Rachid, Secretary of Brazil’s Federal Revenue Service, Amec requested again that the taxation of foreign investors in tender offers be clarified.

Amec understands that there is no justification for the adoption of a tax treatment in tender offers different from that used in the purchase and selling of shares without offers. This means that the 15% tax exemption on capital gains for foreign investors on the stock exchange is also valid for the tender offers, including go-private offers. In practical terms, the situation is not like that. There are custodians that withhold the tax in the case of tender offers and cause a kind of arbitrage: the foreign investor sells his/her position on the stock exchange before the offer to take advantage of the tax benefit.

In Amec’s opinion, the Federal Revenue Service and the CVM must clarify the situation and help increase investors’ trust in the regulatory environment.

The President Letter 08/2018 – Taxation of foreign investors in tender offers is available here.

The President Letter 06/2016 – Taxation of foreign investors in tender offers is available here.

The Broadcast’s article “Amec reacende discussão sobre tributação de estrangeiros em OPAs” (“Amec reopens discussion about the taxation of foreign investors in tender offers”) may be found here.