FMX | Connect – www.fmxconnect.com - (Reported 6/03/2010)
BVMF3 Summary of Conference Call on Goodwill and Taxes
Brazilian newspaper Folha de São Paulo said the tax authority was investigating BM&FBovespa's misuse in 2008 of a tax shield from the merger of Bovespa and BM&F.
CFO Carlos Kawall reaffirmed that the goodwill was created in accordance with the current tax law and under market conditions. “We believe all the procedures were legal and fully complied with the Brazilian law," Kawall said.
BVMF3 management said that the Folha de São Paulo article was not accurate:
1. The article characterizing that the “internal goodwill” was artificially created is incorrect as both exchanges had no controlling group of shareholders and had, at that time, different ownership structures and different boards. Management added that at the time of the corporate transaction which led to the integration of both exchanges there were two independent companies. The transaction was done in market conditions and followed the global trend for consolidation in exchange industry.
2. The total amount of the goodwill tax benefits is R$4.5bn and not R$5.5 billion as stated in the article.
The exchange confirmed that there is no formal investigation from the tax authority on the goodwill tax benefits. There is currently a routine audit only. Management reaffirmed that the tax shield from goodwill is NOT threatened at this point.
Investigations of merger goodwill tax benefits, like Santander Brasil’s and Natura’s, have resulted in fines from the tax authority. Both cases are being contested in court. BM&FBovespa case is not comparable to prior cases. Prior cases involved the mergers between subsidiaries that supposedly generated internal goodwill while the merger between BM&F and Bovespa was between two publicly traded companies at market prices.
Source: ERDESK
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