The main feature of the cost-sharing agreement is that expenses are simply reimbursed. This is explained by the fact that there is only a distribution of these costs between the parties, since the parent company does not provide services to benefit from such activities. Under such conditions, the subject still raises doubts and controversies. However, if there is an effective cost-sharing agreement with the respective controls, we believe that the impossibility of taxation will be recognised, whether by decision of the Federal Office of Finance, the Administrative Court or the courts. This amended and adapted expense allocation agreement („Revised Agreement“) will be entered into on November 23, 2016 between G.research, LLC (formerly Gabelli & Company, Inc.). („the Company“) and Gabelli & Company Investment Advisers, Inc. (GCIA) (formerly Gabelli Securities, Inc.), a Delaware corporation based in Rye, New York, that serves as a payer for certain labor costs. Although, in certain specific cases, the General Court ruled in favour of taxing transfers abroad, it did, conversely, allow the deduction and reimbursement of those expenses for tax purposes. Finally, it is possible to identify the cost contribution contract in which a group shares the costs and risks associated with the production or use of assets, services or rights.
Generally speaking, the allocation of these expenses relates to research and development, with intangible rights or assets constituting the equivalent. Despite the controversy over the taxation of transfers, the deductibility of expenses and costs – IRPJ / CSLL – and credit – PIS / COFINS – is a favorable position for taxpayers, thus, the response to the request for advance ruling No. 94 COSIT of March 25, 2019, which states that, although these are legal contracts and justified by the need to optimize costs and standardize operation on a broad front, the tax implications of the agreements have sparked discussions. This includes determining whether the inter-group transactions are located exclusively in Brazil or where such activities are centralized abroad. There are cases where the cost-sharing agreement involves a centralized company established abroad. This is a very common agreement between multinationals (MNEs) that make the tax issue slightly different from the taxes in question: we believe that the Brazilian tax authorities are not allowed to tax transfers abroad under a cost-sharing agreement with non-resident companies, because: (iii) service agreements (there is often a profit-making margin remuneration, whereas under a cost-sharing system it is not a right to benefit, but only a reimbursement). On the other hand, in view of the relations between undertakings within an economic group, the intra-group services contract provides for efficient provision at a fair price, as if it were an undertaking independent of the group. (iii) the amount paid in connection with such expenses would be deductible as long as: (a) it is proved that they are habitual, regular and necessary; (b) be calculated on the basis of appropriate and objective evaluation criteria agreed in advance by the parties; (c) compensate for the actual costs of the provision of those services or goods by each undertaking; (d) the centralised company is responsible only for the costs due to it; and (e) – there is control over these shared expenses and reimbursements. In addition to deductibility for the purposes of the IRPJ and the CSLL, the company is also in favour, in the same reasoning, of the possibility of offsetting the PIS and COFINS credits in the non-cumulative regime. On the other hand, the Federal Office of Finance has generally taken a position on cost-sharing agreements concluded with companies established abroad by taxing the transfer via IRFONTE (15%), imports pis/COFINS (9.65%), cide (10%) and ISS.
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