TAX DEDUCTION OF GOODWILL AMORTIZATION IS ALLOWED FOR INCOME TAX PURPOSES
11 January 2021
The following article of opinion, related to a ruling issued by the Supreme Court of Justice on admission, considers:
- CSJ (according to its English acronym) dictates precedent on the tax amortization of intangible assets under Article 60 of the Income Tax Regulations
- CSJ considered that the amortization of a surplus generated in a merger by absorption of companies qualifies for protection under Article 60 of the Income Tax Regulations. We consider that this equalization may be subject to additional liquidations by the DGI in similar cases.
- CSJ did not admit the deduction for income tax purposes of a provision created for benefits granted under a customer loyalty program.
At BDO we believe that due to this premise, it is essential that every business acquisition and/or merger (M&A) transaction has a precise and technical analysis of the assignment of the transaction value to the individualized tangible and intangible assets acquired, the financial and tax treatment of each of those assets, as well as the capital gain determined in the transaction.
BDO in Panama may assist you in the analysis and preparation of work to demonstrate the differences between the tax and financial treatment of these intangibles, as well as their amortization over time, according to the contractual and economic conditions of each case.