Resolution CMN No. 4,842 — Consolidates General Criteria for Measurement and Recognition of Current and Deferred Tax Assets and Liabilities

Resolution No. 4,842

RESOLUTION CMN No. 4,842, OF JULY 30, 2020

Consolidates the general criteria for the measurement and recognition of current and deferred tax assets and liabilities by financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

The Central Bank of Brazil, in accordance with Art. 9 of Law No. 4,595, of December 31, 1964, makes it known that the Monetary Council, in a session held on July 30, 2020, based on Arts. 4, items VIII and XII, and 31 of the aforementioned Law, and on Art. 61 of Law No. 11,941, of May 27, 2009, and considering the provisions of Decree No. 10,139, of November 28, 2019,

RESOLVES:

CHAPTER I
OBJECT AND SCOPE OF APPLICATION

Art. 1 This Resolution consolidates the general criteria for the measurement and recognition of current and deferred tax assets and liabilities by financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

Sole Paragraph. The provisions of this Resolution do not apply to consortium administrators and payment institutions, which must observe the regulations issued by the Central Bank of Brazil in the exercise of their legal powers. (Amended, effective March 1, 2024, by CMN Resolution No. 5,116, of January 25, 2024.)

Sole Paragraph. The provisions of this Resolution do not apply to consortium administrators, payment institutions, securities brokerage firms, securities distribution firms, and currency brokerage firms, which must observe the regulations issued by the Central Bank of Brazil in the exercise of their legal powers. (Amended, effective March 1, 2024, by CMN Resolution No. 5,116, of January 25, 2024.)

CHAPTER II
DEFINITIONS

Art. 2 For the purposes of this Resolution, the following are considered:

I - deferred tax asset: the value of the tax on profit recoverable in future periods related to:

a) deductible temporary differences;

b) future compensation of unused tax losses; and

c) future compensation of unused tax credits;

II - temporary difference: expenses or revenues recognized in the fiscal year and equity variations recognized directly in shareholders' equity that are not yet deductible or taxable for Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) purposes, whose future exclusions, additions, or compensations are explicitly established or authorized by tax legislation for the purpose of calculating taxable profit or tax loss;

III - deductible temporary difference: a temporary difference that results in deductible amounts in the determination of taxable profit or tax loss of future periods;

IV - taxable temporary difference: a temporary difference that results in taxable amounts in future periods;

V - taxable profit: profit calculated for a period, in accordance with the rules established by tax legislation, on which taxes are levied;

VI - deferred tax liability: the value of the tax on profit payable in future periods related to taxable temporary differences;

VII - tax loss: loss calculated for a period, in accordance with the rules established by tax legislation, from which taxes recoverable are defined;

VIII - accounting result: profit or loss calculated for a period, before the calculation of the effects of taxes on profit; and

IX - current tax: the value of the tax payable or recoverable in the reference period.

CHAPTER III
CURRENT TAX ASSETS AND LIABILITIES

Art. 3 The institutions mentioned in Art. 1 must recognize as:

I - assets the values related to current taxes recoverable in future periods and to any taxes paid that exceed the amount due in the period, to which the institution has the legal right to future compensation or refund, including presumed credits calculated based on credits arising from temporary differences, in accordance with current legislation; and

II - liabilities the values of taxes due related to the current period and previous periods.

CHAPTER IV
DEFERRED TAX ASSETS AND LIABILITIES

Section I - Deferred Tax Asset

Art. 4 The institutions mentioned in Art. 1 must record deferred tax assets arising from temporary differences, Corporate Income Tax (IRPJ) tax loss, and negative base for Social Contribution on Net Profit (CSLL) only when the following conditions are met cumulatively:

I - there is an expectation of generating future profits or taxable revenues for Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) purposes, as applicable, in subsequent periods, based on a technical study that demonstrates the probability of occurrence of future tax and contribution obligations that allow the realization of the deferred tax asset within a maximum period of ten years; and

II - they present a history of profits or taxable revenues for Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) purposes, as applicable, proven by the occurrence of these situations in at least three of the last five fiscal years, including the reference fiscal year.

§ 1 The provisions of this article must be observed individually by each institution.

§ 2 The provision of item II of the main text does not apply to institutions that:

I - were established less than five years ago; or

II - have a history of losses verified in the phase prior to the change in shareholding control.

§ 3 The period for realizing the deferred tax assets referred to in item I of the main text does not apply to deferred tax assets originating from tax losses caused by the exclusion of revenues from the excess depreciation of assets subject to financial leasing operations, up to the limit of the corresponding deferred tax liabilities.

§ 4 The condition established in item II of the main text may be waived, at the discretion of the Central Bank of Brazil, based on a request that presents a justification based on a technical study of the expectation of generating future taxable profits, as provided for in item I of the main text.

§ 5 The technical study referred to in item I of the main text must:

I - be prepared individually by each institution;

II - result from technical projections made based on consistent and verifiable criteria, supported by internal and external information, considering at least the behavior of the main economic and financial conditioning factors and indicators;

III - be based on feasible premises and be consistent with other accounting, financial, managerial, and budgetary information of the institution;

IV - contain a comparative table between the values projected for realization and those actually realized for each fiscal year, as well as the present value of the credits, calculated based on the institution's average funding rates or, if none exist, the institution's average cost of capital; and

V - be examined by the supervisory board, if one exists, approved by the institution's management bodies, and reviewed during the semi-annual and annual balance sheets.

Art. 5 The probability of realizing deferred tax assets must be carefully evaluated, at a minimum, when preparing the semi-annual and annual balance sheets, and the corresponding portion of the asset must be written off obligatorily in the event of at least one of the following situations:

I - the conditions established in Art. 4 are not met;

II - the values actually realized in two consecutive periods are less than 50% (fifty percent) of the values projected for the same period in the technical study mentioned in Art. 4, item I; or

III - there are doubts regarding the institution's operational continuity.

§ 1 The provision of item I of the main text does not apply to deferred tax assets originating from tax losses caused by the exclusion of revenues from the excess depreciation of assets subject to financial leasing operations, up to the limit of the corresponding deferred tax liabilities.

§ 2 The write-down of the asset portion mentioned in the main text, resulting from the non-compliance with the condition established in Art. 4, item II, may be waived, at the discretion of the Central Bank of Brazil, based on a request that presents a justification based on a technical study of the expectation of generating future profits or taxable revenues, as provided for in Art. 4, item I.

Art. 6 It is prohibited to recognize a new deferred tax asset while there is no decision by the Central Bank of Brazil regarding the requests provided for in Art. 4, § 4, and Art. 5, § 2.

Sole Paragraph. The institutions mentioned in Art. 1 are authorized to maintain the tax credits linked to the requests provided for in the main text while there is no manifestation by the Central Bank of Brazil.

Section II - Deferred Tax Liability

Art. 7 The institutions mentioned in Art. 1 must recognize deferred tax liabilities arising from temporary differences in the period in which the corresponding revenues or equity variations are recognized.

Section III - General Criteria

Art. 8 Deferred tax assets and deferred tax liabilities must be recognized in offset to the period's result.

Sole Paragraph. Deferred tax assets and deferred tax liabilities arising from gains or losses recorded directly in shareholders' equity must be recognized in shareholders' equity.

Art. 9 The values of deferred tax assets and liabilities must be offset only in cases where the institution has the legal right to offset at the time of settling the tax obligation, provided there is compatibility of deadlines in the projection of realization and enforceability.

CHAPTER V
GENERAL PROVISIONS

Art. 10 For the purposes of measuring and recognizing current and deferred tax assets and liabilities, the criteria and rates in effect on the reference date of the financial statements must be adopted.

Sole Paragraph. In the event of a change in tax legislation that modifies criteria and rates to be adopted in future periods, the effects on the deferred tax asset and liability must be recognized immediately based on the criteria and rates applicable to the period in which each portion of the asset will be realized or the liability will be settled.

Art. 11 The institutions mentioned in Art. 1 must keep available to the Central Bank of Brazil:

I - the technical study mentioned in Art. 4, item I, for the period of realization of the respective deferred tax assets, counted from the reference date; and

II - the reports that clearly and objectively demonstrate compliance with the criteria defined in this Resolution, for a minimum period of five years.

Art. 12 If impropriety or inconsistency is found in the procedures for recognizing and measuring deferred tax assets, especially regarding the premises for their realization, the Central Bank of Brazil may determine their write-down, with the consequent recognition of the effects in the financial statements.

Art. 13 The Central Bank of Brazil is authorized to issue regulations and adopt measures deemed necessary for the execution of the provisions of this Resolution, including providing for:

I - the disclosure of information in explanatory notes; and

II - the procedures to be observed for the presentation of requests and their respective justifications in technical studies of the expectation of generating future taxable profits mentioned in Art. 4, § 4, and Art. 5, § 2.

CHAPTER VI
FINAL PROVISIONS

Art. 14 The following are revoked:

I - Resolution No. 3,059, of December 20, 2002;

II - Resolution No. 3,355, of March 31, 2006;

III - Resolution No. 4,441, of October 29, 2015;

IV - Circular No. 1,962, of May 23, 1991;

V - Circular No. 2,353, of August 4, 1993; and

VI - Circular No. 3,171, of December 30, 2002.

Art. 15 This Resolution enters into force on January 1, 2021.

Roberto de Oliveira Campos Neto
President of the Central Bank of Brazil