Tax due diligence is an essential process in the legal structurings of capital markets offerings in Brazil, including Real Estate Receivables Certificates (CRIs), as it ensures legal security and transparency for investors.
Given the increasing complexity of tax legislation, it is crucial for real estate securitization institutions to understand the risks that may affect the project’s viability, including tax executions, tax cautions, and disregard for legal personality.
One of the central objectives of tax due diligence is to assess the tax compliance of the issuing entity and the underlying assets that secure the CRI, involving a review of tax obligations and the identification of hidden liabilities. The analysis of ongoing tax executions is crucial, as pending issues can compromise the viability of the CRI and the expected return for investors.
Furthermore, due diligence promotes transparency by ensuring that investors have access to accurate and complete information. A rigorous due diligence process not only supports the issuance of the CRI but also builds trust in the tax assessment of the structure.
Identifying potential disregard for legal personality is another important aspect of this process, ensuring that investors are aware of additional risks that may impact the security of their investments.
Finally, tax due diligence serves as a risk mitigation tool, protecting both issuers and investors. In a dynamic market where tax regulations are constantly evolving, the ability to manage these risks is essential for the success of operations and for maintaining investor confidence in CRIs.
