1. TAX MATTERS Provisional Presidential Decree No. 627, of November 12, 2013 – Revocation of the Transitional Tax System (RTT); taxation of the profits abroad of controlled company or affiliate by individuals; premium/discount resulting from equity interest; payment in installments of the Brazilian Social Integration Program (PIS) and Tax for Social Security Financing (Cofins) due by financial institutions and insurance companies and of Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) on profits earned abroad.

2. On November 12, 2013, the Provisional Presidential Decree No. 627 was published in the Brazilian Federal Register. This Provisional Presidential Decree promoted several changes in the Individual Income Tax (IRPF), IRPJ, CSLL, PIS and Cofins taxation systems, in order to adjust the tax law to the international accounting rules (IFRS), as decided by the Brazilian government upon enactment of Law No. 11638/2007, and issuance of many communications by the Accounting Opinion Committee - CPC. Please note that the purpose of these changes was to maintain the tax neutrality, irrespective of some amendments to the tax law, as informed below. From the several amendments made, this memorandum will address those relating to the following matters: Revocation of the Transitional Tax System – RTT; Taxation of profits originated from equity interests held in controlled companies domiciled abroad by individuals resident in Brazil; New system to calculate the premium or discount resulting from the acquisition of equity interest; Possibility of paying debts relating to PIS and Cofins due by financial institutions and insurance companies in installments; Possibility of paying debts relating to IRPJ and CSLL on profits earned by controlled companies or affiliates abroad in installments. As a general rule, the innovations brought by this Provisional Presidential Decree (MP) shall only come into force on January 1 st, 2015, except for those taxpayers that choose application thereof as from the calendar year 2014.

3. Revocation of the Transitional Tax System – RTT The Transitional Tax System was instituted by articles 15 through 24 of Law No. 11941/2009 to neutralize the effects of the implementation of new accounting methods and criteria by Law No. 11638/2007, by means of tax adjustments determined by that law, while a Law to regulate the tax effects resulting from that change was not enacted. In view of the fact that such Provisional Presidential Decree was enacted exactly to adjust the tax law to the new accounting methods and criteria established by the aforementioned Law No. 11.638/2007, the purpose of the RTT was exhausted. In view of that, article 99, X, of MP 627 expressly revoked the Transitional Tax System – RTT, and the promised tax neutrality was maintained. Taxation of profits originated from equity interests held in controlled companies domiciled abroad by individuals resident in Brazil Article 89 of MP 627 established new rules for the profits made available to the controlling individual resident in Brazil originated from equity interest held in controlled companies located abroad. According to the aforementioned provision, these profits shall be deemed available on the date of the balance sheet in which they were assessed, and they shall be subject to Income Tax in case any of the following conditions is met:

4. I – the controlled company is located in a country or premise of favored taxation, or benefits from the privileged tax system set forth by articles 24 and 24-A of Law No. 9430/1996; II – the controlled company is subject to the lower taxation system, i.e., the system by means of which the profits of legal entities domiciled abroad are taxed at a nominal rate lower than twenty percent. This system was introduced by item III of article 80 of MP 627; and III – the individual resident in Brazil does not have the corporate documents of the legal entity domiciled abroad registered with the competent authorities, identifying the other members. With respect to item II above (lower taxation system), we note that the MP uses the term “nominal rate”, allowing the application of benefits and tax exemptions that result in the use of an actual tax rate lower than 20%, which will certainly result in relevant conflicts when such rule comes into force. Another relevant issue relates to the scope of the rule introduced by the aforementioned article 89, which refers to controlled companies located abroad, which resulted in uncertainty if this term also involves investment funds, trusts, foundations etc. Articles 90 and 91 of the aforementioned MP also establish other rules relating to this matter.

5. New system to calculate the premium or discount resulting from the acquisition of equity interest According to the innovations brought by MP 627, the cost of acquisition in investment assessed by the amount of the owners' equity must no longer be separated in two, but rather in three categories. The portion relating to the amount of the owners' equity at the time of the acquisition shall remain the same as in the previous system. However, the amount formerly understood as premium in the acquisition must now be separated in two classifications, in the following order: § The amount corresponding to the difference between the amount of the owners' equity at the time of the acquisition, determined in accordance with the equity method, and the fair value of the net assets of the invested company, named surplus value or capital loss; and §The premium for future profitability (goodwill), represented by the residual value of the cost of acquisition, less the amount of the owners' equity at the time of the acquisition and the surplus value or capital loss between this amount and the fair value of the net assets of the invested company. Therefore, paragraph 2 of article 20 of Decree-Law No. 1598/77, which established the economic reasons to record the premium, was expressly revoked, and a new system was created, imposing on the taxpayer, as informed above, the form of assessment of the premium or discount.

6. In addition to the amendments to the law informed with respect to the premium or discount assessment system, another relevant innovation instituted by MP 637 was the requirement of preparation of an expert report proving the fair amount of the net assets of the invested companies attributed by the taxpayer, which shall be filed with the Brazilian Federal Revenue Service, or the summary of which shall be registered with the Notary Public by the last business day of the thirteenth month following the month of acquisition of the equity interest. We further note that the offset (upon realization thereof) of the surplus value or capital loss and the premium (goodwill) shall only be permitted in the event of transactions between non-related parties. Please note that the new provisions introduced by the MP are pending regulation by the Brazilian Federal Revenue Service. Therefore, we will follow up on this matter and inform you as soon as the rule is published. Finally, we note that the previous law remains valid for premiums registered by December 31, 2014 and realized by December 31, 2015. Payment of debts in installments – Law No. 12865/2013 Provisional Presidential Decree 627 has further amended articles 39 and 40 of Law No. 12865/2013, with respect to (i) the payment in cash of debts relating to the PIS and Cofins due by financial institutions and insurance companies; and to (ii) the payment in installments of debts relating to Corporate Income Tax and to the Social Contribution on Net Income earned by controlled companies and affiliates abroad, respectively.

7. PIS and Cofins Debts – financial institutions and insurance companies According to the amendments, the debts relating to the PIS and Cofins due by financial institutions and insurance companies, due by December 31, 2012, paid in cash pursuant to the provisions of article 39 of Law No. 12865/2013, shall now be reduced by 100% of the individual fines and by 100% of the interest for late payment. Pursuant to the previous wording, these deductions represented 80% of the individual fines and 45% of the interest for late payment. Therefore, the amendments to the law have benefited the taxpayer, in view of the fact that they increased the deductions applicable to such debts. The table below presents a comparison between the previous wording of article 39 of Law No. 12865/2013 and the current wording thereof, already taking into consideration the amendments of MP 627: Changes brought by MP 627 Payment of PIS and Cofins in installments - article 39 of Law No. 12865/2013 Previous wordingNew wording Reduction - payment in cash: a) 100% of the late charge and sua sponte fine b) 80% of the individual fines c) 45% of the interest for late payment d) 100% of the amount of the statutory charges. Reduction - payment in cash: a) 100% of the late charge and sua sponte fine b) 100% of the individual fines c) 100% of the interest for late payment d) 100% of the amount of the statutory charges

8. In addition, two other relevant amendments are: For the taxpayer to enjoy the benefits of the payment in cash or in installments at issue, it shall now desist only from the lawsuits relating to the debts to be paid or paid in installments, and no more from all lawsuits the subject matter of which were the taxes contemplated in article 39 (non-cumulative PIS and Cofins). In addition, the portion corresponding to the reduction of the amount of the fines, interest and legal charges shall not be taken into consideration for calculation of the tax base of the IRPJ, CSLL, PIS and Cofins. IRPJ and CSLL Debts – profit earned by controlled company or affiliate abroad With respect to the debts relating to the IRPJ and CSLL on profits earned abroad, MP 627 has extended its application to the taxable events occurred by December 31, 2012. In addition, it has increased the number of installments from 120 to 180 and expanded the deduction of the amount corresponding to the interest for late payment from 40% to 50%. Changes brought by MP 627 Installment plan for profits abroad - article 40 of Law No. 12865/2013 Previous wordingNew wording Debts due by December 31, 2012 Debts relating to taxable events occurred by December 31, 2012 Payment in installments – up to 120 installments, with 20% as down payment and the remaining amount divided in monthly installments, with a deduction of: a) 80% of the late charge and sua sponte fine b) 80% of the individual fines c) 40% of the interest for late payment d) 100% of the amount of the statutory charges Payment in installments – up to 180 installments, with 20% as down payment and the remaining amount divided in monthly installments, with a deduction of: a) 80% of the late charge and sua sponte fine b) 80% of the individual fines c) 50% of the interest for late payment d) 100% of the amount of the statutory charges

9. MP 627 has further extended the scope of the rule that allows the taxpayer to settle certain amounts included in the payment in installments with the use of credit loss and of negative CSLL tax basis, as informed in the table below: Changes brought by MP 627 Payment in installment of profits abroad – Tax loss and negative CSLL tax basis Previous wordingNew wording Amounts relating to late payment fine, sua sponte fine or individual fine, interest for late payment, including with respect to the debts registered as overdue tax liability, may be paid with the use of tax loss credits and negative CSLL basis of the taxpayer itself and of companies domiciled in Brazil and controlled by the taxpayer on December 31, 2011, provided they continue controlled by it until the date on which the option for the payment or payment in installments is made. Amounts relating to late payment fine, sua sponte fine or individual fine, and to interest for late payment and up to 30% of the principal amount of the tax, including with respect to debts registered as overdue tax liability, of the remaining amount to be paid in monthly installments, may be paid with the use of tax loss credits and negative CSLL base of the taxpayer itself and of controlling and controlled companies on December 31, 2011, domiciled in Brazil, provided this condition remains until the date of option for the payment in installments. Please note that there were also amendments and innovations with respect to the statutory provisions relating to operationalization of the new rules that relate to the payment in installments at issue. The law firm DDSA Advogados remains available to assist its clients to take the applicable measures in view of the amendment to the law, as well as to file a lawsuit seeking reimbursement for the amounts paid in excess during the last five years. DDSA Tax Team