Brazilian transfer pricing rules: Closer to OECD guidelines
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Brazilian transfer pricing rules: Closer to OECD guidelines

3 min.

Brazil is changing transfer pricing rules to allow for joining the OECD. The new rules foresee the adoption of methods and the definition of related parties to align Brazilian regulations with international standards. The proposed legislation must be approved and turned into federal law in 2023. In this event, the rules will be mandatory for companies in 2024, while they will be optional in 2023. The Ecovis consultants know the details.

At the end of 2022, the Brazilian Federal Government proposed modifications to transfer pricing rules. This aims to put an end to the unique Brazilian calculation methods and establish rules aligned with Organisation for Economic Co-operation and Development (OECD) guidelines. However, the primary goal is to create better conditions for foreign investments, mainly to fulfil a recent international treaty with the UK and to avoid double taxation with United States.

Brazilian transfer pricing rules

The proposed new rules are based on the arm’s length principle. The following is a brief overview of the calculation methods:

  • Comparable uncontrolled price method: the average price of the same or similar goods or services in transactions between non-controlled parties
  • Resale price minus: compare the gross margin of procurement operations between controlled parties with the resale price for third parties
  • Cost plus: set a price by calculating the standard cost of the goods plus a standard profit margin (based on comparable transactions)
  • Net margin: use the net profit of another controlled transaction to determine the net profit of the transaction in question
  • Profit split method: consists of sharing the profit or losses obtained in the development of a product by the parties involved
The tax team will be happy to support you in implementing and complying with the new regulations.
Mauricio Nucci, Partner Lawyer, Vaz de Almeida Advogados*, São Paulo, Brazil

Contrary to current regulations, the changes propose allowing companies to apply the “best method” principle if certain requirements are met. As a result, there is the possibility of applying other methods not mentioned here (nor mentioned by legislation) in line with international standards, as long the results are reasonable and consistent.

It is important to point out that taxpayers will be able to consult the tax authorities prior to calculation in order to avoid tax disputes. However, it is also important to mention that commodities and intangible transactions may be subject to a specific method, with the first based on international exchange values.

For further information please contact:

Mauricio Nucci, Partner Lawyer, Vaz de Almeida Advogados*, São Paulo, Brasil

*Vaz de Almeida Advogados in alliance with ECOVIS International for legal services in Brazil

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