BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior, Bruno Marques Feitosa, Matheus Di Felippo and Urick Soares, William Freire Advogados
1. Rules Governing Transfer Pricing 1.1 Statutes and Regulations In Brazil, transfer pricing rules are regulated by Federal Law No 14,596/2023, the application of which has been mandatory from the year 2024, and in Normative Instruction No 2,161/2023, published by the Federal Revenue Service, to better regulate the application of transfer pricing rules. Brazilian legislation also provides for the possibility of formalising a consultation with the Federal Revenue Service, with the aim of clarifying doubts regarding the application of the rules. Such consultations, when publicly answered by the Federal Revenue Service, are inserted into the national legal system, notably as an instrument for interpreting tax rules and making it mandatory that any tax authorities obey the param - eters established in the response to the consultation. 1.2 Current Regime and Recent Changes The first regulation of transfer prices in Brazil occurred in 1996, through the enactment of Law No 9,430/1996. The model then adopted provided for the application of transfer pricing methods, whenever transactions with goods, services and rights were verified, as well as the payment or receipt of interest from related par - ties. Although there was a provision for the levy of transfer pricing rules on transactions involving “rights” (intan - gibles), none of the methods provided for in the gov - erning legislation were sufficient to test transactions of this nature, which made compliance with this obli - gation impossible, which is why it was not possible to apply transfer pricing rules to this asset class. The concept of related parties was, primarily, based on the corporate link, direct or indirect, and the concept of significant influence was not adopted. The methods provided for by the original wording of Law No 9,430/1996 allow them to be divided into two groups: (i) those whose essence is price comparison; and (ii) those that are limited to data collection and application of fixed margins. In the first, we have inde - pendent prices compared in imports, and sales prices in exports. In the second, we have the resale price minus profit, acquisition, or production cost plus prof -
it, etc, in which there are margins set for profit, cost and transaction value. Those methods were criticised by the OECD, as will be pointed out below, especially when adopting fixed presumption margins. In 2012, in a first attempt to bring the Brazilian model closer to OECD standards, Law No 12,715 was enact - ed, which created two new methods, PCI, for imports, and PECEX, for exports. Such methods were closer to the arm’s length principle, as they determined that the parameter prices would be obtained based on market quotations. It was an exclusive application model for commodities. Although it represented an improvement and modernisation of Brazilian standards, the model had flaws, notably with regard to the concept of com - modities, the comparability criteria and the regulation of adjustments to be made in comparable operations. The obligation to adopt the two new methods (PCI for imports, and PECEX for exports of commodities) – to the detriment of the possibility of opting for the most favourable method, which existed until then – was jus - tified in the explanatory memorandum of Provisional Measure No 563/2012, later converted into Law No 12,715, “in order to prevent manipulation of values in import operations or exports”. Parallel to the enactment of Law No 12,715/2012, discussions on transfer pricing between the Brazilian Federal Revenue Service (RFB) and the OECD inten - sified amid the OECD/G20 BEPS Project, with two dialogue events held in 2014 and 2015. In 2017, at the invitation of Brazilian authorities, the OECD, with support from the European Commission, held a tech - nical event in Brazil, the aim of which was to provide a reciprocal understanding of transfer pricing systems. Still in 2017, the RFB highlighted a team of auditors to conduct technical studies with the aim of identifying similarities and differences between Brazilian prac - tices and those adopted by the OECD. The following year, a group of technical studies was officially launched to examine the similarities and divergences, including gaps, between Brazil and the OECD Transfer Pricing Guidelines. The group had members from the RFB and the OECD.
31 CHAMBERS.COM
Powered by FlippingBook