BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior, Bruno Marques Feitosa, Matheus Di Felippo and Urick Soares, William Freire Advogados
standards, adopt a more prescriptive approach due to the traditions of the Brazilian tax system. These devices aim to reduce the burden of complying with tax obligations and provide legal certainty in tax mat - ters for taxpayers and also improve the efficiency of tax administration. However, such provisions, even following such an approach, offer taxpayers the pos - sibility of determining results based on analysis of facts and circumstances in a manner consistent with the international standard.” Therefore, it is possible to state that the current Bra - zilian rules are very close to the standards required by the OECD of its signatories, so that it can be con - cluded that there is full alignment with the body’s Guidelines. 9.2 Arm’s Length Principle From the publication of Law No 14,596/2023, the arm’s length principle started to be adopted as an adequacy paradigm for controlled transactions. With the publication of the aforementioned standard, every transaction subject to transfer pricing calcula - tion must, by applying the most appropriate method, demonstrate that its pricing occurred under circum - stances and conditions consistent with market prac - tices, in compliance with the arm’s length principle. This principle replaces the fixed margin model previ - ously adopted by Brazilian legislation for the purpose of verifying the adequacy of controlled operations. 9.3 Impact of the Base Erosion and Profit Shifting (BEPS) Project Since the first decades of the millennium, Brazil, as a member of the G20, has been at the forefront of important agendas relating to projects that shape the rules of international taxation, such as Transparency and Exchange of Information for Tax Purposes, the OECD BEPS Project/G20 and the Two-Pillar Solution to Address Fiscal Challenges Arising from the Digitali - zation of the Economy. From this perspective, the influence of BEPS actions on Brazilian fiscal policy is undeniable, notably with regard to transfer pricing and information sharing rules.
The main influences of BEPS on Brazilian legislation are: • Law No 12,973/2014 – update of taxation rules on a universal basis (CFC Rules) – BEPS Action 3; • Normative Instruction No 1,571/2015 and Norma - tive Instruction No 1863/2018 – provide for man - datory provision of information regarding financial operations of interest to the Brazilian Federal Rev - enue Service and on the final beneficiary of legal entities (UBO) – Action 12 of BEPS; • Normative Instruction No 1,681/2016 – Country- by-Country Declaration – BEPS Action 13; • Normative Instruction No 1,689/2017 – later replaced by Normative Instruction No 2,058/2021 – deals with the consultation process – Action 5 of the BEPS; and • Normative Instruction No 1,846/2018 – MAPA – BEPS Action 14. Parallel to this, Brazil advanced in studies to align Brazilian transfer pricing practices with OECD guide - lines, which culminated in the issuance of Law No 14,596/2023, which, as already pointed out in this document, represents total alignment with the stand - ard of the OECD, consequently, with great influences from BEPS. 9.4 Impact of BEPS 2.0 Brazil has formally implemented Pillar Two of the OECD/G20 Inclusive Framework through Provisional Measure No 1,262/2024, later converted into Law No 15,079/2024, along with Normative Instruction No 2,228/2024, issued by the Brazilian Federal Revenue Service. These instruments establish the domestic legal framework for applying the Global Anti-Base Erosion (GloBE) Rules, including a minimum effective tax rate of 15% for multinational enterprise (MNE) groups with consolidated revenues equal to or exceeding EUR750 million. The legislation provides for the application of the Income Inclusion Rule (IIR), which ensures that income earned by foreign subsidiaries and permanent estab - lishments is subject to top-up taxation in Brazil if it is taxed below the minimum rate. The framework also
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