BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior, Bruno Marques Feitosa, Matheus Di Felippo and Urick Soares, William Freire Advogados
• at least 5%, in cases where the service provider is a legal entity domiciled in Brazil; • a maximum of 5%, in cases where the provider is a related party abroad; • for the purposes of applying this simplified rule, only those services that: (a) have a supportive nature; (b) are not part of the main activities of the related party or multinational group; (c) do not require the use of unique and valuable intangible assets and do not contribute to their creation; (d) do not imply the assumption or control of economically significant risks by the service provider and do not lead to the creation of such a significant risk for him; and (e) do not contribute significantly to the creation, increase or maintenance of value in the multi - national group, to the essential capabilities or to the chances of success of the multinational group’s business. Services that the multinational group also provides to unrelated parties cannot be considered low-value- added services. If necessary, an appropriate allocation method or apportionment criterion must be used to determine the cost of low-value-added intragroup services among group members in proportion to the benefits or benefits expected for each group member. 11.2 Rules on Savings Arising From Operating in the Jurisdiction Brazil does not adopt policies of this nature. 11.3 Unique Transfer Pricing Rules or Practices As Brazilian practices are fully aligned with OECD guidelines, there is no rule that can be highlighted as
It provides detailed guidance on how to apply the arm’s length principle to a variety of intra-group finan - cial dealings, including: • inter-company loans; • cash pooling arrangements; • guarantees; • captive insurance; • hedging; and • risk-free and risk-adjusted returns on capital. This chapter reflects the increasing scrutiny by tax administrations on the pricing of financial transactions within multinational groups, which are often used in tax planning strategies. With the publication of Law No. 14,596/2023, Brazil has officially begun the transition toward full alignment with the OECD Transfer Pricing Guidelines, including: • the adoption of the arm’s length principle as the core standard; • functional and risk analysis; • recognition of comparability adjustments; and • importantly, the inclusion of financial transactions, as addressed in Chapter X. The new Brazilian rules now explicitly incorporate the OECD’s approach to related-party financial transac - tions, meaning: • intercompany loans must be assessed under arm’s length conditions (eg, interest rate, credit rating, terms); and • financial guarantees and other intra-group arrange - ments are subject to valuation under OECD princi - ples. 12. Co-Ordination With Customs Valuation 12.1 Co-Ordination Requirements Between Transfer Pricing and Customs Valuation Considering that the anti-avoidance function present in the transfer pricing control rules also manifests itself in the rules that determine customs valuation, reflections naturally arise about the possible effects
exclusive to Brazilian practice. 11.4 Financial Transactions
Chapter X of the OECD Transfer Pricing Guidelines, introduced in the 2022 edition, addresses Transfer Pricing Aspects of Financial Transactions.
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