BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior, Bruno Marques Feitosa, Matheus Di Felippo and Urick Soares, William Freire Advogados
14. Judicial Precedent 14.1 Judicial Precedent on Transfer Pricing There is no administrative or judicial case law on the new criteria defined by Law No 14,596/2023. 14.2 Significant Court Rulings There is no administrative or judicial case law on the new criteria defined by Law No 14,596/2023. 15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions Before the enactment of Law No 14,596/2023, roy - alties could only be deducted in the amount of 5% of the expense incurred, as determined by Law No 3,470/1958. With the publication of the new transfer pricing rules, the limitation on the deductibility of royalties was revoked, with such expenses being fully deductible if it is an uncontrolled operation. With the exception of royalty operations, there are no limitations on capital remittances abroad. 15.2 Restrictions on Outbound Payments Relating to Controlled Transactions Before the enactment of Law No 14,596/2023, roy - alties could only be deducted in the amount of 5% of the expense incurred, as determined by Law No 3,470/1958. With the publication of the new transfer pricing rules, the limitation on the deductibility of royalties was revoked, however, the transaction must be subject to analysis of adequacy to the arm’s length principle if it is a controlled transaction. With the exception of royalty operations, there are no limitations on capital remittances abroad.
15.3 Effects of Other Countries’ Legal Restrictions There are no policies of this nature in Brazil. 16. Transparency and Confidentiality 16.1 Publication of Information on APAs or Transfer Pricing Audit Outcomes As a general rule, inspection processes are confiden - tial, with publicity only given to the parties involved. Because APAs require the disclosure of highly stra - tegic and confidential information, taxpayers place themselves in a position of vulnerability when engag - ing with the tax authorities to negotiate such agree - ments. This concern is partially addressed in Article 12 of the draft Normative Instruction, which establishes the Federal Revenue Service’s obligation to maintain the confidentiality of financial, commercial, technical, and tax data provided by taxpayers, in accordance with applicable legal provisions on tax and profes - sional secrecy. However, a significant concern remains: if the parties fail to reach a final agreement, Article 31, paragraph 4 of the draft allows the information obtained during the process to be shared with other departments within the Federal Revenue Service. This provision raises doubts about the actual protection afforded to infor - mation disclosed in a co-operative context and may discourage taxpayers from participating in the APA programme due to the risk that such information could later be used against them in tax proceedings. 16.2 Use of “Secret Comparables” There are no policies regarding secret comparables in Brazil.
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