BRAZIL Law and Practice Contributed by: Ricardo Barretto Ferreira da Silva and Camila Sabino Del Sasso, Azevedo Sette Advogados
( Programa Emergencial de Retomada do Setor de Eventos , or PERSE). 5.4 Tax Consolidation Brazil does not currently allow tax consolida - tion for income tax or social contributions. Each company in a corporate group is taxed inde - pendently. While there are some administrative simplifications and sector-specific programmes, true group taxation is not part of Brazilian tax law at this time. However, Brazil is in the process of implement - ing a major tax reform, which includes the cre - ation of a unified VAT system (CBS and IBS). Although this reform simplifies the indirect taxes, tax consolidation is still not explicitly introduced for corporate income taxes. 5.5 Thin Capitalisation Rules and Other Limitations Thin capitalisation rules apply to loan transac - tions and other forms of indebtedness between a Brazilian-based company and a related party abroad. As a result, interest payments made to foreign related parties are tax-deductible under Brazilian law only if certain limits are respected, which vary depending on whether the interest recipient is located in a low-tax jurisdiction (LTJ) or benefits from a privileged tax regime. Generally, for interest paid to related parties not based in LTJs or not benefiting from such regimes, the deduction for IRPJ and CSLL pur - poses is allowed only when specific thresholds are met. 5.6 Transfer Pricing In 2023, Brazil enacted Law No 14,596, intro - ducing a new transfer pricing regime, which is aligned with the OECD guidelines followed by most jurisdictions worldwide. Under the new
rules, cross-border transactions (import or export of goods, services, intangible properties, and loans) between related parties must follow the arm’s length principle, which replaces the previous system based on fixed margins. The law incorporates a comparability analysis process, where controlled transactions are eval - uated against those between unrelated parties. Internal comparables are preferred but, if una - vailable, external comparables from commercial or international databases may be used, provid - ed they are properly supported by documenta - tion as required by the Normative Instruction of the Brazilian Federal Revenue Service – IN RFB No 2,161/2023. To address differences between markets, adjust - ments must be applied, including a country risk premium. The law also requires the use of the interquartile range to eliminate outliers when the comparability range is broad and contains uncertainties, except in specific situations such as international dispute resolutions or where the tax authority provides different guidance. 5.7 Anti-Evasion Rules The legislation in force to combat tax evasion is made up of a set of rules aimed at punish - ing illegal practices and curbing abusive behav - iour in the tax sphere. The main law related to this topic is Law No 8,137/1990, which defines crimes against the tax system, such as tax eva - sion, fraud, and omission of information to the tax authorities. In addition, the National Tax Code ( Código Tributário Nacional , or CTN) – especially after Complementary Law No 104/2001 – introduced a general anti-avoidance rule, allowing the tax authority to disregard acts or legal transactions
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