BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior, Bruno Marques Feitosa and Urick Soares, William Freire Advogados
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 exclusive to Brazilian practice. 11.4 Financial Transactions Chapter X of the OECD Transfer Pricing Guide - lines, introduced in the 2022 edition, addresses Transfer Pricing Aspects of Financial Transac - tions. It provides detailed guidance on how to apply the arm’s length principle to a variety of intra- group financial 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 transac - tions, as addressed in Chapter X.
lated on all direct and indirect costs related to the transaction, of: • at least 5%, in cases where the service pro - vider is a legal entity domiciled in Brazil; • a maximum of 5%, in cases where the pro - vider 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 valu - able intangible assets and do not contrib - ute 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 crea - tion, increase or maintenance of value in the multinational group, to the essential capabilities or to the chances of success of the multinational group’s business. Services that the multinational group also pro - vides to unrelated parties cannot be considered low-value-added services. If necessary, an appropriate allocation method or apportionment criterion must be used to deter - mine 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.
104 CHAMBERS.COM
Powered by FlippingBook