BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior, Bruno Marques Feitosa and Urick Soares, William Freire Advogados
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, royalties 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 With the publication of the new transfer pricing rules, the limitation on the deductibility of royal - ties was revoked, with such expenses being fully deductible if it is an uncontrolled operation.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. Before the enactment of Law No 14,596/2023, royalties 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 With the publication of the new transfer pricing rules, the limitation on the deductibility of royal - ties was revoked, however, the transaction must be subject to analysis of adequacy to the arm’s length principle if it is a controlled transaction.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. 15.2 Restrictions on Outbound Payments Relating to Controlled Transactions
payer’s tax obligation, identifying the amount to be paid. • Assessment notification – the taxpayer is notified of the tax collection through an offi - cial document sent by the tax authority. • Challenge or administrative appeal – the taxpayer has the right to challenge the tax assessment by filing a challenge or adminis - trative appeal, demonstrating any errors in the charge or legal reasons for the challenge. • Administrative decision – the tax authority analyses the objection or appeal and issues an administrative decision, whether or not it accepts the arguments presented by the taxpayer. • Payment or registration in active debt – if the administrative decision is unfavourable to the taxpayer and there is no longer any possibility of appeal, he/she must pay the tax or the tax authority may register the debt in active debt for judicial collection. Judicial phase: • Lawsuit – if the taxpayer disagrees with the administrative decision, he/she can appeal to the judiciary, filing a lawsuit to contest the collection of the tax. • Tax foreclosure – if the court decision is unfa - vourable to the taxpayer, the Public Treasury may initiate the tax execution process to col - lect the tax, if the taxpayer does not make the spontaneous payment. 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.
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