BRAZIL Trends and Developments Contributed by: Celso Costa, Bruna Marrara, Luiz Rosa and Clarissa Torrente, Machado Meyer Advogados
• Senior corporate management services, except for those consisting of the manage - ment of services that qualify as low value- added services. • International transportation, goods rental or chartering services. The legislation sets forth examples of LVAIS. • Human resources management services. • Accounting, auditing, processing and account management services. • Legal services. • Information technology (IT) services that are not part of the group’s core business, for example, the installation, maintenance and updating of IT systems used in the business, training on the use or application of informa - tion systems or the development of IT guide - lines. • Other general administrative or office ser - vices. Due to the special transfer pricing approach that can be applied towards LVAIS, one could construe that the list provided for by the legisla - tion and transcribed above should be deemed merely exemplificative, so that the verification as to whether a certain service can or cannot be deemed a LVAIS shall be made on a case- by-case basis, considering the nature of the ser - vice vis-à-vis the essence of the main activities developed by the relevant taxpayer. Such conclusion would be reinforced by the fact that activities that the Multinational Enterprise (MNE) also renders to unrelated parties shall not
deemed “service” for purposes of the New Bra - zilian TP Rules if: • the activity is characterised as a shareholder activity; or • the activity represents the duplication of a service already provided to the taxpayer or which the taxpayer has the capacity to perform on its own, except in cases where it is demonstrated that the duplicated activity results in additional benefits for the taker – as per the “benefit” concept set out above. Shareholders’ activities are carried out in the capacity of shareholder, directly or indirectly, in its own interest, including those which sole pur - pose or effect is to protect the capital investment or to promote or facilitate compliance with legal, regulatory or reporting obligations. Thus, although the New Brazilian TP Rules pro - vide for a very broad concept of “services” in order for activities developed by and between Related Parties to be covered by its scope of application, such rules carve-out the “sharehold- ers’ activities” from the transfer pricing scope to ensure that those managerial acts that are intrin - sic to MNEs do not unduly impact the assess - ment of the CIT taxable basis of the Related Par - ties involved: neither to reduce nor increase it. One can conclude that, similarly to what is veri - fied for LVAIS’s purposes, establishing whether an activity developed by the parent/holding company of an MNE can be settled as “share- holder activity” is contingent upon the verifica - tion whether the activity developed by the share - holder in a direct or indirect benefit of the rest of the group is one which non-related parties would not be reasonably willing to pay for (ie, would not be onerous on an arm’s length basis).
be deemed as LVAIS. Shareholder activities
Differently from the above, the development of a certain activity between Related Parties is not
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