Transfer Pricing 2025

BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior, Bruno Marques Feitosa and Urick Soares, William Freire Advogados

2. Definition of Control/Related Parties 2.1 Application of Transfer Pricing Rules Controlled Transactions Before the enactment of Law No 14,596/2023, transfer pricing rules applied only to transac - tions (i) carried out between related parties, and (ii) involving goods, services or rights as well as the payment and remittance of interest, exclud - ing the payment of royalties that had a specific limitation. Law No 14,596/2023 expanded the spectrum of application of transfer pricing rules, which are now mandatory for “any commercial or financial relationship between two or more related parties, established or carried out directly or indirectly, including contracts or arrangements in any form and series of transactions.” This concept includes, for example: • transactions with tangible goods, including commodities; • transactions involving intangibles; • services of any kind; • cost-sharing contracts; • business restructuring, including the termina - tion or renegotiation of commercial or finan - cial relationships; • financial operations, including debt opera - tions, intra-group guarantees, centralised treasury management agreements and insur - ance contracts; • transactions that have as their object the dis - posal or transfer of assets, including shares and other interests, even if they occur in capi - tal return or subscription operations; and • any sale, assignment, loan, rental, licensing, advance and contribution.

• Unequal conditions of competition – as it tends to favour some multinational compa - nies by enabling reduced taxation, which benefit from situations for erosion of the tax base and transfer of profits (BEPS), and in other situations causing excess taxation due to double taxation caused due to the gaps and divergences between the Brazilian transfer pricing system and the international standards. In view of the conclusions highlighted in the study, technical, legislative and taxpayer debates began, so that a new transfer pricing system could be implemented in Brazil. As a result, on 14 June 2023, Law No 14,596 was published, revoking the transfer pricing standards then in force and establishing a new methodology in alignment with OECD Guide - lines, adopting the arm’s length principle as a parameter for adjusting prices charged in con - trolled transactions, replacing the fixed margin system. Such is the alignment of the OECD with the new Brazilian model, that Normative Instruction No 2,161/2023, published by the Federal Revenue Service to regulate the matter, expressly deter - mines that the guidelines embodied in the report “OECD Transfer Pricing Guidelines for Multina- tionals Enterprises and Tax Administration 2022” , as well as its future amendments, are subsidiary sources for the interpretation and integration of transfer pricing control standards.

CHAMBERS.COM