Transfer Pricing 2025

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

3. Methods and Method Selection and Application 3.1 Transfer Pricing Methods In view of the alignment with the OECD Trans - fer Pricing Guidelines for Multinational Com - panies and Tax Administrations, the methods adopted by Brazilian legislation are the same as those regulated by the OECD. The methods are described in this section. However, first the authors present the practices that must precede the choice and application of methods. Delineation of the Controlled Operation Once the controlled transaction has been identi - fied, its real economic content must be extracted from it (delineation). This task requires knowl - edge and analysis of: • the economic sector in which the taxpayer operates and the elements that affect the per - formance of a company’s commercial opera - tion in that economic sector; • the taxpayer’s organisational structure; • the functions, assets and relevant risks assumed by the entities that are part of the group in which the taxpayer is included; and • the production chain and its added value. The delineation of the economic content of the transaction must be done based on the analy - sis of the factual and circumstantial elements of the transaction, and it is recommended to check the economically relevant characteristics listed below, always seeking the options realistically available for the transaction. • Contractual terms of the transaction – the attribution of rights and obligations between the parties, written or unwritten, the analysis of facts and circumstances and evidence of the effective conduct of the parties, which will

It is concluded that any economic interaction existing between related parties is subject to verification of adequacy through the transfer price. The concept of the standard is so com - prehensive that even omissions found in the course of commercial relations can be subject to adequacy analysis for transfer pricing. In other words, if one of the related parties remains inac - tive, when a certain active conduct is expected from them, in compliance with common market practice, this omission may be subject to trans - The rule taken from Law No 14,596/2023 and Normative Instruction No 2161/2023 also inno - vates in the concept of related parties. The previ - ous regulations adopted a criterion in which the verification of corporate ties (direct or indirect) predominated for the purposes of classifying the parties as “related” . fer pricing rules. Related Parties Under the primacy of economic substance, the influence of one party over the other, exercised directly or indirectly, is considered as related whenever the influence of one party over the other is verified, and which may cause the trans - action carried out not to occur under market conditions. The influence must be verified based on the characteristics of the transaction and the commercial and economic ties between the par - ties. Whenever business and economic circum - stances demonstrate the existence of significant influence of one party over the other, the applica - tion of transfer pricing rules becomes manda - tory, even if there is no corporate link between the parties. In addition to related parties, transfer pricing rules are also mandatory for transactions carried out with an individual or legal entity resi - dent or domiciled in a country that does not tax income or that taxes it at a rate lower than 17%, or that is a beneficiary privileged tax regime.

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