BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior, Bruno Marques Feitosa and Urick Soares, William Freire Advogados
3.4 Ranges and Statistical Measures The new transfer pricing rules in Brazil introduce the concept of “Comparable Range” . The Comparable Range should be used when the application of the most appropriate method leads to a range of observations of financial indi - cators of comparable transactions carried out between unrelated parties, the appropriate range will be used to determine whether the terms and conditions of the controlled transaction are in accordance with the arm’s length principle. When regulating the matter, the Normative Instruction establishes that the determination of the Interval of Comparable will be carried out by adopting the following procedures: • the range must be composed of observations obtained from comparable operations; • selected observations that have a lower degree of comparability in relation to the con - trolled transaction or that are not sufficiently reliable must be eliminated; • after the elimination of these transactions, if uncertainties remain regarding the degree of comparability of the comparable transactions with respect to the controlled transaction that have not been precisely identified or quanti - fied and adjusted or if any uncertainty regard - ing reliability remains, the interquartile range will be considered as the range appropriate; and • if there are no uncertainties about the degree of comparability of the comparable transac - tions in relation to the controlled transaction, nor about their reliability, the complete range will be considered the appropriate range.
In summary, there are two hypotheses for using the Comparable Interval: • in cases where the controlled transaction indicator is within the comparable range, the principle of arm’s length is applied; and • in cases where the controlled transaction indi - cator is not included in the comparable range, the controlled transaction will be assigned the value of the average of the values identified in the appropriate range. 3.5 Comparability Adjustments Law No 14,596/2023 determines the perfor - mance of comparability adjustments, as long as they are reasonably precise, to eliminate the material effects of differences in relation to the controlled transaction or the tested party, observing that: • comparability adjustments to eliminate mate - rially relevant differences should be made if, and only if, they are expected to increase the reliability of the results; • comparability adjustments must be made after applying consistent criteria to transac - tions between unrelated parties that reveal the highest degree of comparability; • the same difference must not be adjusted more than once using the same comparability adjustment, or different adjustments, so that the effect of the adjustment that eliminates the same difference multiple times is not computed; • the need to make numerous or substantial comparability adjustments may indicate that transactions between unrelated parties are not sufficiently comparable; and • each adjustment must be duly justified and documented, including the provision of information that demonstrates the need for each of the adjustments with reference to the
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