This document discusses changes in Brazilian transfer pricing rules, particularly the introduction of new rules through Temporary Measure 1,152/2022. Previously, Brazil relied on fixed markup rates and mandatory formulas for price calculation, which differed from the OECD’s Transfer Pricing Guidelines. The new rules, if approved, shift towards the OECD guidelines, emphasizing the arm’s length principle. It also introduces additional transfer pricing methods. The document highlights the importance of accurate delineation of controlled transactions and describes related-party definitions. The level of documentation and compliance requirements is discussed, as well as the penalties for non-compliance. Lastly, it touches on tax havens and the introduction of the Country-by-Country Report (CbCR) in Brazil.
The Brazilian transfer pricing landscape underwent significant changes recently due to Temporary Measure 1,152/2022. Prior to this, Brazilian rules differed considerably from the OECD Transfer Pricing Guidelines, relying on fixed markup rates and mandatory price calculation formulas. However, with the introduction of Temporary Measure 1,152/2022, Brazil aims to align more closely with the OECD principles.
Temporary Measure 1,152/2022 defines related parties as those influenced directly or indirectly by each other, potentially affecting transaction terms. This encompasses various entities, including controlling shareholders, affiliated companies, and entities with shared interests or control.
The document highlights the importance of documentation, such as invoices, agreements, and commercial records, in supporting corporate income tax returns. There is no exemption from documentation obligations for related party transactions, and taxpayers must provide detailed information on methods, price support, and calculation records when requested by tax authorities.
Temporary Measure 1,152/2022 introduces a broader range of transfer pricing methods, bringing Brazil closer to OECD guidelines. These methods include Cost-Plus Markup, Resale Price Less Markup, Compared Uncontrolled Prices, Transactions Net Margin, and Profit Split.
Brazil introduced Country-by-Country Reporting (CbCR) as part of BEPS Action 13, which applies to multinational entities based in Brazil with significant revenues. The CbCR must be filed with the Corporate Income Tax Return and serves as an additional tool in tax audits.
Brazil distinguishes between tax havens and countries with privileged tax regimes, maintaining a list of jurisdictions with lower tax rates or inadequate information sharing.
Non-compliance with transfer pricing documentation and regulations can lead to penalties, interest charges, and tax adjustments. Penalties can range from untimely filing fines to substantial penalties for evasion, fraud, or collusion.
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