Brazil’s Federal Revenue has published Normative allowing the option to apply Transfer Pricing rules in line with OECD’s model

2023 Feb.28

The Federal Revenue Service published, on March 24, the Normative Instruction no. 2132/2023, providing to taxpayers the option to apply to the transfer pricing rules to controlled transactions carried out in 2023 by the new methods provided for in Provisional Measure no. 2152/2022, which aligns with the guidelines of the Organization for Economic Cooperation and Development (OECD).

The option for the new methods will be irreversible, will cover all transactions with related parties abroad, and must be formalized between September 1 and 30, 2023, by opening a digital file on the e-CAC Portal, and attaching the completed form in the sole annex.

It is also possible to opt for the new standard if a new legal entity is created during the year and if the legal entity is extinguished between January and August 2023.

In addition to providing for the choice between the methods for calculating the transfer price, the definitions of the arm’s length principle, of spontaneous and compensatory adjustment (made by the taxpayer when the assessment is lower than that determined according to the arm’s length) and primary (made by the IRS auditor – tax assessment) has been established.  The adjustments cannot, therefore, reduce the IRPJ and CSLL calculation basis, nor increase the tax loss or negative calculation basis of the taxes.

The normative ruling also provides for the “non-deductibility” of the IRPJ and CSLL tax bases of the amounts remitted abroad as royalties and technical, scientific, and administrative assistance to (i) entities resident or domiciled in territories with favored taxation or privileged tax regimes (“tax havens”) and (ii) related entities, when the deduction of the results of the amount in double non-taxation.

Taxpayers should review the transfer pricing policy practiced, evaluating which calculation method is more advantageous (OECD model x current model), according to the peculiarities of each business.

In addition, by signaling the migration to the OECD transfer pricing model, Brazil is fulfilling the requirement to become a member country of the Organization, even though this is still a long process.

The tax team of Rolim, Viotti, Goulart, Cardoso Advogados is available for any clarifications related to the subject.

Related attorneys: Luis Felipe de Campos / Danilo Gomes Breve / Roberto Junqueira de Alvarenga Neto /