· 1 min read
New Transfer Pricing Measures in Brazil
Brazil adopts the arm’s length principle and aligns its transfer pricing regime with OECD guidelines. The reform introduces new valuation methods, stricter documentation requirements, and penalties—marking a key shift for multinationals operating in the country. ALS offers strategic support for implementation and compliance.
On December 29, 2022, the Brazilian government published Provisional Measure No. 1,152/2022 with the aim of aligning its transfer pricing system with OECD Guidelines. The most significant change is the introduction of the arm’s length principle, which had previously been absent from Brazilian legislation.
The reform also introduces new valuation methods, stricter documentation requirements, and important changes in key areas such as intangibles, financial transactions, and business restructurings.
Key Highlights of the New Regulation
- Adoption of the arm’s length principle, replacing the fixed margin system.
- Specific rules for intra-group services, intangibles, cost contribution agreements, restructurings, and guarantees.
- Recharacterization of transactions with low-tax jurisdictions (corporate income tax below 17%) as related-party transactions.
- Limitations on interest deductibility, subject to the “necessity” criterion and thin capitalization rules.
- New criteria for deducting royalties and certain service fees.
- Introduction of Advance Pricing Agreements (APAs) for periods of up to four years, issued by the Federal Revenue of Brazil.
- Penalties of up to BRL 5 million (approx. €1 million) for failure to provide adequate documentation of related-party transactions.
If approved by Congress, the new regime will take effect on January 1, 2024, although taxpayers may voluntarily opt for early adoption starting January 1, 2023.
 copia.Npi4j0fS.png)