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13.4. Transfer Pricing

Since 1997, Brazilian tax legislation43  has provided for transfer pricing rules44  applicable to the import and the export of goods, rights or services, as well as to foreign loans between related companies or involving residents in a tax haven jurisdiction or whose country provides corporate confidentiality. When carrying out these transactions, the taxpayer must apply one of the transfer price methods established in law to calculate the parameter price for tax purposes.

The parameter price corresponds to the maximum tax deductible cost and expenses for import transactions, and the minimum taxable revenue for export transactions.

Although the names of methods coincide with methods specified in the OECD Guidelines45 , such as the resale price method (PRL) or cost plus method (CPL)46 , their application is unique to Brazil and is driven by predetermined profit margins that range from 15% to 60%, regardless of the specific situation of the taxpayer’s business or industry. The Brazilian provisions do not foresee a “best method rule”. The taxpayers are allowed to choose the method that provides the best results from their perspective.

For transfer pricing purposes, entities are deemed to be related inter alia in the case of:

  • a non-resident head office or parent company;
  • a non-resident branch;
  • individuals and legal entities which are characterized as being a controlling shareholder or an affiliated company;
  • a foreign company that is under the same corporate or administrative common control, or at least ten per cent of the corporate capital of each company is held by the same legal entity or individual;
  • the exclusive distributor of a Brazilian company; and
  • a non-resident individual or company which has a Brazilian company as its exclusive distributor.

In international trade operations, transfer pricing rules provide that: a) the costs and expenses of assets, services and imported rights paid by a Brazilian company shall follow the transfer pricing rules to be deductible; consequently, the amount exceeding the "parameter price" would not be deductible; and b) the Brazilian company shall record a minimum income derived from export transactions, corresponding to the 'parameter price'.

Service transactions are also subject to transfer pricing rules, although the rules do not impose specific methods. The rules are not applicable to the payment of royalties,nor to fees for technical, scientific, administrative or similar assistance, provided that the agreement is registered with the Brazilian Intellectual Property Agency (INPI).

Brazilian Transfer Pricing rules are extended to intercompany loans, except if the loan agreement is registered before the Brazilian Central BankSMALL:47 , when interest paid to a related company will be deductible limited to Libor plus 3% spread a year or a Brazilian lender should record a minimum income at the same amount.  

43Law nr 9,430, of December, 27th, 1996.

44TÔRRES, Heleno Taveira. Dupla tributação internacional sobre as rendas das empresas.  São Paulo: Revista dos Tribunais, 2001. p.161 e ss.; CARVALHO, Paulo de Barros.  Preços de transferência no direito tributário brasileiro. In: UCKMAR, Victor (Coord.); TÔRRES, Heleno Taveira (Coord.) Impuestos sobre el comercio internacional.  Madrid: Marcial Pons, 2008, p. p. 678-692; BRIGAGÃO, Gustavo; LYRA, Bruno. Transfer pricing - regras brasileiras frente aos tratados internacionais. In: TÔRRES, Heleno Taveira (Coord.). Direito tributário internacional aplicado.  São Paulo: Quartier Latin, 2007. p. 433-458; UTUMI, Ana Claudia Akie.  Preços de transferencia. Principios de la OCDE y la realidad de la aplicación en Brasil. In: UCKMAR, Victor (Coord.); TÔRRES, Heleno Taveira (Coord.) Impuestos sobre el comercio internacional.  Madrid: Marcial Pons, 2008, p.693-702.  

45OECD.OECD Transfer pricing guidelines for multinational enterprises and tax administration.Paris: OECD publishing, 2009.

46"Infatti, anche i metodi del prezzo di rivendita e del cost-plus operano una comparazione in quanto raffrontano l'utile lordo conseguito dalla dalla impresa associata con quello che una delle imprese associate avrebbe conseguito nell'ipotesi in cui le stesse attività fossero state svolte a favore di imprese indipendenti" (MAISTO, Guglielmo. Il progetto di rapporto OCSE sui prezzi di transferimento. Rivista di diritto tributario. Milano: Giuffrè, 1995, abr., nº 4, p. 364).

47TÔRRES, Heleno Taveira.  Direito tributário internacional: planejamento tributário e operações transnacionais.  São Paulo: Revista dos Tribunais, 2001. p. 531.