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Brazil’s New Transfer Pricing Rules Now in Effect

Learn how Brazil’s transfer pricing aligns with the OECD and enhances compliance.
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Implementation Background

Brazil’s new transfer pricing rules went into effect on January 1, 2024 for multinational enterprises (MNEs) operating in Brazil. Taxpayers had the option of electing to early adopt the new transfer pricing rules in 2023, but as of 2024, the new rules are now mandatory. The new transfer pricing rules align with the Organisation for Economic Co-operation and Development’s (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022 (OECD Guidelines).

The new transfer pricing rules originated from Provisional Measure 1,152/2022 published on December 29, 2022. On May 10, 2023, the Brazilian Federal Senate approved Bill of Law No. 8/2023, and on June 14, 2023, the bill received presidential approval and was signed and converted into Law 14,596/23. On September 29, 2023, the Brazilian Revenue Service (RFB) published Normative Instruction (NI) 2,161/23, which provides implementation guidance related to Law 14,596/23.

Arm’s-Length Principle

Brazil historically relied on a formulaic approach that incorporated fixed operating margins. With the adoption of the arm’s-length principle, transfer prices are determined based on fair market prices determined through a comparables search. As such, an economic analysis and in-depth functional, asset, and risk analysis will be important to substantiate transfer pricing policies and documentation.

Transfer Pricing Methods

The new Brazilian transfer pricing methods closely align with the OECD Guidelines, which include traditional transaction-based methods (comparable uncontrolled price method, resale price method, and cost plus method) and transactional profit methods (profit split method and transactional net margin method (TNMM)). The RFB prefers traditional transaction-based methods; however, transactional profit methods may be used if traditional transaction-based methods cannot be applied.

Related Parties & Testing Transactions

The new transfer pricing rules broaden the definition of what constitutes a related party and applies the new transfer pricing rules to all cross-border related-party transactions, including tangible goods, services, intangibles, and loans.

NI 2,161/23 specifies that the simplest party to the intercompany transaction is the tested party. If the taxpayer does not demonstrate the selection of the tested party based on functions, risks, and assets, the RFB may define the Brazilian entity as the tested party. Transactions may be tested on a combined basis if those transactions are intrinsically connected.


Local comparables are preferred; however, non-local comparables may be used if adjustments can be made to consider any material differences. In line with the OECD Guidelines, the RFB allows for the use of multiyear data and weighted averages to calculate financial indicators of comparable companies; however, loss makers or companies with a negative weighted average of financial indicators or with a negative financial indicator in more than one year should be eliminated.

Safe harbors may be applied to certain types of low-valued added intercompany services transactions. For taxpayers that provide importing or exporting services, the safe harbor the RFB has established is a 5% gross margin on the total costs of the low value-added services.

In addition, royalty transactions now require an economic analysis, as the new rules eliminated the deductibility cap for royalty and technical assistance payments.

Transfer Pricing Adjustments

NI 2,161/23 outlines three types of transfer pricing adjustments to achieve results in line with the arm’s-length principle:

  1. Spontaneous adjustment, made directly to the income tax calculation.
  2. Compensatory adjustment, made by both parties to the transaction at the close of the fiscal year.
  3. Primary adjustment, made by the RFB to increase the corporate income tax in the event the taxpayer has not made arm’s-length adjustments. 

It is important to note that compensatory adjustments do not automatically trigger an adjustment of other taxes, which may create some complexity for taxpayers with import functions that apply the TNMM.

Documentation Requirements

Transfer pricing documentation requirements are aligned closely with the OECD Guidelines. Companies with intercompany transactions exceeding R$500 million (approximately $100 million) are required to complete a master file and a local file. Companies with intercompany transactions between R$15 million (approximately $3 million) and R$500 million are required to complete a simplified “light” local file. Companies with intercompany transactions below R$15 million are not required to complete transfer pricing documentation but must still adhere to the arm’s-length principle. 

Taxpayers are required to present certain transfer pricing information as part of the corporate income tax return filing. For fiscal years ending December 31, 2024, documentation must be submitted through the RFB’s online Portal e-CAC by December 31, 2025. For fiscal years ending December 31, 2025 and beyond, documentation must be submitted by October 31 of the following fiscal year. The RFB will accept master files in English and Spanish, but taxpayers may need to present a Portuguese translation if requested. Local files must be prepared in Portuguese.


Transfer pricing documentation is required for penalty protection. Brazil imposes penalties for non-compliance with transfer pricing rules that vary depending on the documentation. For master files and local files that are submitted late, a 0.2% per month penalty on gross revenue may apply. For master files and local files that have incomplete or inaccurate information, a 3% penalty on gross revenue may apply. If the RFB conducts a tax procedure or inspection measure and the taxpayer fails to file timely information requested by the tax authority, a penalty of 5% of the intercompany transactions may apply. 

Next Steps for Taxpayers

The RFB will likely publish additional NIs to provide guidance on other topics related to Law 14,596/23, such as cost contribution arrangements, business restructurings, mutual agreement procedures, advance pricing agreements, and other topics. MNEs with operations in Brazil should carefully consider and prepare for the changes to the transfer pricing rules, which will likely result in an increased compliance burden for companies. MNEs will need to review and modify existing transfer pricing policies to align with the new transfer pricing framework and consider other potential impacts, including foreign tax credits, customs valuation, income taxes, and increased transfer pricing scrutiny. 

If you have any questions or need assistance, please reach out to a professional at FORVIS.

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