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Transfer pricing rules in Brazil: what changes in 2024

An earth globe to illustrate the new transfer pricing regulation in Brazil.

Transfer pricing rules are an international trade pillar firstly created back in the mid-1950s. In Brazil, the federal government has just taken an important step: the rules have just been updated and will follow a global standard that facilitates international transactions.

There are significant details about transfer pricing rules in Brazil that must be considered; which is why Europartner has put together all the information you need to have in order to adapt your investments and your companies in Brazil – and make them profitable.

This article also draws on the expertise of Felipe Schaukoski, a very special guest with 11 years of experience on Transfer Pricing.

What is transfer pricing?

In a nutshell, we can say that “Transfer Pricing” refers to the price established in commercial transactions between companies of the same economic group, especially when they are located in different countries. 

Transfer pricing requirements were firstly introduced in a comprehensive manner back in the 1950s, in the United States, when multinational companies began to expand globally.

The main goal of transfer pricing regulations is to prevent the allocation of profits through price manipulation in transactions involving goods, services, or rights between companies that are part of the same economic group (i.e. intercompany transactions). 

In most countries, including Brazil, there are specific rules to ensure that intercompany transactions are not used to shift profits to low-tax jurisdictions and thus reduce the taxes due in the country of origin. 

For example, a company could sell products or services at below-market prices to its subsidiary located in a low-tax country. This would reduce the company’s taxable income in the high-tax country where its headquarters are located.

Some of the main reasons why transfer pricing rules were created include:

  • Combating tax evasion: transfer pricing rules help prevent multinational companies from reducing their tax burden by manipulating the prices of their intercompany transactions, as well as promoting international cooperation.
  • Promoting competition: pricing rules help ensure that multinational companies with subsidiaries located in different countries compete on a level playing field.

To combat possible problems, the OECD published the first transfer pricing guidelines in 1995. These guidelines established principles and methods for determining appropriate prices for transactions between related parties.

The OECD guidelines have been revised several times over the years as international business practices have evolved. The most recent version of the guidelines was published in 2022.

In Brazil, transfer pricing rules were introduced by Law No. 9,430 of 1996. The law established that multinational companies must adopt appropriate prices for transactions between their subsidiaries located in Brazil and its related parties abroad.

Let’s take a closer look at the Brazilian case and its updates.

Transfer Pricing Rules in Brazil

In 2023, Brazil published new transfer pricing legislation, which is in line with OECD guidelines. The new legislation came into force on January 1, 2024.

Before that, Brazil had a specific, simplified model: virtually all transactions were analyzed using fixed profit margins. According to the new regulations, effective as of 2024, the economic reality of the parties of the transactions must be considered, and the choice of the TP methodology will depend on several factors, including market practices and benchmarks.

The previous model was considered simplified, but contained several problems that resulted in double taxation or even double non-taxation. 

The 1996’s rules were created at a moment when Brazil was industrializing its economy, and therefore the regulations had a strong focus toward transactions involving trade of goods. 

The applicability of the Brazilian old TP rules for transactions involving services or rights, specially intangibles, remained challenging and very often couldn’t be applied by taxpayers and tax authorities.  

The new model fully adopts the international standard, which is more complex and demands more effort and attention from companies and their respective accounting and tax departments.

In the new TP rules, any commercial or financial relationship, conducted between related parties, directly or indirectly, is now subject to transfer pricing controls in Brazil

The new rules have a much broader scope than the previous legislation and include, among others, transactions such as cost contribution agreements, business restructurings, hard-to-value intangibles, financial transactions including guarantees, insurance contracts, cash pooling etc.

Let’s now take a closer look at one of the guiding principles for the new rule.

Arm’s Length Principle (“ALP”)

This principle is the cornerstone of the transfer pricing rules. In essence, the arm’s length principle requires that the prices charged for goods, services, or intellectual property transferred between related entities should be comparable to prices that would be charged between unrelated entities under similar circumstances. It aims to:

  • Ensure a correct determination of the tax base in the different countries
  • Avoiding double taxation or double non-taxation in different countries
  • Minimize conflicts between tax administrations

Imagine a multinational company, XPTO Corp, located in Country A. XPTO Corp also has a subsidiary in Country B. XPTO Corp sells a product to its subsidiary in Country B for a very high price. Country B, upon realizing this, may challenge the transfer pricing and try to tax the profits based on a fair market value of the product (Arm’s Length Principle). However, if there are no clear or aligned transfer pricing regulations in Country A, Country B may issue a transfer pricing adjustment, effectively resulting in double taxation of the same income in both countries.

On the other hand, double non-taxation can also occur when income or profits are not taxed in any jurisdiction due to gaps or inconsistencies in tax regulations. Lack of transfer pricing regulations can create opportunities for multinational corporations to exploit differences in tax rules between jurisdictions to avoid taxation altogether. Here’s an example:

Continuing with the example of XPTO Corp, suppose it has subsidiaries in Country C and Country D. Country C has very limited transfer pricing regulations, while Country D has no transfer pricing regulations at all. XPTO Corp manipulates transfer prices to shift profits to Country D, where they are taxed at very low rates or not taxed at all. Meanwhile, Country C, despite having regulations in place, may not have the necessary enforcement mechanisms or resources to challenge XPTO Corp’s transfer pricing practices effectively. As a result, the profits end up escaping taxation in both countries, leading to double non-taxation.

In both scenarios, the absence or inadequacy of transfer pricing regulations can lead to distortions in the allocation of taxable income among jurisdictions, creating challenges for tax authorities in ensuring fairness and preventing both double taxation and double non-taxation.

In Brazil, after the publication of the new transfer pricing rules, through Law 14.596/23, further regulated by the Normative Ruling (“IN”) 2.161/23, the Arm’s Length principle was finally inserted in Article 2 of the mentioned Law, with the following words: “For the purposes of determining the IRPJ and CSLL (Brazilian Corporate Income Tax – CIT) tax base, the terms and conditions of a controlled transaction will be established in accordance with those that would be established between unrelated parties in comparable transactions”.

New transfer Pricing methods in Brazil: who has to comply?

A man in front of his computador and his telefone analyzing charts to determine the best transfer pricing method for his Brazilian company.

Any company that has conducted transactions with related parties abroad, or third-parties located in countries with favored tax regimes, must comply with the arm’s length principle.

Transfer pricing regulations also require that a Local File and a Master File are annually prepared and submitted to tax authorities. While the Master File provides an overview of the multinational group, the Local File describes each relevant intercompany transaction conducted during the period under analysis, and the transfer pricing methodology adopted to demonstrate that intercompany transactions were conducted at arm’s length prices.

There is a threshold that exempts companies that have conducted intercompany transactions in the total amount up to BRL 15 million in the preceding calendar-year, to prepare and deliver the Local File and the Master File. 

It’s important to emphasize that companies that do not meet this threshold still need to comply with the arm’s length principle for all its intercompany transactions.

In contrast to the previous legislation, which mostly relied on spreadsheet calculations and predefined formulas, the requirements now include detailed reports, which involves an economic study explaining the relevant functions performed by the company, the risks assumed, and the assets used in the context of each intercompany transaction.

It is recommended to have a well-prepared and experienced finance/tax department, or to hire a specialized service to carry out these analyses and avoid unexpected fees or penalties.

Important elements to consider

The transfer pricing analysis in Brazil is no longer conducted item by item, as required by the previous legislation. The new methodology depends on a much broader study, considering factors such as the economic sector in which the multinational group operates, its organizational structure, the functions performed, assets employed, risks assumed by the entities that are part of the group, the group’s supply chain, and its value addition by each entity.

The legislation also introduces the following comparability factors, which should be evaluated during the delineation of the transaction: 

  • Contractual terms and the actual conduct of the parties
  • Functions performed, assets used, and risks assumed
  • Specific characteristics of goods, rights, or services
  • Economic circumstances
  • Business strategies

The new legislation also introduced new methods compatible with those used internationally. 

Taxpayers in Brazil will no longer have the discretion to choose the method that is most advantageous to them. The method to be selected, for each transaction, should be the one considered as the most appropriate, depending on the delineation of the transaction, availability of information, and the comparability analysis mentioned above. The legislation also provides a hierarchy for cases where more than one method can be applied with an equal degree of reliability.

Transfer Pricing Methods

Until 2023, there were specific methods for imports, exports and commodities.

Now, in order to determine if an intercompany transaction is according to the arm’s length principle, it is necessary to apply one of the methods below:

Abbreviation* Descrição Margin
PIC Comparable Independent Pricing n/a
PRL Resale Price minus Profit Benchmark
MCL Cost plus Profit Benchmark
MLT Net Transaction Margin Benchmark
MDL Profit sharing Depends on the methodology
Outros Métodos Other Methods Depends on the methodology

*The abbreviation refers to the names in Brazilian Portugues

There is now a hierarchy that demands the most appropriate method for each case.

If, for example, more than one method can be applied in a case, what counts is the order of the new legislation in force.

New Transfer Pricing rules in Brazil: Wider range of covered transactions

As mentioned, the Brazilian old TP rules had a focus on transactions involving trade of goods. Taxpayers struggled to apply the regulations to transactions involving services or rights. It changed with the new legislation, which now will include specific requirements for complex transactions such as:

  • Hard-to-Value Intangibles;
  • Cash Pooling;
  • Guaranties;
  • Insurance;
  • Cost contribution agreements.

It will be also allowed the use of alternative transfer pricing methods, such as the Residual profit method and valuation techniques. 

It’s important to highlight that although such transactions were mentioned in the Law 14,596/23, it is still pending further regulation by Normative Instruction. IN 2,161/23 haven’t brought detailed guidance on those items yet.

What are the risks involved in Transfer Pricing?

If the IRS finds that the company is not complying with the Transfer Pricing rules, it may impose certain penalties, such as:

  • Fines that can range from 0.2% per calendar month, up to 5% of the total value of the corresponding transaction for late submission or submission with inaccurate, incomplete, or omitted information.
  • Fines may also be levied on the consolidated revenue of the group in the case of infractions related to the Global File.
  • Fines from 50%-150% 50% on the amount of unpaid Income Tax (IRPJ) and Social Contribution on Net Profits (CSLL) resulting from the improper application of the transfer pricing method; and
  • No deduction for expenses incurred in intercompany transactions that are not properly documented; and
  • Imposition of default interest on the unpaid amount of tax.

How to ensure your company’s legal security

From 2024 onwards, companies will have to anticipate, analyze and apply the new rules to their business. Market studies will also be relevant to evaluate the method used.

Previously, fixed margins made this process simpler, but now the entrepreneur will have to price throughout the year, knowing the appropriate arm’s length remuneration to follow intercompany transactions. Companies may also need to regularly carry out benchmarking studies to identify arm’s length margins in order to price its products.

According to Felipe Schaukoski, the new rules are less objective, which can lead to different interpretations.

“It’s important to have a good transfer pricing policy in place, duly supported by intercompany agreements and additional evidences that the arm’s length principle was adopted.”

Felipe Schaukoski


Europartner recommends Stocche Forbes to help your company adapt to this new stage in the Brazilian tax system.

With years of experience in the market and the best experts on the subject, Stocche Forbes helps entrepreneurs to diagnose and map transfer pricing transactions, and answer all questions about compliance and ancillary obligations.

If your company intends to invest in Brazil, this new taxation rule is good news, as the policies that will now be practiced will be closer to those already in place in OECD member countries and to market reality.

This also helps to create a more favorable environment for business around the world.

This article was produced with the collaboration of Felipe Schaukoski, from Stocche Forbes.

Felipe Schaukoski has more than a decade of experience dedicated to transfer pricing, with significant roles encompassing both prestigious consultancy firms and global multinationals. His consulting career includes significant roles at Ernst & Young (EY) in Brazil and the United States. In addition, he has TP in-house international experience working in the EU for the last 5 years applying the OECD transfer pricing methodology in more than 20 jurisdictions.


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