Brazil: Transfer Pricing Documentation and BEPS Developments


Published on February 16, 2017

In the context of the Base Erosion and Profit Shifting (BEPS) project, Brazil is an active participant on the discussions of the Action Plan. Regardless of not being an OECD member, in the context of international cooperation Brazil has been playing an important role and adopting several actions respecting local restrictions of the tax law, despite the gap with the legislation in an OECD environment.

Aligning transfer pricing standards

From a transfer pricing perspective great discussion remains in the adoption of the Actions 8, 9 and 10. Especially due to significant differences of the calculation method adopted by OECD members and in Brazil to adjust the price aiming a fair allocation of revenue on businesses carried out with related parties. Under the BEPS project the arm’s length principle would be the basis for transfer pricing control and is based on risks and functions, whereas in Brazil it is settled in fixed margins.

However, in the last years relevant modifications were made to allow independent comparable standards more aligned with OECD arm’s length standards due to the pressure of multinational enterprises (MNEs) deriving from the gap for example between the OECD Transfer Pricing Guidelines (Chapter 2) and the Brazilian statutory methods. Therefore, discussions aiming a more neutral method among both abovementioned are likely to rise in the future.

Transfer pricing documentation and exchange of information

In parallel, transfer pricing documentation has developed significantly in the international context. The adoption of measures to support the implementation of automatic exchange of information in tax matters, through the signature of the Common Reporting Standard Multilateral Competent Authority Agreement (CRS MCAA) imply on an improvement of international cooperation, as it allows disclosing and exchanging information between the countries assuming that they are compliant with requirements of the MCAA Convention. Brazil enacted MCAA through the Federal Decree # 8,842/2016, with effects as of October 2016. 

The Country-by-Country Reporting in Brazil

The approval of the CRS MCAA is also a step towards the possibility of implementing new transfer pricing reporting standards developed under Action 13 of the BEPS Action Plan, namely the Country by Country Reporting (CbCR). It guarantees that tax administrations have access to the MNEs structure and operations, through the annual automatic exchange of country-by-country reports. The confidentiality of such information is safeguarded.

On December 29, 2016, Brazil enacted the Normative Instruction # 1,681/2016, that regulates and requires the annual CbCR for Brazilian enterprises that belongs to multinational groups. The IN # 1,681/2016 establishes that the controlling entity – ultimate parent company – of a Brazilian multinational group files the CbCR at the Corporate Income Tax Return (ECF) if the consolidated revenue for the precedent fiscal year is equal or greater than BRL 2,26 Million.

IN # 1,681/2016 determines that CbCR shall be reported related to calendar year 2016, the layout comprising the reporting form ”W”, whose layout is expected to be published soon. The IN # 1,681/2016 also imposes penalties for not complying with the CbCR rules. For instance, transactions and financial operations that are not fully disclosed in the CbCR may be subject to penalty of up to 3% of the amount of such transactions.

APA regulations in Brazil

Regarding documentation for transfer pricing purposes, it is also worth mentioning that while Brazilian taxpayers are not entitled to file Advance Pricing Agreements (APAs), it is required to have a study and calculation related to any modifications carried out in statutory margins.



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Michael Löb

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Karen Steuer

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