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Proposals for alteration of the current Brazilian rules on transfer pricing discussed at TP Minds Brazil 2018

At the opening of TP Minds Brazil (5 & 6 December 2018), the secretary for International Tax Coordination of the Brazilian Federal Revenue Secretariat, Daniel Teixeira Prates, presented some proposals that are being discussed for alteration of the current Brazilian rules on transfer pricing, to bring them closer to the OECD Guidelines.

Some highlights of the proposals presented, include:

  • Alteration of the concept of related party, probably to exclude the figure of the exclusive distributor/agent;
  • Subjection of new transactions to application of the transfer pricing rules, such as those involving payment of royalties, since the limit of deductibility of 5% specified in Finance Ministry Edict 436/1958 is not realistic;
  • Elimination of the possibility of choosing methods to indicate the most appropriate method for each type of transaction, with prevalence of the comparative method, as occurs in the ambit of the OECD Guidelines;
  • Elimination of the existence of distinct methods for import and export transactions;
  • Inclusion of the possibility of analyzing transactions in sets;
  • Maintenance of the methods involving fixed margins, provided it is possible to determine these margins; and
  • Revision of safe harbors regimes.

Additionally, the secretary reported that a study group will be created to analyze the possibility of establishing new percentages for the existing fixed margin methods, to avoid double taxation of income.

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