Transfer Pricing in Brazil

Transfer pricing legislation in Brazil was born in the mid-90s, due to the growth of large multinational companies in this country.

These norms were incorporated by Law No. 9430 of 1996, which was inspired by the guidelines established by the Organization for Economic Cooperation and Development (OECD). However, it has presented its own particularities, which have created divergences in terms of the model proposed by the OECD.

Since their creation, the Brazilian transfer pricing rules have been characterized by the attempt to simplify the taxpayer’s assessment of the prices agreed upon between related parties and at the same time to facilitate the Tax Administration’s verification.

However, such regime has not undergone many changes over time and has presented certain problems. Therefore, in 2019 Brazil has been working together with the OECD on a project to align itself with their transfer pricing model.

Definition of Transfer Pricing

Transfer pricing is understood to be the prices or values agreed in operations carried out between related parties, also known as intercompany transactions.

Principle of Full Competition in Brazil

The principle of full competition or “arm’s length” principle that governs transfer pricing is based on the fact that the values or considerations agreed between related parties are in line with market value, that is, as if they had been agreed between independent parties.

This principle is not expressly included in the Brazilian transfer pricing legislation, although it is in accordance with the Explanatory Memorandum of Law No. 9430/1996.

It is worth mentioning that this principle has nuances in the Brazilian legislation, since there are certain operations that are not subject to it, such as royalties, technology transfer licenses, and other intangibles, in addition to regulating certain safe ports for certain operations.

Scope of Application of Transfer Pricing in Brazil

According to Article 18 and 19 of the Law, the transfer pricing rules in Brazil will apply to the following import and export operations:

  1. Operations carried out with related parties, which are for the taxpayer in Brazil cost or expense related to acquisition of goods or services and rights.
  2. Operations carried out with related parties, which are for the resident taxpayer income from sale of goods, services and rights.

It is also stated, according to article 24 of the Law, that these rules shall apply to transactions carried out with a person, whether an individual or a legal entity, resident in a tax-favored country, which do not tax income or, if taxed, do so at a rate below 20%.

Definition of Related Parties in Brazil

According to article 23 of the Law, the following shall be considered as parties related to the legal entity in Brazil:

  • Its parent company when it is resident abroad.
  • Its subsidiary or branch when it is domiciled abroad.
  • The person, whether natural or juridical, domiciled abroad, who owns part of the capital stock of the resident juridical person and makes it its controller.
  • The juridical person domiciled abroad, which is characterized by being its subsidiary or affiliate, as indicated by Law No. 6,404.
  • The legal entity resident abroad and the legal entity resident in Brazil, when both have the same individual or legal entity that controls them socially, administratively or holds at least 10% of the capital of each.
  • The legal entity domiciled abroad, when, together with the company domiciled in Brazil, they hold a percentage of the capital stock of a third company, which makes them controllers or affiliates of the latter, according to the provisions of Law No. 6,404.
  • The individual or legal entity domiciled abroad that may be considered as an associate in a consortium or condominium, according to Brazilian legislation.
  • The natural person domiciled abroad that has a kinship relationship up to the third degree is the spouse or partner of the directors, partner, or shareholder of the legal entity residing in Brazil.
  • The exclusive agent, distributor or concessionaire, whether a natural or juridical person, residing abroad.
  • The natural or juridical person resident abroad, of which the juridical person resident in Brazil is the exclusive agent or distributor for the purchase and sale of goods, services or rights.

Transfer Pricing Methods in Brazil

The transfer pricing regime in Brazil distinguishes the use of methods, depending on whether it is an import or export operation with a related party, so that articles 18 and 19 detail the following:


The following valuation methods are available for this type of operation:

  • Independent Method of Compared Prices (PIC): It is defined as the arithmetic weighted average of the prices of goods or services, when these are identical or similar, that can be found in the Brazilian market or in other countries under similar conditions.
  • Resale Price Less Profit Method (PRL): It is defined as the arithmetic weighted average of the sales prices of goods, rights or services in the country, in Brazil, under similar payment conditions and calculated under certain methodologies.
  • Cost of Production plus Profit (CPL) Method: Refers to the weighted average cost of producing identical or similar goods, services or rights, adding the rate and taxes for exports charged in the country from which they originate plus a profit margin of 20% over costs.

Additionally, Article 18 -A establishes a method for the case of imports of commodities, also called PCI method, taking as reference the international quotation values of futures and commodities.


According to article 19, when the income from these transactions with related parties is less than 90% of the average price in sale of goods, services or rights, in the Brazilian market under similar conditions, any of the following methods must be used:

  • Export Sales Price Method-PVEx : This is defined as the arithmetic average of the sales prices of exports made by the taxpayer to other customers, or the prices agreed upon by another exporter, under similar conditions, during the same period.
  • Wholesale Price Method in the Country of Destination minus Profit -PVA : This method consists of making an arithmetic average of the sales prices practiced in the wholesale market of the country of destination, for operations in similar conditions, discounting the taxes charged in that country, and a profit margin of 15% on the wholesale price.
  • Retail Price Method in the Country of Destination minus profit- PVV: It is defined as the arithmetic average of the prices practiced in the retail market of the country of destination, for operations in similar conditions, discounting the taxes charged in that country, and a profit margin of 30% of the retail price.
  • Acquisition or Production Cost plus Taxes and Profit Method – APC: This method considers the arithmetic average of the acquisition or production costs, adding the taxes and contributions collected in Brazil and a profit margin of fifteen percent on the sum of the costs plus taxes and contributions.

Safe Harbour in Brazilian Transfer Pricing Legislation

The Brazilian legislation on transfer pricing has the particularity of presenting “safe harbours”, or also known as “safe ports”. In the case of the transfer pricing system, certain margins are established, so that if the taxpayer is within these margins, the Federal Revenue of Brazil (RFB) would not have to question the transfer prices established.

One of these safe harbors is found in article 19 of the Law mentioned above, since the transfer pricing methodology will only be applied in export transactions when the income with related parties is less than 90% of the price of similar goods or services in the Brazilian market.

This type of mechanism seeks to facilitate the taxpayer and also the tax authority the verification of prices.

Transfer Pricing Statement and Documentation in Brazil

Brazilian transfer pricing legislation, unlike other Latin American legislations, has not yet introduced the first two levels of documentation required by Action 13 of the BEPS Plan (Base and Erosion and Profit Shifting) for transfer pricing, such as the Local Report (Local File) and the Master Report (Master File).

However, if you have regulated the third level of documentation, i.e., the Country-by-Country Report (Cbc or Country-by-Country Declaration) through Regulatory Instruction No. 1681 issued by the RFB in December 2016.

Article 3 of said regulation states that taxpayers domiciled in Brazil who are the parent company of a multinational group are obliged to submit this report.

In turn, a member of a Multinational Group residing in Brazil will be required to file it in the event of any of the following situations:

  • The parent company is not required to file this report in its jurisdiction.
  • The jurisdiction of the parent company has signed a Country by Country Report Exchange Agreement with Brazil, but does not have a Competent Authorities Agreement.
  • With these two agreements, the parent company’s jurisdiction is in systematic default and is reported by RFB to the group’s resident entities.

The parent company resident in Brazil or its member entities resident in that country will not file such declaration when the consolidated income of the previous fiscal year is less than R$ 2,260,000,000.00 or 750,000,000.00.

This will be declared through the EFC system or Fiscal Accounting , by the Public System of Digital Accounting (Speed) and therefore its presentation term will be the one established for the EFC.

On the other hand, the Brazilian transfer pricing rules require that transfer pricing documentation be submitted annually along with the corporate tax return.

Sanctions for Transfer Pricing Noncompliance in Brazil

The legislation on transfer pricing in Brazil does not have specific infractions regarding transfer pricing. However, general infractions and penalties may be applied.

In case of untimely filing of the return, the obligated taxpayers will be subject to a fine of R$ 1,500.00 for each month or fraction thereof.

Likewise, in case of an inaccurate declaration, they will be subject to a penalty of 3% of the value of the omitted transactions.

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