Brazilian Senate approves the Provisional Measure No. 1,152/2022, which awaits the President’s sanction to be converted into law

Wednesday, May 31th, 2023

On May 10th, 2023, the Brazilian Senate approved the Provisional Measure (PM) No. 1,152/2022, already approved by the Chambers of Representatives, without substantial changes. The text of the Provisional Measure was forwarded to the Executive Branch and awaits the President’s sanction or veto (integrally or partially), resulting in a possible conversion into law.

The PM No. 1,152/2022 amends the Corporate Income Tax (Imposto de Renda das Pessoas Jurídicas – IRPJ) and the Social Contribution on Net Profit (Contribuição Social sobre o Lucro Líquido – CSLL) legislation to establish new transfer pricing rules, aligning the Brazilian rules to the Organization of Economic Cooperation and Development (OECD) guidelines.

The original text of the Provisional Measure was lightly amended by the Brazilian Chamber of Representatives, of which the following stand out:

• Elimination of the restriction on the deductibility of royalties paid to legal entities located in jurisdictions classified as tax havens, which is now allowed if certain specific criteria are met;
• Exclusion of the secondary adjustment, a concept established for dealing with the consequences of improper transfer of profits to other jurisdictions due to an error in the tax calculation basis; 
• Changes in the criteria for applying the PIC (Comparable Independent Price) method in transactions involving commodities.

The application of the new rules remains optional for the calendar year 2023 and mandatory from 2024 onwards.

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