The Brazilian Federal Government enacts the Legal Framework for Transfer Pricing (Law no. 14,596/23)

Monday, June 19th, 2023

The Brazilian Federal Government sanctioned without vetoes the law that updates the national rules for transfer pricing to the standards recommended by the Organization for Economic Co-operation and Development (OECD).

On June 15, 2023, the Law no. 14,596 was published in the Brazilian Official Gazette (Diário Oficial da União) – it modified the transfer pricing rules related to the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profit (CSLL) to the standards recommended by the OECD.

The conversion into law of the Provisional Measure no. 1,152/2022 is the result of a long journey developed jointly between the Brazilian Federal Revenue Service, the OECD, and the Brazilian business community to adjust the Brazilian tax and foreign exchange laws to the international standards in transfer pricing for international transactions between related parties.

Although the Provisional Measure was signed without vetoes by the Federal Government, it is important to highlight that the original text of the bill had some changes made during the Congressional discussions, such as:

• The exclusion of the secondary adjustment – a concept adopted to deal with the consequences of improper transfer of profits to other jurisdictions due to error in the tax calculation basis;
• Changes in the rules applicable on commodities;
• Suppression of an article that restricted the deductibility of royalties paid to companies established in tax heavens.

The adoption of the new rules is optional for the calendar year of 2023, being mandatory from 2024 onwards. The early adoption of the new transfer pricing rules must be confirmed by companies until the end of September 2023, through an electronic process on the e-CAC portal. To support the decision for the possible anticipation of effects to 2023, it is recommended that taxpayers carry out a comparative diagnosis that considers not only the methodological aspects of transfer pricing, but also the situation regarding royalty-bearing contracts.

NNB Advogados has a specialized team in Tax Law, intellectual property, and transfer pricing, being qualified to assist companies in advisory and litigious demands. To learn more about how we can assist you, please contact us.