On 30 March 2023, the Brazilian Lower House of Congress adopted Measure No. 1,152 to overhaul its transfer pricing system that was introduced on 29 December 2022. In addition to introducing the arm’s length principle into the Brazilian transfer pricing system, provisional Measure No. 1.152 would introduce new transfer pricing methods and documentation requirements, as well as significant changes in the treatment of intangible assets, financial transactions and corporate restructuring.
Notable changes to the text passed by the House of Commons include that (a) royalties paid to related parties residing in low-tax jurisdictions would be tax-deductible if they comply with the arm’s length principle, and (b) the Comparable Uncontrolled Price (CUP) method is the preferred method for transactions involving commodities, unless the facts and circumstances of the transaction, as well as functions, risks and assets to other group companies in the value chain justify another transfer pricing method.
The bill has yet to be approved by the Upper House within 60 days from 30 March 2023. Once approved and published in the Official Gazette, the revision will come into effect on 1 January 2024. However, the Brazilian Federal Tax Agency has allowed taxpayers to voluntarily opt-in to the new TP framework starting in 2023.
