The Federal Revenue Service has clarified that companies under the actual profit regime may deduct trademark royalties paid to domestic related parties, provided the payments meet business necessity, INPI registration, and fair market value requirements.
Brazil’s tax authority, the Federal Revenue Service (RFB) has issued Ruling No. 208/2026, which was published in the Official Gazette on 29 October 2026. The ruling explains when a company under the actual profit regime can deduct trademark royalties when it calculates its corporate income tax (IRPJ).
The case involved a Brazilian company that paid royalties to a Brazilian licensor. The contract was registered with the National Institute of Industrial Property (INPI). The two firms owned no shares in each other and did not form a corporate group. They did, however, share two individual partners.
The old ban and its repeal
For decades, Article 71, sole paragraph, line d of Law No. 4,506/1964 barred companies from deducting royalties paid to their partners, shareholders, or directors. Article 363, item I of the Income Tax Regulations (RIR/2018) repeated that rule.
Law No. 14,596/2023 repealed the statutory ban through Article 46, caput, item III, line b. The repeal took effect on 1 January 2024. Companies that adopted the law early under article 45 could apply it from 1 January 2023.
The RFB noted that a regulation exists only to carry out a law. The Federal Constitution (article 84, IV) and the National Tax Code (articles 97 and 99) set that limit. Once the law was repealed, the regulatory ban lost its legal basis for events from 1 January 2024 onward.
Who counts as a partner
Even before the repeal, the RFB held that this arrangement did not fall under the ban. The word sócios refers only to people or entities that hold shares directly in the paying company. Article 108, § 1 of the National Tax Code prohibits stretching tax rules by analogy. Shared individual owners do not turn two separate companies into partners.
The family clause in Article 363, item I reaches only individuals linked to a partner. It does not apply to other companies.
Domestic deals and the transfer pricing rules
The transfer pricing rules in Law No. 14,596/2023 apply only to deals between related parties where at least one side is based abroad (article 1, sole paragraph, and article 4). Purely domestic payments fall outside those rules. Tax authorities instead review them under general expense rules and the disguised profit distribution regime (Distribuição Disfarçada de Lucros, or DDL).
Lifting the ban does not make deductions automatic. Taxpayers must meet three conditions:
- The royalties must be necessary, usual, and normal for the business (articles 311 and 362 of RIR/2018, and articles 47 and 71, caput, line a of Law No. 4,506/1964). The company must show that it actually uses the trademark.
- The license must be registered with INPI under article 365, § 3 of RIR/2018. Law No. 14,596/2023 removed the old cap of 5% of net revenue found in article 365, which came from Law No. 3,470/1958 and Law No. 4,131/1962. The registration requirement remains in force.
- The DDL rules apply (articles 528 onward of RIR/2018, based on Decree-Law No. 1,598/1977, article 60). Royalties paid to a related party above market value are presumed to be a disguised profit distribution under article 528, caput, item V. If a common partner controls the payer by majority voting power, article 530 extends that presumption even when the payee is a separate company. Only the excess over fair market value is disallowed (article 531, caput, item IV). The taxpayer can rebut the presumption by proving that the terms match what unrelated parties would agree to (article 528, § 3).
What this means for taxpayers
Law No. 14,596/2023 replaced automatic bans with economic checks. Companies can now deduct royalties paid to domestic partners or related firms. They must prove business need, keep the INPI registration current, and show that the price reflects fair market value.
