Brazil: OECD-aligned transfer pricing rules passed by Chamber of Deputies, await vote in Senate

The Senate now has 60 days to pass the legislation.

Passed by Chamber of Deputies, await vote in Senate

The Chamber of Deputies yesterday passed Provisional Measure No. 1,152, which would enact significant changes to the Brazilian transfer pricing system—shifting from Brazil’s historical, formula-based transfer pricing rules to an arm’s length standard consistent with the OECD Guidelines.

The government of Brazil issued Provisional Measure No. 1,152 on 29 December 2022, and the Brazilian parliament (both the Chamber of Deputies and the Senate) then had 120 days to transpose the draft legislation into law. Read TaxNewsFlash

In addition to introducing the arm’s length principle to Brazil’s transfer pricing system, Provisional Measure No. 1,152 would establish new transfer pricing methods and documentation requirements, and considerable changes to the treatment of intangible assets, financial transactions, and business restructuring. Read TaxNewsFlash

The conversion of provisional measures into law gained steam in the last week when the government and opposition agreed on voting the provisional measures still implemented by the former government. The Chamber of Deputies voted on the provisional measure yesterday. The provisional measure was accepted by a vote of 369-10. The now Bill of Conversion No. 8/2023 (Projeto de Lei de Conversão n. 8/2023) includes the following changes after the latest discussions:

  • Royalties paid to related parties in low-tax jurisdictions and operating under special tax regimes (as defined by Brazilian law) are deductible as long as they are in accordance with the arm’s length principle.
  • Tax authorities cannot perform a secondary adjustment in case transfer prices are deemed not in accordance with the arm’s length principle.
  • For commodities, the comparable uncontrolled price (CUP) method remains the most appropriate method unless the facts and circumstances of the transaction, as well as functions, risks, and assets vis-à-vis other group companies in the value chain, render another transfer pricing method more appropriate.

Next steps

The Senate now has 60 days to pass the legislation. It is not clear at present if the Senate will accept the bill without any changes or if it will reject the bill and ask the Chamber of Deputies to consider adjustments.

KPMG tax professionals understand that the bill will most likely be approved, and Brazilian entities will be required to prepare and present transfer pricing documentation based on the new guidance for the 2024 fiscal year. Taxpayers also will be able to opt for the early adoption and, thus, observe the new rules for 2023 fiscal year.

For more information, contact a KPMG tax professional in Brazil:

Ericson Amaral |

Edson Costa |

Henrique De Conti |

Sebastian Hoffmann |


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