Brazilian Provisional Measure to Align with the OECD

On December 29, 2022, the Brazilian government released a presidential decree that contains legislation to align Brazil’s unique transfer pricing system with the OECD Transfer Pricing Guidelines. This provisional measure introduces the arm’s length principle, as well as OECD transfer pricing methods, new documentation requirements, and considerable changes to the treatment of intangible assets, financial transactions and business restructuring.

Brazil has long been a standout in the world of transfer pricing, opting to handle the pricing of intercompany transactions in more of a formulaic manner. Brazil’s transfer pricing system differs from the rest of the world, making it common for multinational enterprises operating in Brazil to experience double taxation as a result of being subject to differing systems of global taxation. However, all of that changes with the latest provisional measure.

In order to become adopted, the provisional measure must be transposed into law by the Brazilian parliament (congress and senate) within 120 days. While this is not yet certain, it is expected that parliament will support the bill and it will become law.

Our host Brittany Hardin Tanguay is joined by Brad Parker (Principal, KPMG US - Transfer Pricing practice), and Sebastian Hoffmann (Senior Manager, KPMG Brazil - Global Transfer Pricing practice), to discuss the latest news along with some initial thoughts and reactions.