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Brazil To Align Transfer Pricing Rules With OECD Guidelines

by Mike Godfrey, Tax-News.com, Washington

16 July 2019


The OECD and Brazil's Receita Federal (RFB) issued a joint statement at an event on July 11, 2019, to present the outcomes of a 15-month work program carried out by OECD and the RFB on Brazil's transfer pricing rules and the possibility that they be aligned with the OECD's guidelines.

According to the OECD, the three-stage work program was launched in February 2018 to undertake an in-depth analysis of Brazil's transfer pricing legal and administrative framework and examine the similarities and divergences between the Brazilian and OECD transfer pricing approaches to valuing cross-border transactions between associated enterprises for tax purposes.

The differences identified were then further assessed from the perspective of meeting the primary objectives of transfer pricing rules as well as from the perspective of other tax policy objectives.

The international business network Business at OECD, other multinational entities, and tax administrations representing Brazil's major trading partners provided input.

In particular, in terms of the strengths and weaknesses of Brazil's transfer pricing regime, the report found that:

  • Brazil's transfer pricing regime diverges from the OECD guidelines in 30 areas;
  • 27 out of the 30 issues identified in the Brazilian transfer pricing rules increase the risk of double taxation;
  • A large number of the gaps or issues identified create BEPS risks, leading to potential loss of revenue; and
  • Significant tax uncertainty results from the misalignment of the rules with the OECD transfer pricing standard given that, out of the 30 issues identified, only three instances lead to positive outcomes regarding tax certainty from an international perspective.

Following the assessment, Brazil is considering whether to immediately align its regime with the OECD's guidelines or do so gradually. The OECD said that the findings of the study will serve as a basis to assist decision-makers in deciding on the way forward for Brazil's transfer pricing regime. It recommended that Brazil develop a roadmap for reform, identify the key design features of a new regime, draft implementing legislation, invest in capacity building initiatives, consider structural changes at the tax agency, and consider changes that would simplify compliance.

TAGS: compliance | tax | investment | tax compliance | training | tax authority | legislation | transfer pricing | Brazil | Tax | BEPS

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