Brazil is not exempt from amendments to international taxation. Due to the imminent implementation of the global minimum tax, multinational companies operating in the country will have to reconsider their Transfer Pricing policies to ensure compliance with the new regulations.
Global Minimum Tax
The global minimum tax is an OECD-led initiative intended to ensure that large multinational companies pay at least 15% tax on their profits, regardless of the location of their generation. This amendment results from global efforts against tax evasion and tax base erosion, warding from profit shifting off to low-tax jurisdictions. Due to this global movement, Brazil is aligning with these measures, which will directly affect the Transfer Pricing strategies of companies with operations in the country.
Effects on Transfer Pricing
Due to the global minimum tax, multinational companies operating in Brazil will have to evaluate their intercompany transactions and their Transfer Pricing policies, which results from the thoroughness of tax authorities to possible discrepancies from related-party transactions, in addition to any adjustments in global tax policies could affect profitability and regulatory compliance. The mandatory maintenance of proper Transfer Pricing documentation will become even more critical, given that companies shall support that their transactions are under Arm’s Length terms, complying with both local regulations and international guidelines.
Preparing for Compliance
Therefore, multinational companies must review their tax structures and Transfer Pricing policies in anticipation of any adjustments that Brazilian tax authorities may implement. Internal audits, functional analysis, and the correct determination of comparables will be necessary to avoid tax risks and penalties. In addition, companies must be prepared to justify any variations in their Transfer Pricing structures in response to new tax transparency requirements and the global minimum tax implementation.
Preparation of Companies in Brazil
Companies should review their intercompany operations and ensure that their Transfer Pricing policies comply with the Arm’s Length Principle. In addition, it is advisable to perform tax audits and obtain specialized advice to mitigate any risks arising from the new global tax. Effective tax planning will be essential to maintain competitiveness and avoid unfavorable adjustments.
Call to Action
If your company needs specialized advice to prepare for the global minimum tax effects on Brazil and ensure compliance with Transfer Pricing regulations, contact us at TPC Group. We are at your disposal to assist you in navigating this complex tax landscape.
Source: Legislacao & Mercados
