Brazil: Low Value Added Intragroup Services Regulation

March 12, 2024

The provision of low-value-added intragroup services is a particular issue in the Transfer Pricing area, given that these services may be under/overinvoiced and not have a clear comparative market. Therefore, tax entities have implemented tax regulations to ensure these services are at Arm’s Length prices. This article will address the tax regulations regarding low value-added intragroup services in the recent Brazilian Transfer Pricing regulations.

OECD Guidelines on Intragroup Services

The Organization for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines define intra-group services as the activity (e.g., administrative, technical, financial, commercial, etc.) for which an independent enterprise would have paid or performed on its own.

Tax Regulations in Brazil

Accordingly, the OECD guidelines state that low value-added services must fulfill certain characteristics, which include non-core supporting services out activities of the multinational group that do not require the use of important and valuable intangible assets, lead to the creation of important and unique intangibles, nor involve the assumption or control of an important or relevant risk for the service provider or cause an important risk for such provider.

Definition of Low Value-Added Services Under the Brazilian Regulations

According to the regulations regarding low value-added intra-group services, the Secretariat of the RFB (Receita Federal do Brasil – Internal Revenue of Brazil/Brazilian IRS) issued Normative Instruction No. 2161, which regulates the new Transfer Pricing regime, defining these services as the controlled transaction consisting of rendering low value-added services.

The aforementioned instruction states that the remuneration for such services shall have a gross profit margin, calculated on all direct and indirect costs related to the transaction, of:

  • At least 5% (five percent) when the service provider is a legal entity domiciled in Brazil;
  • At most 5% (five percent) when the provider is a related party abroad.


Likewise, low value-added services are those of a solidarity nature unrelated to the main activities of the related entity or the multinational group, do not require exclusive and valuable intangible assets, do not contribute to their creation, nor imply the assumption or control of economically significant risks by the service provider and those not significantly contributing to the creation, increase, or maintenance of value in the multinational group, the essential capabilities, or the possibilities of success of the multinational group’s business.

Exceptions to the Consideration of Low Value-Added Services

On the other hand, the Brazilian regulation highlights the cases in which a service will not be considered a low value-added service, referring to:

  • Services that the multinational group also provides to unrelated parties.
  • Services constituting one of the main business activities of the multinational group.
  • Research and development activities – R&D.
  • Manufacturing and production services; purchasing activities related to raw materials or others used in the manufacturing or production process.
  • Sales, marketing, and distribution activities.
  • Financial transactions.
  • Extraction, exploration, or processing of natural resources.
  • Insurance and reinsurance activities.
  • Senior management services.
  • International transportation services, merchandise leasing, or affreightment.


In addition, according to the OECD guidelines, the Brazilian legislation provides some examples of low value-added intra-group services to explain companies. Among them, are human resources management, accounting, auditing, processing, account management, legal, and other general administrative or clerical services.

Simplified Approach to Determine Amounts

The Brazilian legislation, according to OECD guidelines, establishes that the taxpayer may choose a simplified approach to determine the amounts corresponding to the low value-added intra-group services. This simplified method is based on the allocation of all associated costs of a low value-added service incurred for the activity of the members of a multinational group to those members.

Multinational groups choosing to use this simplified approach must have available the detailed information and documentation mentioned below to the tax authorities:

  • A description of the categories of low value-added intra-group services and a justification for rendering the services.
  • Written contracts or agreements to render services and any amendments thereto.
  • Documentation and calculations supporting the determination of the shared cost account.
  • Calculations reflecting the application of the specified allocation keys.

Effective Management and Tax Compliance

Effective management of low-value-added intra-group services can be a significant strategic resource for multinational companies. Conversely, all tax regulations and obligations must be complied with to avoid potential tax and financial risks.

In conclusion, the regulation of low value-added intra-group services in Brazil, according to the OECD guidelines, represents significant progress against under-invoicing and overvaluation of services within multinational groups. Regulatory Instruction No. 2161 establishes clear criteria to determine the fair remuneration of these services, ensuring performance at market prices. In addition, offering a simplified approach to determination facilitates tax compliance when the necessary documentation supporting the allocation of costs is filed to the authorities. This regulation not only provides legal certainty to companies but also promotes transparency and fairness in intragroup transactions, thus strengthening the integrity of the Brazilian tax system.