With the entry into force of Law No. 14,596/2023 and RFB Normative Instruction No. 2,161/2023, Brazil has adopted a new Transfer Pricing regulatory framework aligned with the international principles promoted by the OECD. Among the most novel elements of this system are the so-called compensatory adjustments, which represent a significant change from previous tax practice and pose both legal and operational challenges.
What are compensatory adjustments?
According to Brazilian regulations, compensatory adjustments are corrections made by the parties to a controlled transaction to ensure that the price applied is within the arm’s length range. These adjustments must be made before the end of the fiscal year and be duly supported by accounting, tax, and contractual documentation demonstrating their economic reasonableness.
Unlike primary adjustments (determined by the tax authorities) or spontaneous adjustments (made unilaterally by the taxpayer), compensatory adjustments require recognition by both parties involved and must be reflected in the accounts through the issuance of tax documents, such as credit or debit notes. This requirement increases the need for advance planning and coordination between related entities.
Regulatory ambiguities: impact on other taxes?
Although the regulatory framework establishes that compensatory adjustments do not have an automatic effect on taxes other than IRPJ (Corporate Income Tax) and CSLL (Social Contribution on Net Income), the term “automatically” creates legal uncertainty.
For example, if an adjustment affects the value of an import, the values declared at customs may be questioned and related taxes, such as Import Tax, IPI (Tax on Industrialized Products) or PIS/COFINS, may be reassessed. Internationally, there are already precedents in countries such as Poland, where the applicability of VAT to this type of adjustment has been discussed, concluding that they do not constitute consideration for services but rather price correction mechanisms between related parties.
These uncertainties require taxpayers to assess each case individually to determine whether the adjustment may trigger indirect effects on other tax obligations.
Practical challenges and need for guidance
The implementation of compensatory adjustments, as provided for in Brazilian regulations, requires companies to adopt robust internal control mechanisms and consistent documentation processes. It also requires the review of intercompany contracts, the clear definition of applicable Transfer Pricing methods, and the advance preparation of reports supporting the corrections.
Given that there are still no complementary rules that deal in detail with the effects of compensatory adjustments on other taxes or regimes (such as foreign trade, ISS, or tax benefits), regulatory gaps remain that create legal uncertainty.
To date, the Brazilian Federal Revenue Service has not issued specific guidelines clarifying whether compensatory adjustments can modify the tax base for other taxes. This regulatory silence translates into a latent risk for taxpayers, especially in international transactions or those involving tax incentives.
Final considerations
Compensatory adjustments are an important step toward the convergence of the Brazilian system with international best practices, particularly with regard to the arm’s length principle. However, their practical application requires caution due to possible spillover effects on other areas of the tax system.
In the absence of clear guidelines, taxpayers are advised to carefully assess each situation, keep detailed records and, if possible, consult the tax authorities in advance to avoid future contingencies. It is also expected that, as the implementation of the new regime becomes more established, the Federal Revenue Service will issue additional regulations providing greater legal certainty regarding the collateral effects of these adjustments.
Source: https://www.migalhas.com.br/depeso/435844/ajustes-compensatorios-nas-novas-regras-de-precos-de-transferencia