Transfer Pricing documentation in Brazil has gained greater importance following the adoption of the OECD guidelines through Law No. 14,596/2023. Multinational companies and economic groups with transactions between related parties must demonstrate that their transactions follow the arm’s length principle, that is, conditions equivalent to those applicable between independent companies.
Proper documentation is essential to reduce tax risks, avoid penalties, and comply with the requirements of Brazil’s Federal Revenue Service.
What does transfer pricing documentation include?
The documentation compiles analyses and information demonstrating the compliance of transactions between companies within the same group, such as:
- Purchase and sale of goods;
- Provision of services;
- Financial transactions;
- Royalties and intangibles;
- Loans between related companies.
With harmonization with international standards, Brazil now requires a more robust documentation framework aligned with global tax compliance practices.
Key General Requirements
Companies must maintain complete information on their transactions, including:
Functional Analysis
It evaluates:
- Functions performed by the parties;
- Assets used;
- Risks assumed.
This analysis is essential for determining the most appropriate Transfer Pricing method.
Applicable methods
Among the main accepted methods are:
- PIC (Preço Independente Comparado, its Portuguese acronym);
- PRL (Resale Price Less Profit, in Portuguese);
- MCL (Cost Plus Profit, in Portuguese);
- MLT (Net Transaction Margin, in Portuguese);
- MDL (Profit Split Method, in Portuguese);
In accordance with OECD guidelines and local transfer pricing regulations, incorrect application of the methodologies mentioned above may lead to challenges by the tax authorities and resulting tax adjustments.
Supporting documentation
The following must also be submitted:
- Intercompany agreements;
- Financial statements;
- Economic studies;
- Comparability analysis.
Local File and Global File
Brazil formally applied for OECD membership in 2017 and is currently considered a key partner. Its membership entails compliance with standards regarding governance, the environment, and the economy. With regard to Transfer Pricing, Brazil had to adopt three levels of information suggested in the OECD guidelines and which are internationally accepted:
Local File
It contains details of the Brazilian entity’s transactions, methods used, and economic analyses. The level of information to be reported will depend on the amount of transactions the resident company conducts with its related parties, for example:
- If the amount of controlled transactions exceeds R$ 15,000,000 but is less than R$ 500,000,000, then the Simplified Local File must be submitted.
- If the amount of controlled transactions exceeds R$ 500,000,000, then the Complete Local File must be submitted.
- Global File:
Describes the multinational group’s global policy and its Transfer Pricing guidelines. In this regard, it is important to note that, as long as the company is not required to file the Local File (amount of controlled transactions less than R$ 15,000,000), it is also not required to file the Global File.
Risks of Non-Compliance
The lack of adequate documentation may result in:
- Fines and tax adjustments;
- Increased exposure to audits;
- Reputational risks;
- International tax disputes.
Therefore, multinational companies must have adequate Transfer Pricing consulting to ensure compliance with Brazilian and international standards.
Transfer Pricing documentation has become a strategic element for companies with international operations. Brazil’s alignment with the OECD requires greater transparency, economic consistency, and tax control.
Proper local file for transfer pricing helps organizations reduce tax risks and strengthen their corporate governance.
At TPC Group, we have transfer pricing specialists ready to assist companies in preparing documentation aligned with the requirements of the Brazilian Federal Revenue Service and international guidelines.
Sources
OECD – Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations