Introduction: The revolution in transfer pricing rules in Brazil
Brazilian transfer pricing legislation has undergone a historic transformation with the enactment of Law No. 14,596/2023, regulated by RFB Normative Instruction No. 2,161/2023. This change represents Brazil’s definitive alignment with the international standards of the Organization for Economic Cooperation and Development (OECD), abandoning the previous prescriptive system in favor of the arm’s length principle.
For multinational companies and economic groups with cross-border operations, understanding this new regulatory framework is not only a legal obligation but a vital strategic necessity. The new rules, mandatory as of January 2024, substantially change the way prices must be set and controlled transactions documented, requiring immediate adaptation of tax compliance processes.
The new regulatory framework: Law 14,596/2023 and IN RFB 2,161/2023
Adoption of the arm’s length principle
The main innovation in Brazilian transfer pricing legislation is the express adoption of the arm’s length principle as a regulatory basis. This principle establishes that transactions between related parties must be set under the same conditions that would be established between independent parties in comparable transactions.
Law No. 14,596/2023 clearly establishes that the terms and conditions of a controlled transaction must be set in accordance with those that would apply between unrelated parties. This change represents a significant break with the previous model of Law No. 9,430/1996, which used standardized methods with fixed margins, without taking into account the operational particularities of each sector.
Expanded scope of application
The new regulatory framework substantially expands the concept of controlled transactions. The current transfer pricing legislation applies to:
- Transactions involving tangible and intangible assets
- Intragroup provision of services
- Cost-sharing agreements
- Business restructurings
- Financial transactions (loans, guarantees, derivatives)
- Dispositions or transfers of assets, including shares
- Sales, licenses, and other commercial transactions
This scope contrasts sharply with previous legislation, which was essentially limited to the import and export of goods and services.
Transfer pricing methods Brazilian legislation
The six established methods
Unlike the previous regime, which separated the methods between import and export, the new transfer pricing legislation establishes six methods applicable regardless of the nature of the transaction:
Independent comparable price (ICP): compares the price charged in the controlled transaction with the prices of comparable transactions between independent parties. It is considered the most direct method when reliable comparables are available.
Resale price minus profit (RPM): Used when the reseller purchases products from a related party and resells them to independent parties, deducting the appropriate gross margin.
Cost plus profit (CPP): Applicable when the supplier in a controlled transaction sells products to a related party, adding an appropriate profit margin to the costs incurred.
Transaction net margin (TNM): Examines the net margin obtained in a controlled transaction by comparing it with the margins of comparable transactions between independent parties. This represents an important innovation introduced by the new legislation.
Profit split method (PSM): Divides the combined profits of a controlled transaction between related parties according to each party’s economic contribution. This is particularly relevant for transactions involving unique intangibles.
Other methods: The legislation allows the use of alternative or combined methods, including evaluation techniques, provided they are technically justified and comply with the arm’s length principle.
Most appropriate method rule
The choice of method should be based on its ability to provide the most reliable determination of the conditions that would be established between independent parties. IN RFB No. 2.161/2023 details the criteria for methodological selection, taking into account the availability of information, the degree of comparability, and the reliability of the necessary adjustments.
Comparability analysis: the core of the new system
Elements of comparability analysis
Current transfer pricing legislation requires a robust comparability analysis, taking into account the relevant economic characteristics of the transactions. IN RFB No. 2.161/2023 establishes a structured process that includes:
Functional analysis: Identification of the functions performed, the assets used, and the risks assumed by each party to the controlled transaction.
Characteristics of goods or services: Physical attributes, quality, availability, volume of operations.
Contractual terms: Payment terms, guarantees, risk sharing clauses.
Economic circumstances: Market conditions, geographic location, market size, level of competition.
Business strategies: Market penetration, innovation, diversification.
Comparability adjustments
When differences between the controlled transaction and the comparable transaction significantly affect prices or margins, adjustments must be made to eliminate the effects of those differences. In the case of the use of foreign comparables, Brazilian law mentions adjustments related to Brazil’s country risk.
Ancillary obligations: documentation and compliance
Global and local files
The new transfer pricing legislation introduces documentation obligations in line with OECD standards:
Global file (Master File): consolidated view of the multinational group, including the organizational structure, description of economic activities, global transfer pricing policy, and allocation of results.
Local File: Details of the Brazilian entity’s operations, with functional analysis, identification of controlled transactions, selection and application of methods, comparability analysis, and segmented financial information.
Deadlines:
- For the 2024 fiscal year: until December 31, 2025
- From 2025 onwards: three months after the ECF filing deadline (October 31 for the standard calendar year)
Exemption: Taxpayers with controlled transactions of less than BRL 15 million in the previous year are exempt from filing the local file.
Country-by-Country Report
Multinational groups with consolidated annual revenues equal to or greater than €750 million must file a country-by-country report containing consolidated data on revenues, profits, taxes paid, and number of employees per tax jurisdiction.
Registration of transactions with raw materials
IN RFB No. 2,246/2024 established the specific obligation to electronically register all controlled transactions involving the export and import of raw materials, regardless of the method used.
Executive Declaratory Act Copes No. 1/2025 approved the Manual for Completing the Raw Materials Transaction Register (RTC) version 2.0.
Adjustment regime: spontaneous, compensatory, and primary
Spontaneous adjustments
An important innovation in transfer pricing legislation allows taxpayers to make spontaneous adjustments until December 31 of the year following the calendar year of the transaction, avoiding the application of penalties when deviations from the arm’s length principle are identified.
Compensatory adjustments
Taxpayers may make compensatory adjustments, including exclusions from actual profit related to costs incurred at a value lower than that calculated by the arm’s length limit, provided they are properly documented.
Primary adjustments
The tax authority may make primary adjustments by adding to the tax calculation base the results that would have been obtained if the controlled transaction had been established in accordance with the law. IN RFB No. 2,161/2023 allows the use of information on comparables available until the delivery of the ECF.
Transfer pricing legislation and penalties
Fines for non-compliance with documentation requirements
Transfer pricing legislation establishes severe penalties for failure to submit or improper submission of documentation:
Failure to submit on time: a fine of 0.2% per month or fraction thereof on the taxpayer’s gross income.
Submission without requirements: fine of 3% on gross income, with a minimum of R$20,000 and a maximum of R$5,000,000.
Inaccurate information in the CbC report: fine of 0.2% on the consolidated income of the multinational group for the previous year.
Non-deductibility of royalties
Law No. 14,596/2023 establishes specific rules on the non-deductibility of royalties and technical assistance payments to related parties in cases where the same amount is treated as a deductible expense for another related party, or the amount deducted in Brazil is not treated as taxable income for the beneficiary.
Advance pricing agreements (APAs): Preventive legal certainty
An important innovation in transfer pricing legislation is the possibility of entering into advance pricing agreements (APAs), instruments that determine in advance the methodology for calculating transfer prices for a fixed period.
APAs are intended to increase predictability for companies and reduce future disputes with tax authorities. The specific regulations for this institute will be issued by the Ministry of Finance through a Normative Instruction that will come into force in January 2025.
OECD Guidelines: Subsidiary Application
IN RFB No. 2,161/2023 establishes that the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022 serve as a subsidiary source of interpretation of Brazilian transfer pricing legislation, except when they are contrary to or incompatible with the provisions of the law or RFB regulatory acts.
This provision brings Brazil closer to the dynamic application methodology of the OECD Guidelines, allowing for interpretative updates in line with the evolution of international standards, although the prevalence of the RFB’s express interpretation may give rise to cases of interpretative disparity.
Conclusion: compliance as a competitive advantage
The transformation of Brazilian transfer pricing legislation represents a fundamental milestone in the modernization of the national tax system. Alignment with OECD standards provides greater legal certainty, reduces the risks of double taxation, and facilitates the operations of multinational groups in Brazil.
However, the sophistication of the new rules requires organizations to take a proactive stance, invest in robust compliance structures, and develop specialized technical expertise. Timely compliance not only mitigates tax risks and contingencies, but also strengthens corporate governance and credibility with tax authorities and stakeholders.
The transition period requires special attention, as 2024 represents the first year of mandatory application and documentation for this period must be submitted in December 2025.
Ensure compliance with expert advice
The complexity of the new transfer pricing legislation requires multidisciplinary technical knowledge that integrates tax, economic, accounting, and legal expertise. Is your company prepared for the regulatory challenges of the new legal framework?
Our team of specialists offers comprehensive transfer pricing solutions, including:
- Risk diagnosis and gap analysis
- Preparation of global and local files
- Functional analysis and comparability studies
- Implementation of corporate pricing policies
- Defense in administrative proceedings and audits
- Strategic advice for structuring multinational operations
- Support in formalizing APAs
Contact us and find out how we can help your organization efficiently manage transfer pricing, transforming legal compliance into a sustainable competitive advantage.
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