Reporting information and complying with Transfer Pricing regulations is a key obligation for many companies operating in Brazil. In recent years, the country has evolved its Transfer Pricing regime, adopting a framework more aligned with international standards, particularly through Law 14.596/2023 and RFB Normative Instruction No. 2.161/23. This article outlines the requirements for filing Transfer Pricing in Brazil, including relevant thresholds and the necessary documentation based on current regulations.
Mandatory Transfer Pricing Reporting
Being required to file Transfer Pricing means that a company must demonstrate to the Brazilian tax authority (Receita Federal do Brasil, RFB – Federal Revenue of Brazil) that related-party transactions, both domestic and international, comply with the Arm’s Length Principle, i.e., the prices, margins, and conditions agreed upon among related parties must be consistent with those of independent parties under similar conditions. Filing this information has two aspects:
- Registration in the annual income tax return (Escrituração Contábil Fiscal, ECF – Fiscal Accounting Bookkeeping).
- Detailed documentation, when applicable, in accordance with the thresholds established by the regulations.
Who Is Required in Brazil?
1) Multinationals with Significant Transactions
Companies based in Brazil that belong to a multinational group and exceed certain transaction thresholds must prepare Transfer Pricing documentation in a more comprehensive format (Master and Local Files). According to current regulations, these thresholds are as follows:
- Controlled transactions equal to or greater than BRL 500 million require the complete preparation of the Local and Master Files, aligned with the OECD framework.
- Transactions between BRL 15 million and BRL 500 million require a simplified Local File and, depending on the size of the group, also a Master File.
- Transactions below BRL 15 million are exempt from preparing Local and Master Files, although they must comply with general tax system registration requirements.
These thresholds are based on the criteria set by RFB Regulation No. 2,161/23 and aim to calibrate the documentation burden according to the taxpayer’s operational scale.
2) Country-by-Country Reporting (CbCR) Requirements
In addition to local and global documentation requirements, Brazil demands a Country-by-Country Report (CbCR) from member entities of a multinational group when the consolidated group reaches a certain level of global income (for example, consolidated revenue in the previous year exceeding certain thresholds, such as BRL 2.26 billion or the equivalent of EUR 750 million). This report details the group’s revenues, taxes, and economic activities across all jurisdictions in which it operates.
3) Brazilian Controlling Entity
Any company domiciled in Brazil that acts as the ultimate controlling entity of a multinational group must also comply with CbCR filing when the criteria established by global reporting regulations are met.
4) Other Related Entities
Even if an entity does not exceed the detailed documentation thresholds (Local or Master File), it must still include Transfer Pricing information in its income tax return (ECF). This annual reporting obligation stands apart from transaction values and applies to all companies that conduct related-party transactions within and outside Brazil, subject to local Transfer Pricing rules.
Documentation Preparation
Local File
It refers to the detailed documentation of controlled transactions carried out by the Brazilian entity, including functional analysis, method selection, comparables, calculation, and conclusions.
Master File
It contains consolidated information on the multinational group, its global corporate structure, Transfer Pricing policies, and principles considered in setting intra-group prices.
Country by Country Report
It provides a consolidated report of the group’s global operations, as required by international reporting regulations incorporated into the Brazilian regime.
Non-compliance with Transfer Pricing Obligations in Brazil
Failure to comply with the documentation and reporting obligations established in Law No. 14,596/23 exposes Brazilian taxpayers to significant financial penalties, without prejudice to other applicable tax measures. According to Article 35 of Law 14,596/23, failure to file or incorrect filing of the required documentation may result in, among others, the following penalties:
- Fine for late filing: Equivalent to 0.2% of the gross turnover for the period to which the obligation refers, for each calendar month or fraction of delay.
- Fine for inaccurate, incomplete, or omitted information: May reach 5% of the value of the controlled transaction, or 0.2% of the consolidated turnover of the multinational group for the previous fiscal year, alternatively, when the obligation refers to information about the economic group.
- Fine for non-compliance with the formal requirements of the ancillary obligation: Equivalent to 3% of gross turnover for the corresponding period.
- Fine for obstruction of the audit: Failure to timely file the information or documentation required during a tax proceeding may result in a penalty of up to 5% of the value of the controlled transaction.
The regulations also establish clear quantitative limits for these penalties, setting a minimum amount of BRL 20,000 and a maximum amount of BRL 5,000,000 per violation, in accordance with Article 35, §1. Additionally, when the tax authority considers that the documentation is insufficient to perform an adequate comparability analysis, Article 34, §1 empowers the RFB to recharacterize the functions, assets, and risks of the parties involved and to adopt reasonable estimates, which substantially increases the risk of tax adjustments in the IRPJ (Imposto sobre a Renda das Pessoas Jurídicas – Corporate Income Tax) and CSLL (Contribuição Social Sobre o Lucro Líquido – Social Contribution on Net Income).
Conclusion
In Brazil, the obligation to file Transfer Pricing information applies to:
- Companies with related-party transactions, regardless of size, must file the annual return (ECF).
- Entities with significant transactions, which must also prepare Local and Master Files, according to established thresholds.
- Controlling entities of multinational groups, which must file the Country-by-Country Report when the established global revenue limits are exceeded.
The tax management of any company operating in Brazil and conducting intra-group related-party transactions must understand these obligations and the applicable thresholds.
Specialized Transfer Pricing Advice in Brazil
At TPC Group, a company specializing in Transfer Pricing, we provide comprehensive technical advice to multinational groups operating in Brazil. We assist our clients in identifying obligations, preparing the required documentation, and responding to audits by the Receita Federal do Brasil, ensuring compliance with the Arm’s Length Principle and mitigating tax risks.
Contact us for a preventive assessment of your intercompany operations in Brazil.
Source: Presidency of the Republic – Planalto