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Demystifying Transfer Pricing in Brazil

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On the date of 9th June 2017, a conference was held in the Círculo Ecuestre of Barcelona, organised by Andersen Tax & Legal and the Brazil-Catalonia Chamber of Commerce

On the date of 9th June 2017, a conference was held in the Círculo Ecuestre of Barcelona, organised by Andersen Tax & Legal and the Brazil-Catalonia Chamber of Commerce, in which, after an introduction by Miquel Terrasa (Partner of Andersen Tax & Legal) and Javier Mirallas (Chamber President), Demetrio Barbosa and Leonardo Mesquita (Partners of Andersen Tax Brazil) presented the current economic situation and investment possibilities in Brazil, based on the regulatory framework with respect to transfer prices provided by the Brazilian legislation.

In this regard, Brazil today is not a Member State of the Organisation for Economic Co-operation and Development; therefore, the regulations on transfer pricing do not follow the harmonised parameters provided by the OECD, but rather they follow their own guidelines. A practical effect of this is that, while the OECD parameters function as a support in valuing related party operations, the Brazilian regulations on transfer pricing directly calculates the valuation adjustment to perform.

Brazil has participated in the BEPS action plan (“Base Erosion and Profit Shifting”), as another measure to avoid tax evasion and to ensure that the profits derived from economic activities are taxed where these activities are carried out and where value is created. A measure derived from the BEPS is the “Country-by-Country report”, which is required to be presented in Brazil since the fiscal year 2016. 

Furthermore, the Brazilian Tax Administration has the “Public Digital Bookkeeping System”, a permanent electronic system of interchange of tax, accounting, and employment information among the taxpayers and the Administration, allowing the latter to obtain information practically in real time on the operations executed by the taxpayers.

The statutory period in Brazil is five years, with the usual practice of the Tax Administration being to perform tax verifications corresponding to those periods that are on the point of expiry. In the line of tax verifications, it can be highlighted that, on the subject of transfer prices, approximately 60% of the inspections result in tax regularisations, with the total regularised amount reaching 1 billion euros.  

Lastly, Brazil has been positioned as a platform of investment towards LATAM. An example is the “Drawback Regime” importing system, which allows the importing of goods, at no charge, in Brazil for their subsequent assembly/mounting in that country and their later transfer to Latin American clients.

In conclusion, the present and future is presented as an optimal opportunity for investing in Brazil. Economic growth is envisaged whose only handicap is the current political situation of the country. Possibly in the future the political situation will reach the necessary “good practices”, for example, if figures such as João Doria, the current mayor of São Paulo, reach positions of power. 


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