Did you know that in 2024 Brazil entered a new era in the field of transfer pricing? The transfer pricing rules in Brazil underwent a significant transformation, aligning with the OECD’s international standards. This reform aims to increase transparency, reduce tax risks, and promote global compliance. It’s important to note that companies operating in countries with favorable taxation will also be subject to this new rule.
In the old system, the Brazilian methodology prioritized simplicity over accuracy by using fixed markup margins, for example. While this offered certain advantages, it often caused issues such as:
- Risks of double taxation;
- Inconsistent treatment of international transactions;
- Challenges in aligning with trade partners in treaties.
In a world of interconnected economies, the need for standardization is essential. By adopting OECD-aligned rules, Brazil ensures:
- Fair competition;
- More transparent compliance practices;
- Alignment with international agreements and trade partners.
The main point is that companies operating in Brazil will now have to compare their operations with those of other companies. But what does this mean for companies subject to transfer pricing?
- More robust documentation requirements: Tax authorities will demand detailed analyses, including benchmarking studies, comparable transactions, and functional analyses.
- Arm’s length principle as the central standard: Intercompany transactions will be evaluated to ensure prices reflect market conditions.
- Greater tax certainty: With the adoption of OECD practices, companies can reduce disputes and tax penalties.
While the transition brings undeniable benefits, it also introduces challenges. Companies may face initial difficulties in adapting systems, gathering local and global data, and meeting the new compliance standards.
Is your company ready for this change? Whether you are new to the Brazilian market or already have established operations, adaptation will be necessary. Count on ORGATEC to solve the transfer pricing issue in Brazil.