In Brazil on 29th December 2022, draft legislation was published that updates current transfer pricing rules into a set of rules consistent with the OECD-guidelines. The provisional Brazilian rules need to be enacted into law within 120 days from the date of publication. Given the lengthy process so far, and the current favourable environment, the proposed rules are expected to be enacted. If the proposed legislation becomes law, Brazilian taxpayers would have the option to adopt the new rules for the 2023 tax year, but the new regime would be mandatory for 2024.
The new rules represent a significant realignment of Brazil’s existing transfer pricing regime, Provisional Measure (“MP”) No. 1.152/2022 towards the OECD transfer pricing guidelines. This includes the formal introduction of the arm’s length principle to Brazil’s transfer pricing regime for the first time.
In addition, the proposed legislation incorporates transfer pricing concepts such as the delineation of intercompany transactions, comparability analyses, and the "most appropriate method" selection (incl. both traditional transaction methods and transactional profits methods).
However, key differences from an OECD approach are suggested in terms of: