Provisional Decree aligns transfer pricing rules with international standards

New transfer pricing system enters into force in 2024, but companies may apply new rules as of January 2023

In order to align transfer pricing rules with international standards, the Federal Government published, on December 29, Provisional Presidential Decree No. 1,152/2022 . The law amends the legislation on Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL), updating the taxation levied on Brazilian companies that perform sales of goods and services with related parties abroad.

The decree, which has introduced new rules for calculating transfer prices for multinationals, has been eagerly awaited by the productive sector. As of its publication, international transactions performed by companies within the same business group shall now comply with the standards set forth by the Organization for Economic Cooperation and Development (OECD).

A new development is the enforcement of the arm's length principle, under which transactions performed between related parties shall follow the same terms and conditions that would have been established between unrelated parties in a free trade market, so that they are carried out on equal footing. The change is expected to attract new investors and foster the signing of treaties with other countries, aimed at curbing double taxation.

Taxpayers may adopt the new rules as early as 2023 if so they wish. The regulation, however, will become mandatory as of 2024.

It should be noted that the National Congress has 120 days from the decree’s publication date to deliberate on the matter. If the order is not signed into law by then, its effects will be declared null and void.

Support for transfer pricing application

Brazil's tax and economic environment is increasingly aligning itself with international standards. Amidst this ever-shifting scenario, Domingues e Pinho Contadores has a team dedicated to assisting multinationals in transfer pricing analysis and application, always taking into account the client's business strategy. You can rely on our support: dpc@dpc.com.br.