Basic transfer pricing rules in Brazil

Pursuant to Art. 18 of Statute 9.430/96, the Transfer Pricing regime applies to the import and export operations of goods and services between related legal entities.

Under Art. 23 of Statute 9.430/96, the following should be considered connected or related to a Brazilian entity:

a)      their headquartes located abroad;

b)      their branch, if located abroad;

c)      the individual or legal entity, resident or domiciled abroad, whose ownership interest in its capital stock characterizes it as its parent or affiliate company, as defined in paragraphs 1 and 2 of art. 243 of Statute 6.404/1976;

d)      a legal entity domiciled abroad that is characterized as its subsidiary or affiliated, as defined in §§ 1 and 2 of art. 243 of Statute 6.404/1976;

 e)      a legal entity domiciled abroad, when it and the company domiciled in Brazil are under common corporate or administrative control or when at least ten percent of the capital stock of each one belongs to the same individual or legal entity;

f)       a natural or juridical person, resident or domiciled abroad, who, jointly with the legal entity domiciled in Brazil, holds a shareholding in the capital of a third legal entity, the sum of which is characterized as controlling companies or affiliates thereof, in the form Defined in §§ 1 and 2 of art. 243 of Law 6404 of December 15, 1976;

g)      the individual or legal entity, resident or domiciled abroad, that is its associate, in the form of a consortium or condominium, as defined in Brazilian law, in any enterprise;

h)      a natural person residing abroad who is related to or related to the third degree, spouse or companion of any of its directors or of its partner or controlling shareholder in direct or indirect participation;

i)       the individual or legal entity, resident or domiciled abroad, that enjoys exclusivity, as its agent, distributor or concessionaire, for the purchase and sale of goods, services or rights;

j)       an individual or legal entity, resident or domiciled abroad, in which the legal entity domiciled in Brazil enjoys exclusivity, as agent, distributor or concessionaire, for the purchase and sale of goods, services or rights

With the measure, the legislator intends to ensure, in particular, that transactions between legal entities belonging to the same economic group are similar to those practiced in the domestic market, avoiding irregular remittances abroad or irregular collection or deduction of income tax.