As the year-end approaches Brazilian taxpayers endeavour to prepare transfer pricing documentation that is acceptable under Brazilian transfer pricing rules, while testing transactions performed at prices determined within the context of transfer pricing policies prepared with observance of international standards.
As widely known, Brazil’s transfer pricing rules do not adopt the internationally accepted arm’s length standard. Instead Brazil’s transfer pricing regulations provide the use of statutory fixed margins to derive a benchmark ceiling price for inter-company import and minimum gross income floors for inter-company export transactions. While incorporating these transaction-based methods, Brazilian transfer pricing rules excluded profit-based methods, such as TNMM or PSM. In addition, there are many controversial legal issues that have been disputed by taxpayers and tax authorities, and as a result the tax authorities have been imposing tax assessments against many taxpayers.