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January 10, 2023

Brazil's new transfer pricing rules and their impact on customs valuation discussed

  • The Brazilian Government has published new transfer pricing (TP) rules adopting the arm's-length principle.
  • These rules could impact the current process of using TP information for purposes of assessing customs valuation when importing goods from related parties.

On 29 December 2022, the Brazilian Government published Provisional Measure (PM) No. 1,152 which introduces new TP rules in Brazil.

The PM is a type of Decree, signed and published by the President, with the power of Law that needs to be approved by the Congress within 60 calendar days from publication (that is extendable by another 60 calendar days) to be enacted as law.

For details on the new TP rules, see EY Global Tax Alert, Brazilian Government publishes Provisional Measure adopting arm's-length principle, dated 30 December 2022.

This Alert highlights the impact of these new rules on customs valuation.

Transfer pricing and customs valuation

As background, on 23 June 2022, through Normative Instruction 2,090, (IN RFB 2.090/22), The Brazilian Federal Revenue Service (RFB) formalized the possibility of using certain TP information for the purposes of assessing the customs value declared by Brazilian importers when importing goods from related parties. This procedure has been adopted for customs audit purposes in recent years.

However, the use by the Brazilian Customs authorities of parameter prices established by the TP rules (for example those derived from the adoption of deemed and fixed profit margins for establishing the resale price of imported goods in the local market) to validate the customs value has triggered different interpretations between taxpayers and tax authorities. Taxpayers have asserted that the parameter prices do not reveal the reality of prices practiced in the local sales and therefore they were not a suitable basis for the challenging of declared customs values in Brazil.

With the introduction of PM 1,152, which has modified the TP rules in Brazil, the possibility that TP studies will be used to facilitate the auditing of declared customs values has potentially been strengthened. The new TP rules differ from the former rules as they are not based on deemed and fixed margins. They are instead focused on an analysis of the functions performed and risks assumed by each party in the transaction, as well as methods geared to identifying a proxy value that would be practiced between independent parties — aligned with the arm's-length principle, an approach which is broadly aligned with the goals of the customs valuation rules.

The new TP rules will be in force as of January 2024, but taxpayers could choose to follow and apply them in the current year (2023). It is important to note that if the option is exercised to follow the rules for 2023, it will be irreversible.

Under these circumstances, a harmonized approach between the customs valuation rules and the content of the TP studies becomes essential. This will help to allow Brazilian importers to demonstrate that the price paid or payable in intercompany transactions has not been influenced by the relationship between the parties such that the price practiced is divergent from a fair and logical market price. This will consequently reduce in Brazil the risk that the Customs authorities could reject the transaction value as an appropriate parameter for evaluating the declared value.


For additional information with respect to this Alert, please contact the following:

EY Assessoria Empresarial Ltda

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific