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June 16, 2023

Brazil transfer pricing law enforceable beginning 1 January 2024

  • Brazil has enacted a new transfer pricing law that may be early adopted in 2023 and will become mandatory in 2024.
  • The Brazilian Revenue Authority will likely invite public comments on the new law in the near future.
  • Taxpayers should begin preparing for imposition of the new rules.

General context

A new law, published in the Brazilian Federal Official Gazette (Diário Oficial da União - DOU) on 15 June 2023, establishes a transfer pricing (TP) framework in Brazil that is aligned with the guidelines provided by the Organisation for Economic Co-operation and Development (OECD).

The new TP model in Law No. 14,596 of 14 June 2023 (Law 14,596/23) aims to integrate Brazil into the global value chains and mitigate both double taxation and double nontaxation scenarios. Moreover, this new TP system will likely remove one of the main obstacles associated with tax-credit recognition in the United States (i.e., foreign tax credits) arising from income tax paid and/or withheld in cross-border transactions involving Brazil.

Approval process

As part of the implementation of the new Brazilian TP framework, Provisional Measure No. 1,552/22 (PM 1,552/22) was published on 28 December 2022. PM 1,552/22 was approved both by the Lower House of Congress and the Federal Senate and then sent to be sanctioned by the Brazilian President on 25 May 2023.

On 14 June 2023, PM 1,152/22 was converted into Law 14,596/23 when signed by the Brazilian President without any relevant change in the text approved by the Brazilian Congress.

Next steps

Brazilian taxpayers may opt to adopt the new TP system aligned with the OECD guidelines this year. To do so, taxpayers must inform the Brazilian Tax Authorities (RFB)1 between 1 September and 30 September 2023. The new TP system will be mandatory for all taxpayers as of 1 January 2024.

It is expected that the Brazilian Revenue Authority (RFB) will hold a public consultation in the coming weeks, launching a discussion on the new TP regime. Based on the public consultation, the RFB will publish a set of Normative Instructions that will provide guidance and define the requirements to be followed. The public consultation can be seen as an opportunity for Brazilian taxpayers to effectively participate in the process of creating a new TP environment.

The publication of Law 14,596/23 is a milestone for Brazil and represents a new chapter in the country's international operations. It is expected that the TP framework will draw new foreign direct investments and help integrate Brazil into global value chains. This change goes beyond the tax system, as it affects the operating models of multinationals with a presence in Brazil.

It is essential that multinational groups adequately prepare for this change, including by mapping potential impacts on their business in Brazil and abroad (e.g., early adoption, impacts on income taxes and customs valuation, foreign tax credits in the United States, etc.)

Summary of the main technical aspects of the new TP model

Key aspects of Law 14/596/23 include:

  • Becomes effective on 1 January 2024, but may be early adopted as of 1 January 2023
  • Introduces the arm's-length principle and broadens the related-party concept
  • Applies the new TP system to all cross-border intercompany transactions (i.e., intangibles, cost-contribution agreements, and business restructuring)
  • Implements all TP methods according to the OECD standard (PIC2, PRL3, MCL4, MLT5, MDL6) and best-method rule for intercompany transaction analysis
  • Introduces functional (functions, assets and risks) and economic analysis for applying the new TP documentation rules
  • Applies the comparable uncontrolled price (CUP) method as the most appropriate method when reliable comparables are available for cross-border commodities transactions; however, taxpayers may apply other methods based on the appropriate facts and circumstances
  • Selects the tested party based on the most reliable data and best-method rule
  • Includes all cross-border financial transactions, such as intercompany loans, guarantees, centralized treasury functions and insurance transactions
  • Eliminates the royalty deductibility limitation currently in force in the Brazilian tax framework and includes royalty transactions under the scope of the new TP system
  • Introduces a comparable range (interquartile or complete) considering profit-level indicators
  • Introduces spontaneous, compensatory and primary adjustment
  • Introduces simplification measures and tax certainty instruments (mutual agreement procedures and advance pricing agreements)


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

EY Assessoria Empresarial Ltda, São Paulo

Ernst & Young LLP (United States), International Tax and Transactions Services, Transfer Pricing

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

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

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor


1 Through the digital portal provided by the RFB: Portal do Centro Virtual de Atendimento (Portal e-CAC).

2 Comparable uncontrolled price (PIC - Preço independente comparável)

3 Resale price method (PRL — Preco de revenda menos lucro)

4 Cost plus method (MCL — Custo mais lucro)

5 Transactional net margin method (MLT — Margem líquida da transação)

6 Profit split method (MDL — Divisão de lucro)