Newsletter Edition 44 - February 2023


MP 1,152/2022 on transfer pricing aligns Brazil with the OECD

The tax lawyer Juliana Monteiro de Barros and the leading partner of Transfer Pricing at EY, Márcio Oliveira, highlighted that the new legal framework for transfer pricing in Brazil, expressed in Provisional Measure 1,152/2022, brings complex changes as compared to previous legislation, such as introducing the judgment variable and the choice of new calculation methods. The two spoke at the webinar promoted by ABPI’s Technology Transfer and Franchising Study Committee on February 1st, with the participation of the Committee Coordinators Cândida Ribeiro Caffé and Patrícia Falcão and assistant coordinator Pablo Torquato.

The good news about the new transfer pricing rules in the taxation of royalties, which include intellectual property assets, is that it aligns Brazil with the rules of the Organization for Economic Cooperation and Development (OECD), already followed by the other members of the organization. However, expected to come into effect in January 2024, the new legal framework will still have to pass through Congress and be converted into Law. “It is expected that there will be changes in the original text,” pointed out Juliana Monteiro de Barros, recalling that the new MP revokes all previous legislation on the matter Cândida Caffé, in her capacity as a Coordinator of the ABPI Committee, emphasized that the modernization of tax rules applicable to technology transfer contracts was an old demand in the sector. She also warned that the adaptation of companies to the new rules  represents a great challenge and that there is a need to assess contracts in progress “to ensure compliance with transfer pricing rules when the new rules come into force.”

Oliveira, in turn, considered that introducing the judgment variable in the context of tax analysis contained in the new legislation has important implications for choosing the “most appropriate” calculation method for transfer prices. He also indicated the need for training of the tax authorities. “It is the first time that Brazil has adopted such a model. It is a paradigm shift that will require a great deal of effort from taxpayers and the tax authorities,” he stated. “For the Tax Authorities, it is something very new.” The E&Y partner even suggested the creation of a chamber specialized in calculating and judging the economic value of the operation for disputes involving transfer pricing.

If you are an ABPI member, you can still watch the event in the restricted events area on ABPI’s website. Click here and log in.