MP 1,152/2022 on transfer pricing aligns the country with the OECD
The new legal framework for download prices in Brazil, expressed in Provisional Measure 1.152/2022, brings complex changes in relation to previous legislation, such as the introduction of the judgment variable and the choice of new calculation methods, pointed out, in this Wednesday, 1st, tax lawyer Juliana Monteiro de Barros and E&Y partner Márcio Oliveira. The two spoke at the webinar promoted by ABPI’s Technology Transfer and Franchising Studies Commission, which was attended by Commission coordinators Cândida Ribeiro Caffé and Patrícia Falcão, and assistant coordinator Pablo Torquato.
The good news about the new transfer pricing and royalty distribution rules, which include intellectual property assets, is the fact that it aligns Brazil with the rules of the Organization for Economic Cooperation and Development (OECD), already followed by the other members. 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”, began Juliana Monteiro de Barros, remembering that the new MP revokes all previous legislation on the matter.
Cândida Caffé, as a debater, pointed out that the modernization of tax rules applicable to technology transfer contracts was an old demand in the sector, but warned that companies’ adaptation to the new rules represents an enormous challenge. He also emphasized the need to evaluate contracts in progress, to ensure compliance with transfer pricing rules when the new rules come into force.
Oliveira considered that the introduction of the variable “judgment” in the context of tax analysis, contained in the new legislation, has important implications for choosing the “most appropriate” calculation method for the transfer price. He also pointed out the need for training of the tax authority. “It is the first time that Brazil has adopted a model like this, it is a paradigm shift that will require a great deal of effort from taxpayers and the tax authorities,” he said. “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.