Transfer Pricing refers to the rules applicable to transactions carried out between companies within the same group located in different countries, such as the sale of goods, provision of services, licensing of intangibles, and financial transactions.
The objective is to ensure that these transactions occur under conditions equivalent to those that would be practiced between independent companies.
Legal Framework
In Brazil, the rules are established under Law No. 14,596/2023 and RFB Normative Instruction No. 2,161/2023, aligned with the OECD Transfer Pricing Guidelines (2022).
These regulations adopt the international standard based on the Arm’s Length Principle.
Main Methods
Brazilian legislation provides for methods aligned with OECD standards, including:
PIC – Comparable Uncontrolled Price (CUP)
PRL – Resale Price Minus Margin
CPL – Cost Plus
MLT – Transactional Net Margin Method (TNMM)
MDL – Profit Split Method (PSM)
The selection of the appropriate method depends on a functional analysis (functions, assets, and risks) and the availability of reliable comparables.
Mandatory Documentation
Companies must maintain documentation demonstrating:
• Description of controlled transactions
• Functional analysis
• Method applied
• Comparability study
The documentation structure follows the international standard:
• Master File (Global File)
• Local File
• Country-by-Country Report (CbCR) – mandatory for groups with consolidated revenue exceeding €750 million
The Master File and Local File may be waived when transactions are below R$15 million in a given year.
Transfer Pricing Penalties in Brazil
Non-compliance may result in penalties that vary depending on the violation, ranging from R$20,000 to R$5,000,000, in addition to potential tax adjustments imposed by the Brazilian Federal Revenue Service (Receita Federal).
Benefits of an Adequate Transfer Pricing Structure
- Reduction of tax audit risks
- Greater tax predictability
- Optimization of income taxation across jurisdictions
- Alignment with international standards
- Technical support for tax audits and inspections
Transfer Pricing is a strategic matter that requires multidisciplinary technical analysis and alignment between tax, economic, and operational aspects. Proper structuring and documentation of intercompany transactions are essential to ensure companies’ tax security.
This material is for informational purposes only and does not replace individualized technical or legal analysis.
How Do We Support Your Company?
We offer specialized technical advisory services:
✔ Structuring and reviewing Transfer Pricing policies
Alignment of operations with the new Brazilian framework and OECD Guidelines.
✔ Functional Analysis (FAR)
Mapping functions, assets, and risks to properly characterize group entities.
✔ Method Selection and Application
We analyze which method best represents the Arm’s Length standard for your transaction.
✔ Comparability Studies (Benchmarking)
Identification of comparable companies and determination of appropriate margins.
✔ Intragroup Financial Transactions
Analysis of interest rates, guarantees, and risks of debt recharacterization as equity.
✔ Structuring Mandatory Documentation
• Master File (Global File)
• Local File
• Country-by-Country Report
In addition, we review ECF (Corporate Income Tax Return) records related to transfer pricing, and we have a specialized accounting team responsible for the proper completion of the ECF.
Contact us through the chat available on our website or by email at info@drummondadvisors.com
Written by Adriana Lemos, Lailma Sales, and Hanna Lauar.