Fonte: ITR

The OECD profile signals Brazil is no longer a jurisdiction where TP can be treated as a mechanical compliance exercise, one expert suggests, though another highlights “significant concerns”

A revised OECD transfer pricing profile for Brazil represents more than a technical refresh and reinforces Brazil’s shift toward full alignment with the arm’s-length principle, local experts have told ITR.

The OECD, earlier this month, updated its TP profiles for eight countries, one of which was Brazil. In 2023, Brazil overhauled its TP framework to align with the OECD’s TP guidelines, and the recent OECD profile reflects these updates.

The OECD’s TP profiles focus on countries' domestic legislation regarding TP principles.

Examples include the ALP, TP methods and comparability analyses.

Other examples are intangible property, intra-group services, cost contribution agreements, TP documentation, administrative approaches to avoiding and resolving disputes, safe harbours and other implementation measures.

Allan Fallet, a tax partner at law firm Duarte Garcia, Serra Netto e Terra in São Paulo, tells ITR the profile update is more than a technical refresh.

It represents a formal validation that Brazil has completed its structural migration to an OECD-consistent arm’s-length framework, he says.

The revised profile now reflects a recognisable international architecture, Fallet argues.

This, he suggests, is because it includes explicit recognition of the ALP and adoption of the ‘most appropriate method’ rule.

The availability of methods such as transactional net margin and profit split alongside comparable uncontrolled price, resale price and cost plus, as well as alignment with OECD concepts on comparability, documentation and intangibles, also reinforces this, Fallet says.

“For multinational groups, it materially improves the intelligibility of Brazilian rules for global tax teams and facilitates internal governance, cross-border alignment and audit readiness,” he adds.

Fallet also highlights that the profile confirms Brazil’s adherence to OECD-style comparability analysis, “including the use of ranges and interquartile range where appropriate, the absence of a blanket preference for domestic comparables, and a more nuanced approach to benchmarking and delineation”.

It also consolidates the new compliance ecosystem, master file, local file and enhanced reporting obligations, Fallet says.

This, in practice, will shape taxpayer behaviour more than abstract legislative alignment, he notes.

“The message is clear: Brazil is no longer a jurisdiction where TP can be treated as a mechanical compliance exercise,” Fallet asserts.

“It now requires disciplined functional analysis, defensible economic support and contemporaneous documentation consistent with global best practices.”

Not over yet

This alignment with OECD standards does not automatically equate to legal certainty, however, Fallet argues.

“Recent academic debate, including sophisticated critiques around the concept of ‘options realistically available’ in transaction delineation, highlights a real risk,” he says.

“If applied expansively and without clear administrative guardrails, such concepts can increase discretion and unpredictability, undermining the very tax certainty the arm’s-length standard is meant to promote,” he says.

The OECD profile itself acknowledges that key instruments of certainty, such as unilateral advanced pricing arrangements (APAs), remain dependent on further regulation in Brazil, Fallet highlights.

Until clearer guidance on delineation, APAs and dispute resolution mechanisms is delivered, both taxpayers and advisers will need to approach implementation with technical rigour and strategic caution, he argues.

This, however, is preferable to assuming that formal alignment alone resolves controversy risk, Fallet contends.

He adds that the profile update must be read against a wider backdrop, arguing that TP today is increasingly shaped by forces beyond traditional income tax audits.

“ESG regulation and the EU’s Carbon Border Adjustment Mechanism are already influencing value chain design and functional allocation. Trade and customs pressures are forcing multinational groups to revisit pricing models.

“And, internationally, tax authorities are scrutinising whether TP adjustments can spill over into VAT bases where there is a contractual and economic link to supplies,” he says.

Matheus Cunha of Mannrich e Vasconcelos Advogados in São Paulo echoes Fallet’s view that the OECD’s updated profile reinforces Brazil’s shift toward full alignment with the ALP.

It consolidates the reforms introduced by 2023’s Law 14,596/23, especially the move away from fixed margins and toward a more traditional comparability analysis, he tells ITR.

This provides greater predictability for multinational groups operating in Brazil, according to Cunha.

However, he adds that the transition still demands careful documentation and an early review of existing policies to avoid mismatches with the new framework.

“Overall, the update signals Brazil's continued effort to integrate into global standards and reduce structural discrepancies that previously contributed to prolonged disputes,” he says.

Significant concerns

Stephanie Makin, an international taxation partner at Machado Associados in São Paulo, tells ITR the updated Brazil profile captures the key elements of the new TP framework.

But she adds that issues that come up in practical implementation should be considered when applying these concepts.

Under the former Brazilian regime, the use of so-called ‘secret comparables’ by the tax authorities was a recurring and highly contentious issue, particularly in challenges to the resale price method, Makin tells ITR.

Although the new rules are intended to align Brazil with the OECD arm’s-length standard, they remain untested in practice, she notes.

“A critical question is whether the abandonment of secret comparables will be effective in audits, or whether similar informational asymmetries will persist under a different guise, undermining legal certainty,” Makin says.

A defensive documentation strategy that explicitly evidences unsuccessful local searches to justify the use of foreign comparables is recommended, she adds.

This is despite the fact that the updated profile does not highlight a preference for domestic comparables.

“In practice, reliable domestic comparables are often unavailable or insufficient,” she says.

Following the profile update, Makin says that, from a compliance and documentation perspective, the interaction between the new TP rules and the corporate income tax return “raises significant concerns”.

The level of granularity required in the tax return frequently exceeds that of the local file and demands segregation of transactions that is not always conceptually aligned with the new framework, she argues.

“This disconnect risks turning compliance into a form-over-substance exercise and increases both audit exposure and administrative burden,” Makin claims.

While the profile correctly identifies the absence of specific legislation on issues such as APAs, intercompany services, and cost contribution arrangements, this gap should not be viewed as merely transitional, Makin adds.

“Without clear and timely guidance, these areas are likely to become focal points of dispute,” she says.