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Brazilian Revenue Service issues guidance on the early adoption of the new transfer pricing rules
On 02.24.2023, Normative Ruling of the Brazilian Revenue Service no.(“IN 2,132”) was published in the Official Gazette regulating the possibility of anticipating the effects of Provisional Measure no.1,152/2022 (“MP 1,152”), which introduced new transfer pricing rules in Brazil (still subject to the National Congress approval).
In general terms and under the wording of IN 2,132, there are some important points:
- The early adoption of the new transfer pricing regime must be done between 09.01.2023 and 09.30.2023, except in case of especial event (merger, incorporation of the legal entity after certain date etc.);
- The option is irrevocable and applies from 01.01.2023 for all controlled transactions that take place during the year, even the ones that occur before the election for the early adoption;
- When one opts for the early adoption, the new deductibility rules for royalties and technical, scientific, administrative or other kinds of assistance will also be applicable, including the revoked limitations, even if there is no controlled transaction.
Finally, it seems that there was the intention of allowing compensatory adjustment that would result in the reduction of the CIT taxable basis or increase of tax losses for the year of 2023 only, as an exception of the general rule provided by MP 1,152, which prohibits it. However, apparently there is a mistake in the reference made in the applicable Article (Article 5, § 5), which would not allow such exception until IN 2,132 is eventually amended to correct it.
Lefosse’s Tax Team closely monitors the changes that impact the Brazilian market. For further clarification on this matter, or others that may be of interest to you, contact our professionals.
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