The Federal Revenue Services (SRF) issued Normative Opinion # 1, on January 20th, 2012 ("NO 1/2012"), aiming at clarifying doubts in relation to legal effects of Provisional Measures # 472, # 476 and 478, issued on December 15th, 23rd and 29th, 2009, respectively. The NO # 1/2012 was published in the Official Gazette on May 8th, 2012.
On December 15th, 2009, Provisional Measure # 472 revoked the article 2 of Law 9,959/2000, which defines the Resale Price Minus Profit Method (PRL) 20% and 60% margins. Later on, Provisional Measure # 476, published on December 23rd, 2009, reenacted article 2 of Law 9,959/2000.
Finally, Provisional Measure # 478, published on December 29th, 2009, reaffirmed that the revocation of article 2 of Law 9,959/2000 foreseen in Provisional Measure # 472 should be disregarded, thereby clarifying that the PRL Method could be applied in 2009 fiscal year.
The legal effects of the Provisional Measures # 472, # 476 and # 478 received various interpretations. Accordingly, NO # 1/2012 was issued to make clear and public what is the understanding of the Federal Revenue Services on such subject. The main conclusions are the following:
- The PRL Method, based on the application of profit margins of 20% and 60% can be applied in 2009 and 2010 calendar years;
- For 2010 (January 1st through May 31st) the PVL 35% Method as set forth in Provisional Measure # 478, may be adopted in case it is more favorable to taxpayers;
- As to the Social Contribution Tax on Profits (CSLL), a 90-day period must be observed as of the publication of Provision Measure # 478 so that it can be considered effective.
The PVL 35% Method application is beneficial for taxpayers that selected the PRL Method based on profit margin of 60% according to the formula set by the Normative Instruction # 243/2002, since the adoption of PVL Method provides for a significant reduction of the profit margin. PVL Method may also be an option for taxpayers that adopted PIC or CPL Methods, when the comparison between the methodologies results in reduction or elimination of potential transfer pricing adjustment. The application of PVL Method, however, is not an option for taxpayers that are relying on PRL 20% Method for FY2010, since it requires a higher profit mark-up.
It is important to highlight that taxpayers that choose to apply PVL 35% Method should file an amended Income Tax Return (DIPJ) regarding 2010 calendar year. Accordingly, some practical issues may arise such as the need to segregate the transfer pricing calculation for transactions occurred during the period between January and May, 2010, from the calculation for transactions occurred as of June until December, 2010. In addition to that, an issue regarding the fulfillment of the amendment to Income Tax Return (DIPJ) arises since such tax return didn’t foresee the adoption of PVL 35% Method.
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