• Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 2/13/2014

Brazil - Ruling permits better alignment of transfer pricing policy 

February 13:  A recent ruling by the Brazilian tax authority could allow taxpayers to align their transfer pricing policies and, as a consequence, eliminate potential contingent liabilities, reduce taxable adjustments, and/or eliminate the double taxation arising from transfer pricing regulation mismatches.


Most companies face significant challenges in supporting their transfer pricing policies in Brazil due to the fact that the Brazilian transfer pricing requirements are not aligned with the global arm’s length principle. This difference often creates double taxation issues for taxpayers that do not proactively manage their transfer pricing policies.

However, despite the complexity resulting from this different criterion in Brazil, the Brazilian rules also provide for fixed profit margins that may be applied as “safe harbors” for taxpayers to use for their own benefit.

Also, under the Brazilian rules, taxpayers have flexibility when choosing the method. Moreover, taxpayers may change the method applied on a yearly basis without requiring any justification or approval.

Among the methods for testing the import price, the law provides the “Cost Plus Method” (production cost plus 20% “Profit Margin Method”), which authorizes the supplier / related party to allow up to 20% gross margin on sales to its affiliates located in Brazil, provided that the supplier is the manufacturer of the goods.

In instances when the 20% margin requirement is met, the taxpayer must concentrate its efforts on collecting documentation as evidence of the costs and margin tested.

New RFB ruling

The new ruling from the Brazilian tax authority (Receita Federal do Brazil—RFB) states that a report issued by an independent company is acceptable for evidencing the costs incurred by the tested party abroad.

The report will evidence the costs of production incurred by the supplier abroad and document the costs using data available data at origin.

KPMG observation

Tax professionals have observed that with this new ruling, companies need to consider its application to their specific situations and revisit and possibly adjust their transfer pricing methodology as well as their approach to Brazilian transfer pricing, to align these with the company’s global transfer pricing policy.

For more information, contact a KPMG tax professional with KPMG’s Americas Center or with KPMG in Brazil:

Devon Bodoh

202 533 5681

Alfonso A-Pallete

305 913 2789

Murilo Mello

55 11 218 33 216

Eliete Ribeiro

55 11 218 33 288

Or contact a tax professional with KPMG's Global Transfer Pricing Services.

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now