Brazil has identified a clear pathway for bringing its existing transfer pricing framework into alignment with the international consensus, and is weighing two options - immediate or gradual implementation, according to a new joint report by the OECD and Receita Federal, Brazil's federal revenue authority (RFB).
Transfer Pricing in Brazil: Towards Convergence with the OECD Standard assesses the similarities and differences between Brazil's transfer pricing rules and the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, which is the international consensus on transfer pricing.
The report, released today in Brasília, identifies two options for Brazil to converge with the OECD standard, while enhancing the positive attributes of its existing transfer pricing framework. Both options contemplate full adherence to the arm's length principle, which is at the core of the OECD standard, while seeking to preserve simplification, maintain ease of compliance and effectiveness of tax administration, as well as cross-border tax certainty.
The report is the outcome of a 15-month joint transfer pricing project launched in February 2018 between the OECD and Brazil's federal revenue authority (RFB). The project, supported by the United Kingdom Foreign and Commonwealth Office (FCO), is now in the second phase with the objective of preparing a blueprint and a roadmap that will outline the implementation process.
Grace Perez-Navarro, Deputy Director of the OECD Centre for Tax Policy and Administration, told participants in a launch event hosted by RFB that the OECD would continue to support authorities during whichever implementation plan is chosen. "Aligning Brazil's transfer pricing rules with the OECD standard will reduce the barriers to investment stemming from the existing risk of double taxation," Ms Perez-Navarro said. "Convergence will also reduce the revenue losses resulting from the specific features of the current system. The OECD is committed to provide further assistance and support RFB in this process."
Special Secretary of Brazil's Federal Revenue, José Barroso Tostes Neto, also expressed support for bringing Brazil closer to the OECD standard. "The report outlines the direction of our next efforts, which is the full alignment with the OECD transfer pricing standard", said Mr Tostes Neto. "This is because our vision for the future aims at increasing integration and openness of Brazil. We are counting on all the stakeholders as well as on the OECD and the countries who provided their generous assistance and support to achieve the goal of implementing a system that will be appropriate and work for Brazil, and become an inspiration for other countries to follow."
A brochure containing the key information of the report is available in both English and Portuguese.
