After enduring criticism from trading partners for decades and five years of joint technical work with the OECD, Brazil has finally taken its first formal step toward harmonizing its heterodox transfer pricing regime with multilateral standards — a move widely cited as a prerequisite for OECD accession. But the December 2022 release of Provisional Measure No. 1,152, as significant as it is, raises an important question: What took so long?
The divergence between Brazil’s intercompany pricing regime and a transfer pricing system based on the arm’s-length principle — the standard for allocating income among associated enterprises, which is endorsed in nearly every bilateral tax treaty and by the OECD’s influential transfer pricing guidelines — has long made Brazil something of a rogue state in multilateral tax affairs. Under the OECD-endorsed transfer pricing standards, income and costs are split among associated enterprises by hypothesizing that the entities are unrelated parties transacting on arm’s-length terms.
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.