Wednesday, December 18, 2019
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) .Convergence with the OECD transfer pricing standard requires full alignment with the OECD Guidelines, with a focus on the key areas outlined in Part I, but bearing in mind the need to retain and ensure simplicity, limit tax compliance costs and to ensure effective tax administration. The key consideration is how alignment should occur – immediately or gradually – and the related implications with respect to each option.
The main difference between the two options relates to the timing of the implementation. A similar amount of preparatory work will be necessary to achieve full alignment, but if alignment is achieved under the first option, the new rules will become applicable for all taxpayers immediately, meaning that the leadup to the entry into force of the new system will need to occur within a short timeframe with all different aspects of the system being rolled out simultaneously.
It is envisaged under the first scenario that the adoption of the new system in conformity with the OECD standard will occur in one time and replace in whole the existing framework with a directly effective and operational framework, as opposed to a staged approach in the second scenario.
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.