Corporate - Group taxation

Last reviewed - 28 November 2023

Consolidated tax returns are not permitted in Brazil.

Transfer pricing (applicable until 31 December 2023)

The Brazilian transfer pricing rules apply to import and export transactions of goods, services, and rights between related parties (the legislation provides a broad list of the parties considered as ‘related’ for transfer pricing purposes). Under such rules, the price determined between related parties shall be acceptable, for Brazilian tax purposes, if it is in accordance with one of the transfer pricing methods established by the legislation (no profit methods are available). Since there is no best method approach, taxpayers can choose the least onerous alternative for each good, service, or right on an annual basis (except in cases involving listed commodities). Moreover, all transactions with both tax havens and those subject to privileged tax regimes are subject to transfer pricing rules, whether involving related parties or not.


Brazilian transfer pricing rules are applicable to interest derived from/charged to inter-company loans and/or with entities situated in low-tax jurisdictions, and such interest must comply with the rates established below, in addition to a spread determined by the Ministry of Finance, in order to be acceptable for tax deductibility purposes:

  1. In case of transaction in US dollars, subject to a fixed interest rate: Rate of Brazilian sovereign bonds issued in US dollars in foreign markets.
  2. In case of transaction in Brazilian reais, subject to a fixed interest rate: Rate of Brazilian sovereign bonds issued in Brazilian reais in foreign markets.
  3. In all other cases (e.g. euros): LIBOR for the period of six months.

The additional spread is currently set at 3.5% per year, applicable to interest due to foreign-related parties or to low-tax jurisdictions, and 2.5% per year, in case of interest charged by the Brazilian entity.

For transactions covered in item (iii) above, in currencies for which there is no specific LIBOR, the LIBOR for deposits in US dollars shall be the one to be considered.


Operations involving royalties registered with the National Institute of Intellectual Property should not generally be subject to transfer pricing rules.


The adequacy of the price performed between related parties in any operations involving goods, services, and rights shall be supported by the application of one of the following transfer pricing methods, as determined in the Brazilian transfer pricing rules (the company may choose the most convenient method as there is no ‘best method’ rule).

Methods available for documenting the import transactions:

  • Comparable independent price (PIC).
  • Resale price less profit (PRL).
  • Production cost plus profit (CPL).
  • Imports of quoted commodities (PCI) - applicable only to commodities.

Methods available for documenting the export transactions:

  • Export sales price (PVEx).
  • Wholesale price in the country of destination less profit (PVA).
  • Retail price in the country of destination less profit (PVV).
  • Acquisition or production cost plus taxes and profit (CAP).
  • Export of quoted commodities (PECEX) - applicable only to commodities.

Relief of proof rules (materiality and profitability safe harbours) for inter-company export transactions are available.

Please note that imports and exports of commodities, quoted in commodities exchange markets, must be tested by the use of specific methods called PCI and PECEX, respectively. Based on these methods, taxpayers shall compare the transaction amounts with the daily average quote for each product. 

Taxpayers should prepare the transfer pricing analysis in accordance with the provisions of Law 9,430/96 and further amendments, as well as respective guidelines from the tax administration, mainly substantiated in IN/RFB 1,312/12. Please note that substantial changes related to the tested price and parameter price analysis were made through the more recent IN 1,870/19.

Transfer pricing (mandatory for 2024 onwards, optional for 2023)

As defined by law, the application of the new rules is optional for fiscal year 2023 (retroactively for transactions as of 1 January 2023) but will be mandatory for fiscal year 2024 (starting at 1 January 2024). The deadline for exercising this early adoption option is 31 December 2023.

In June 2023, the Brazilian government converted the MP 1152/22 into Law 14,596, which aligns the Brazilian transfer pricing rules with the arm’s-length principle in accordance with the OECD Transfer Pricing Guidelines.

The new legislation is mostly principles-based and delegates substantial authority to regulations to be issued by the RFB through INs.

The main aspects of the new legislation are summarised below, but a detailed analysis of the new transfer pricing system is highly recommended: 

  • Introduction of the arm’s-length principle in the law as the pillar of the new system.
  • Definition of related parties considering the ’influence‘ exercised directly or indirectly by another party, which may lead to the establishment of terms and conditions in their transactions that differ from those that would be set between unrelated parties in comparable transactions.
  • The transfer pricing provisions also apply to transactions carried out with any entity resident or domiciled in low-tax countries or considered beneficiary of a ’privileged tax regime‘, both cases referencing a corporate tax rate of 17%.
  • Controlled transaction comprises any commercial or financial relationship between two or more related parties, established or carried out directly or indirectly, including contracts or arrangements in any form and series of transactions and is not limited to imports and exports of goods, services, and rights, as well as interest.
  • Comparable transaction concept is consistent with international standards.
  • The most appropriate method must be selected considering the facts and circumstances of the transactions and the availability of reliable information of comparable transactions, among other factors. There are no more fixed margins, and traditional transactional methods (i.e. comparable independent price method [PIC], resale price minus profit method [PRL], cost plus profit method [MCL]), as well as the profit-based methods (i.e. transactional net margin method [MLT] and profit split method [MDL]), are accepted, as well as a combination of methods is allowed.
  • The use of an interquartile range in a panel of comparables is allowed. Also, when the data collected is deemed reliable, the full range of comparables is the appropriate one.
  • Spontaneous and corresponding adjustments are allowed, while primary adjustments can be imposed by the tax authority.
  • Transactions with intangibles, intragroup services, cost contribution agreements (CCAs), business restructurings, and financial transactions have specific provisions consistent with the latest version of the OECD Transfer Pricing Guidelines.

On 29 September 2023, The RFB issued IN 2,161/2023, the first set of regulations to rule the Law. Further guidance through new INs is expected to address topics that were not included in this first regulation.

Country-by-country (CbC) reporting

Although Brazil recently introduced the obligation to present the CbC report, it has not yet imposed the obligation to file either the Master or the Local file.

Thin capitalisation

The Brazilian thin capitalisation rules establish that interest paid or credited by a Brazilian entity to a related party (individual or legal entity), resident or domiciled abroad, not constituted in a tax haven or in a jurisdiction with a privileged tax regime, may only be deducted for income tax purposes if the interest expense is viewed as necessary for the activities of the local entity and the following requirements are met:

  1. the amount of debt granted by the foreign-related party (which has participation in the Brazilian entity) does not exceed twice the amount of its participation in the net equity of the Brazilian entity
  2. the amount of debt granted by a foreign-related party (which does not have participation in the Brazilian entity) does not exceed twice the amount of the net equity of the Brazilian entity
  3. the total amount of debt granted by foreign-related parties as per (i) and (ii) does not exceed twice the sum of participation of all related parties in the net equity of the Brazilian entity, and
  4. in case debt is only granted by related parties that do not have a participation in the Brazilian entity, the total amount of debt granted by all of these related parties does not exceed twice the amount of the Brazilian entity’s net equity.

Consequently, if one of the mentioned 2:1 ratios is exceeded, the portion of interest related to the excess debt amount will not be deductible for Brazilian income tax purposes.

Similar provisions are also applicable to interest paid or credited by a Brazilian entity to an individual or legal entity (whether or not a related party) resident or domiciled in a tax haven or in a jurisdiction subject to a privileged tax regime. In these cases, the ratio reduces to 30% of the Brazilian entity's net equity (0.3:1 ratio).

Controlled foreign companies (CFCs)

Law No. 12,973/2014 introduced rules for the treatment of controlled and affiliated companies for Brazilian CFC purposes.

For controlled companies, the law expressly applies to both directly and indirectly controlled entities individually (‘top down look through approach’). As such, any investment in a controlled foreign entity must be adjusted yearly to reflect the change in the investment value corresponding to the profits or losses of the directly and/or indirectly controlled entity. The change in investment must be recognised in proportion to the Brazilian parent’s participation in its equity, and any positive adjustment relating to profits earned, calculated under the local accounting standards of the jurisdiction of the controlled entity, must be subject to IRPJ and CSLL annually.

Taxpayers will be allowed to consolidate positive and negative adjustments until 2024, provided certain conditions are satisfied as defined by the legislation (the initial term was 2022, which was then postponed to 2024).

One of the requirements introduced by the legislation is related to the concept of the sub-taxation jurisdiction, which is defined as being a jurisdiction that has a nominal income tax rate of less than 20%. In order to be able to consolidate, a company cannot be subject to a sub-taxation regime, in addition to not being subject to a privileged tax regime or resident in a tax haven (or controlled, directly or indirectly, by such entities).

In case the taxpayer does not choose to consolidate its accounting losses, losses will only be compensated by the foreign controlled entity with its own future profits. Accumulated losses accrued before the above-mentioned law may also be used to offset profits without any time limitation, subject to appropriate disclosure.

Under certain conditions, taxpayers may choose to pay income tax due on the foreign profits proportionally to the profits actually distributed to the Brazilian entity, in subsequent periods to that in which such results were generated. However, in the first year, even where there is no distribution of profits, 12.5% of profits will be deemed to be distributed to the Brazilian parent. If no further profits are distributed, the remaining profits will be deemed to be distributed in the eighth subsequent year. Taxpayers choosing to postpone payment of income tax due should consider the impact of interest as well as foreign exchange rates.

In addition to corporate taxes paid, the law expressly extends foreign tax credits to withholding income tax paid abroad on the profits distributed to the Brazilian parent.

For affiliated companies, the law does not require adjustments to the Brazilian entity’s accounts but rather focuses on the profits distributed. Profits will be considered distributed to the parent when credited or paid or in other specific circumstances defined by the legislation. As such, any profits earned by a Brazilian entity through a foreign affiliate will generally only be taxable in Brazil on 31 December of the year in which they were actually distributed to the Brazilian entity, provided that the affiliate satisfies certain conditions defined by the legislation, including not being located in a low-tax jurisdiction.

The CFC rules will not apply for directly or indirectly controlled foreign entities and affiliates in case of activities related to the exploration of oil and gas in Brazil.

Until calendar year 2024, Brazilian parent companies may deduct up to 9% as a presumed/deemed credit on the CFC’s taxable profit, generated by investments abroad that are engaged in the manufacture of food and beverage products and in the construction of building/infrastructure works (the initial term was 2022, which was then postponed to 2024).

This list of activities has been extended to include manufacturing, mineral extraction, exploitation, under public concession contracts, of public assets located in the country of residence of the CFC entity, as well as other general industry.