Since the Brazilian Law number 14.596, from June 14th of 2023 and its regulation by Normative Instruction nº. 2.161/2023, a new scenario has been building for the Brazilian Transfer Pricing. 

By this new era, the Brazilin Law are aligned with the OECD Transfer Pricing Guidelines. 

It means that the Arm’s length principal shall be applicable, as well as information about the framework of Multinational Enterprise, going deeper in its functions, assets and risks allocation and economic analysis. 

This is a game changer. From an objective fixed margin calculation to a subjective analysis of the business profit margin and its allocation of risks into the Multinational group. 

At the same time, documents and evidence of comparability analyses shall be ready to be used, if requested by the Tax Revenue Authority. Furthermore, to avoid fines against the taxpayer, the MNE (Multinational Enterprise) shall have Local and Master Files, which are now being required. 

For the Master File, the taxpayer must provide information regarding the structure and activities of the multinational group to which the taxpayer belongs and the other entities part of the MNE.

The Master File shall be used globally for all other companies, part of the MNE group, wherever the Transfer Pricing rules are applicable. 

For the Local file, it’s requested the description of taxpayer’s activities; description of organization and functional activities, identifying the responsible people that manages each of the unities of MNE; description of his market; its economic context; its function in its geographic location; elements that may influence the price of transaction or sharing the profit and losses and its financial and economic performance; name of principal competitors; name of all entities that have commercial relationship with MNE, highlighting those with controlled transactions; information about controlled transactions, among  and other business strategies in each operation with related parties.

The documents an information shall be on a contemporaneous basis, helping to ensure the integrity of the taxpayer’s position.

Furthermore, it must contain specific information, as: organizational chart of the multinational group; general description of the group's activities and the distribution channel of biggest five commercialized product; information about the group's intangibles; information on the group's financial operations; list and description of specific tax ruling applicable to the taxpayer; and the group's most recent consolidated financial statements of MNE.

When the Master or Local Files are written in foreign languages, others then English and Spanish, a simple translation shall be accompanying the files.

The Master file, Local File and Country-by-Country report are the three main documents to be prepared and delivery to the Brazilian Tax Revenue Authority.

The transaction value ranges that makes compulsory the delivery the Maste and Local Files to the Tax Revenue Authority shall be observed by taxpayer.

The fine for non-delivery of the Country-by-Country Report, Master and Local File can be between the rage of R$ 20,000.00 (twenty thousand reais) to R$ 5,000,000.00 (five million reais). 

Please, be alert with these new rules, which can be common to your jurisdiction but, it’s new for the Brazilian law perspective. Fábio Stefani,