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Law 14596: new Brazilian Transfer Pricing rules

Law 14596 was published on June 15th, 2023, providing for the new Brazilian transfer pricing rules, substantially changing the legislation currently in force, for the purposes of alignment with the OECD TP guidelines.

Law 14596 results from the conversion of Provisional Measure (MP) 1152, published in the end of 2022, and applies to the calculation of the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profits (CSLL).

The law comes into force on January 1st, 2024, but the taxpayer is allowed to choose for its early application as of January 1st, 2023.

According to the Normative Instruction of the Brazilian Federal Revenue Service nº 2132/23 (IN), this option for the early adoption must be formalized in September 2023 by means of a digital procedure in the Virtual Service Center Portal (“Portal e-CAC”). Under the terms of the IN, the option will be irreversible. It is recommended that the effects of the early adoption be carefully studied.

In addition to the significant changes to the Brazilian transfer pricing legislation, the new law also revokes the royalty deductibility rules for Corporate Income Tax (IRPJ) purposes that have been in force since the 1960s.

Law 14596 is still pending regulation by the Brazilian Federal Revenue.


Main changes

General rules

Arm’s Length principle

•       Adoption of the arm’s length principle by the Brazilian legislation

•       Scope of transfer pricing rules broadened to encompass any commercial or financial transactions with related parties abroad

•       Non-exhaustive related party concept

•       Analysis of the main economically relevant characteristics of the transaction (e.g., contractual terms, functions, characteristics of goods, services or rights, economic circumstances and business strategies) to outline the transaction

Methods and comparability analysis

–       Selection of the most appropriate method for the operation, among (non-exhaustive list):

–        Comparable Independent Price (PIC)

–        Resale Price minus Profit (PRL)

–        Cost plus (MCL)

–        Transactional Net Margin (MLT) – new

–        Profit Split (MDL) – new

•       Adoption of comparability analysis

Tranfer pricing adjustments

•       Introduction of compensatory adjustments (adjustment in the transaction amount until the end of the calendar year), in addition to the spontaneous/ primary adjustments (adjustment to the IRPJ and CSLL taxable basis)

Specific rules


•       Introduction of the concept of commodities, with no list of commodities

•       Need to properly evidence the date of the transaction

•       Specific ancillary obligation/registration for transactions involving commodities

•       Preference for application of the PIC method, including based on quoted prices or prices charged to unrelated partied (internal comparables)


•       Introduction of specific rules for intangibles: analysis of relevant functions and economically significant risks

Intragroup services

•       Inclusion of specific provisions to regulate intragroup services, including the use of indirect apportionment criteria under the MCL and the impossibility of charging a profit margin on the mere transfers of funds from third parties

Cost Contribution Arrangements

•       Introduction of the definition of cost contribution arrangements

Business restructuring

•       Application of transfer pricing rules to business restructurings (e.g., transfer of assets to other jurisdictions), by assessing risks and potential profit, among others

Financial transactions

•       Inclusion of all financial transactions (e.g., guarantees, insurance, etc.) under the scope of transfer pricing rules


•       Complete documentation, with information on the comparability analysis, structure and activities of the group and global allocation of revenues and assets

•       Imposition of fines based on percentages of gross revenue in case of non-compliance with the required documentation, limited to BRL 5 million


•       Introduction of advance pricing arrangements (APA), valid for up to 4 years, subject to the payment of a fee


•       Tax deduction not allowed for IRPJ and CSLL purposes of royalties: when the deduction of amounts results in double non-taxation

•       The revoking of the current rules restricting the deductibility, in the IRPJ calculation basis, of royalties, technical assistance expenses and others