Transfer pricing in Brazil: a practical guide for foreign groups under Law 14,596/2023

For more than two decades, Brazil had a transfer pricing system unlike anyone else’s: fixed margins, no arm’s length analysis and royalties left out entirely. That system is gone. Since January 1, 2024, Brazilian companies have priced their transactions with related parties abroad under the arm’s length principle, in line with the OECD Transfer Pricing Guidelines (Law 14,596/2023). For a multinational, this is mostly good news: the group’s global policy can now apply in Brazil. But Brazil kept its own procedures, its own documentation thresholds and some of the heaviest penalties in the region. The documentation for calendar year 2025 is the second cycle under the new rules, and it falls due at the end of October 2026.

This guide explains how the system works for the Brazilian subsidiary of a foreign group: who is covered, which methods apply, how intra-group services, royalties and loans are treated, what documentation is required and what it costs to get it wrong.

Brazilian transfer pricing at a glance

What changed in 2024

Under the old rules (Law 9,430/1996, articles 18 to 24), a Brazilian company tested its import and export prices against statutory methods with fixed profit margins, such as 20% or 30% on resale. The system was simple to apply but produced results disconnected from the economics of the group, and it caused double taxation because foreign tax authorities did not recognize the outcome. Royalties and technical assistance were outside transfer pricing and subject instead to fixed deductibility limits.

Law 14,596/2023 replaced all of this. It repealed the old articles of Law 9,430 and the royalty deductibility rules that had stood since the 1950s and 1960s (article 46), and introduced a full arm’s length framework: delineation of the actual transaction, comparability analysis, functions, assets and risks, and specific chapters on intangibles, services, cost contribution arrangements, business restructurings and financial transactions. Companies could opt into the new rules for 2023; for everyone else, they apply from January 1, 2024 (articles 45 and 47).

Who and what is covered

The rules apply to a Brazilian company’s IRPJ and CSLL when it carries out controlled transactions, defined as any commercial or financial relationship with related parties abroad (articles 1 and 3). Related parties are defined by influence, and the law lists situations that always qualify, including control, entities consolidated in the same financial statements, a right to 25% or more of profits and family relationships up to the third degree (article 4).

Transactions with any party located in a low-tax jurisdiction or under a privileged tax regime are also covered, even if the party is unrelated. For this purpose, the threshold is a maximum income tax rate below 17% (article 40, amending articles 24 and 24-A of Law 9,430/1996).

Arm’s length and accurate delineation

The terms of a controlled transaction must be those that independent parties would agree in comparable circumstances (article 2). The first step is to delineate the transaction as it actually occurs: where the contract and the conduct of the parties differ, the conduct prevails (article 7). The tax authorities may disregard a transaction that independent parties would not have entered into and replace it with one that makes commercial sense (article 8).

Documentation carries more weight than in many countries. If the taxpayer does not provide the information needed to delineate the transaction, functions and risks may be attributed to the Brazilian company (article 34). In other words, a Brazilian distributor described in the group’s policy as “limited risk” needs evidence that the risks really sit elsewhere.

Transfer pricing methods

The law adopts the OECD methods, with Brazilian names and acronyms that appear in local filings (article 11):

• PIC: comparable uncontrolled price (CUP), preferred when reliable data are available;
• PRL: resale price method;
• MCL: cost plus method;
• MLT: transactional net margin method (TNMM);
• MDL: profit split method;
• other methods, provided the result is consistent with the arm’s length principle.

The most appropriate method must be chosen for each transaction. Results are tested against an interquartile range or, in some cases, the full range of comparables; when the result falls outside the range, the adjustment goes to the median (article 16).

Commodities have their own regime. The CUP method applies using quoted prices on recognized exchanges or price-reporting agencies, with rules on the pricing date (articles 12 and 13). Contracts must be registered with the Federal Revenue in the commodity transaction register (RTC) by the 10th day of the month after the contract is signed (Normative Instruction RFB 2,161/2023, article 64, as amended by Normative Instruction RFB 2,246/2024).

The transactions that matter most for a subsidiary

Intra-group services and management fees

Management fees and shared service charges are now deductible only if they pass a benefit test: the service must provide economic or commercial value that an independent company would pay for or perform itself (article 23). Shareholder activities, such as the parent’s governance, consolidated reporting and investor relations, and services that duplicate what the Brazilian company already does, do not meet the test. Under the cost plus method, all costs must be included; direct charging is the rule and allocation keys only apply when direct charging is not practical; and costs passed through without added value do not carry a markup (article 24).

For low value-adding services, the Normative Instruction offers a simplified approach: a markup of 5% on direct and indirect costs, as a minimum when the Brazilian company provides the service and as a maximum when a foreign related party provides it (Normative Instruction RFB 2,161/2023, article 53). Eligibility depends on several conditions, and services also provided to third parties are excluded.

Transfer pricing is only one of the taxes on these payments. Services paid abroad also bear withholding income tax, PIS and Cofins on imports, CIDE in some cases and IOF. See our guide to paying services and royalties abroad from Brazil.

Royalties and intangibles

The repeal of the old deductibility limits is one of the biggest practical changes. Royalties for trademarks, patents, know-how and technical assistance paid to related parties are now deductible to the extent they are at arm’s length. In exchange, the analysis follows the OECD’s DEMPE logic: legal ownership of an intangible alone does not entitle an entity to the returns from it, and an entity that only funds development without controlling the risk earns no more than a risk-free return (article 21). For hard-to-value intangibles, the tax authorities can use actual results to evaluate the original pricing, with exceptions when the difference stays within 20% (article 22).

The law also added an anti-hybrid rule: royalties and technical assistance paid to related parties are not deductible when the arrangement results in double non-taxation, such as a double deduction or an amount not taxed in the hands of the beneficiary (article 44).

Loans, guarantees and cash pooling

Financial transactions have a dedicated chapter. The first question is whether a loan is really debt; if it is in substance equity, the interest is not deductible (article 27). Interest rates must reflect the borrower’s credit risk, taking into account implicit support from belonging to the group (article 28). The law also covers guarantees, cash pooling and captive insurance (articles 30 to 33). These rules apply alongside the thin capitalization limits, which remain in force (Law 12,249/2010).

Cost contribution arrangements and restructurings

Cost contribution arrangements must give each participant a share of costs consistent with its expected benefits (article 25). Business restructurings, such as converting a full-risk distributor into a limited-risk one or moving an intangible out of Brazil, may require compensation for what the Brazilian company gives up (article 26). Both deserve analysis before implementation, not after.

Adjustments: what can and cannot be corrected

The law distinguishes three types of adjustment (article 17):

• Spontaneous adjustment: made by the taxpayer in its own tax calculation to bring the result to arm’s length;
• Compensatory adjustment: made by the parties themselves, changing the price actually charged. It requires symmetrical entries on both sides, a debit or credit note and a statement from the foreign counterparty, and is not available for transactions with low-tax jurisdictions or privileged regimes (Normative Instruction RFB 2,161/2023, article 50);
• Primary adjustment: made by the tax authorities in an audit.

Two points often surprise foreign groups. First, adjustments that reduce the taxable base or increase a tax loss are generally not allowed, except for compensatory adjustments made under the Federal Revenue’s rules or results of a mutual agreement procedure (article 18). Second, Brazil has no secondary adjustment rules, so a primary adjustment does not automatically recharacterize the excess payment as a deemed dividend or loan.

Customs values may also be affected. In May 2026, the Federal Revenue amended the customs valuation rules to incorporate World Customs Organization case studies on using transfer pricing studies and compensatory adjustments for customs purposes (Normative Instruction RFB 2,326/2026). An adjustment for income tax does not automatically change the customs value, so importers should look at both together.

Documentation: Master File and Local File

Normative Instruction RFB 2,161/2023 requires three documents: the country-by-country report, the Master File and the Local File (article 55). The Local File requirement depends on the total value of controlled transactions in the previous year (article 57):

The Local File must cover at least the largest transactions that add up to 80% of each category, and all commodity transactions. The Master File and supporting documents may be submitted in English or Spanish without translation, unless the tax authorities request one (articles 58, 59 and 62).

The documentation is filed as a digital process through the Federal Revenue’s e-CAC portal within three months after the deadline for the ECF, the annual corporate income tax return (article 56). For calendar year 2025, the ECF was due on July 31, 2026, which puts the transfer pricing documentation at the end of October 2026. Only one process may be opened per calendar year, so the file should be complete before submission.

The country-by-country report is still governed by Normative Instruction RFB 1,681/2016 and filed within the ECF. It applies to groups whose consolidated revenue in the previous year reached R$2.26 billion, when the ultimate parent is Brazilian, or EUR 750 million, when it is foreign (article 4).

Penalties

Penalties for documentation failures are set by article 35 of the law:

• late filing: 0.2% of gross revenue for each month or part of a month;
• inaccurate, incomplete or omitted information: 5% of the value of the transaction concerned, or 0.2% of the group’s consolidated revenue for the Master File and the country-by-country report;
• filing without the required content: 3% of gross revenue;
• failure to respond to a notice or obstructing an audit: 5% of the transaction value.

Each penalty has a minimum of R$20,000 and a maximum of R$5 million. The 5% penalty does not apply to formal errors or immaterial information. If the tax authorities disagree with the taxpayer’s position during an audit and the taxpayer has been cooperative, the company can correct its calculation without a penalty (article 36). These penalties are separate from the tax, interest and penalties due on any adjustment itself.

Certainty in advance: specific consultation and MAP

Brazil now offers a ruling on the transfer pricing methodology for future transactions, called a specific consultation (consulta específica) and similar to a unilateral advance pricing agreement (article 38). A favorable answer is valid for up to four years, extendable for two more, and may be applied to past periods if authorized. The fee is R$80,000, or R$20,000 for an extension, adjusted for inflation and not refundable. The Federal Revenue held a public consultation on the detailed rules in 2024; check the current status before applying.

Where a treaty applies, results of a mutual agreement procedure are implemented by the tax authorities, which revise the assessment to reflect the agreement (article 39). Brazil does not have a comprehensive tax treaty with the United States, so this route is not available for US parents.

Transfer pricing and Pillar Two

Large groups now also deal with the Additional CSLL, Brazil’s qualified domestic minimum top-up tax under Pillar Two (Law 15,079/2024). Arm’s length adjustments feed into the GloBE income used to calculate the effective tax rate, so transfer pricing positions and Pillar Two calculations need to be consistent. See our article on Pillar Two in Brazil.

Checklist for a Brazilian subsidiary

• Map every transaction with foreign related parties, including services, royalties, cost sharing, loans, guarantees and cash pooling.
• Calculate the total of controlled transactions for the previous year to know which documentation level applies.
• Check that the group’s transfer pricing policy reflects what the Brazilian company actually does, and keep evidence of functions and risks.
• Document the benefit of every management fee and service charge, and test eligibility for the 5% low value-adding services approach.
• Review royalty agreements under the arm’s length and anti-hybrid rules.
• Plan compensatory adjustments before year end, with debit or credit notes and counterparty statements.
• Register commodity contracts in the RTC by the 10th day of the following month.
• File the documentation through e-CAC within three months after the ECF deadline.
• Align transfer pricing with customs valuation and, for large groups, with Pillar Two.

How Solidy can help

Solidy already serves subsidiaries of multinational companies in Brazil. We help map controlled transactions, review intra-group charges and agreements, prepare the information the group’s transfer pricing advisers need for the Master File and Local File, and keep the accounting, the tax returns and the documentation consistent. If your Brazilian entity is facing its next filing, or your group is reviewing its policy for Brazil, talk to our consultants.