Provisional Measure (MP) 1,142 was published on December 29, 2022, and, after several proposals for amendments to the original text, the MP had its final wording approved unanimously on May 10, 2023, by the Federal Senate through the Bill of Law 8/2023 and will now go for sanction by the President of the Republic.
The new transfer pricing rules imply the immediate need for companies that have operations with related parties and/or tax havens and privileged tax regimes (controlled transactions) to review their controlled transactions, as well as any relationships between the parties.
The urgency and relevance of changing the transfer pricing rules were justified by the recent change in the tax policy of the United States, which no longer allows the use of tax credits referring to taxes paid in Brazil, among other, due to the fact that Brazil does not apply the arm’s length principle; also on the need to facilitate Brazil’s accession to the OECD; the tax collection losses that Brazil experiences year after year due to the various existing deficiencies in the Brazilian legislation, which leads to the erosion of the tax base and transfer of profits (BEPS); as well as the double taxation resulting from the rigidity of the current rules that end up reducing investments in the country.