For decades, Brazil’s transfer pricing regime stood apart from international standards. While most jurisdictions followed the OECD Transfer Pricing Guidelines, Brazil applied a system largely based on predetermined profit margins and objective methodologies, providing taxpayers with a high degree of certainty and predictability.

However, the enactment of Law No. 14,596/2023 marked a turning point for companies conducting international business in Brazil. The new legislation introduced the arm’s length principle, bringing the Brazilian transfer pricing framework into alignment with the OECD Transfer Pricing Guidelines. Although the new rules became mandatory in 2024, 2026 represents a particularly significant milestone, as many businesses are now entering a more mature phase of tax compliance under the new regime.

What has changed?

The most significant transformation is the replacement of the former system based on statutory fixed margins with the arm’s length principle. In practice, transactions between related parties must now reflect the same terms and conditions that would have been agreed between independent parties under comparable circumstances.

This represents a fundamental change in the way companies analyze and document their international transactions. Applying a formula established by law is no longer sufficient. Businesses must now demonstrate -through economic analyses and comparability studies- that their transfer prices are consistent with market conditions.

Furthermore, the scope of the rules has expanded considerably. The new regime now covers:

• imports and exports of goods;
• intra-group services;
• licences and royalties;
• financial transactions;
• cost-sharing arrangements;
• business restructurings; and
• certain transactions involving intangible assets.

Which companies are most affected?

The new requirements primarily affect multinational groups carrying out transactions between related entities located in different jurisdictions.

The companies facing the greatest impact typically:

• centralize regional functions;
• operate shared service centres;
• engage in intra-group financing transactions;
• manage intangible assets within the group; or
• maintain significant import and export flows with related parties.

Many organizations are also discovering that transactions historically considered low risk now require much more robust analyses, particularly where they involve intra-group services, intercompany loans, corporate guarantees or intellectual property structures.

From a practical perspective, the Brazilian Tax Authority is no longer focused solely on calculating the correct amount of tax. Instead, the emphasis has shifted towards the economic substance of transactions, the allocation of functions, assets and risks within the group, and the taxpayer’s ability to support the commercial rationale underlying each controlled transaction.

Documentation and deadlines

One of the most significant aspects of Brazil’s new transfer pricing framework is the adoption of international documentation standards inspired by Action 13 of the OECD BEPS Project. Beyond the methodological changes introduced by Law No. 14,596/2023, companies must now comply with enhanced documentation requirements that demand greater transparency regarding both their intercompany transactions and the multinational group to which they belong.

The level of documentation required depends on the total amount of controlled transactions carried out by the taxpayer during the previous calendar year.

Companies with controlled transactions below BRL 15 million (approximately US$2.92 million) may be exempt from preparing both the Local File and the Master File.

Where the volume of controlled transactions reaches or exceeds BRL 15 million, taxpayers must comply with the documentation requirements established under Brazilian transfer pricing regulations.

Furthermore, taxpayers whose controlled transactions amount to BRL 500 million or more (approximately US$97.64 million) during the previous year are subject to broader and more detailed Local File requirements.

The Local File is intended to document the controlled transactions carried out by the Brazilian entity. It includes information on related parties, the transactions performed, the transfer pricing methods applied, and the economic analysis supporting compliance with the arm’s length principle.

The Master File, on the other hand, provides an overview of the multinational group to which the taxpayer belongs. This document must include information on the group’s organisational structure, principal business activities, significant intangible assets, intra-group financial activities, advance pricing arrangements (where applicable), and the group’s latest consolidated financial statements, enabling the tax authorities to understand the overall structure and operations of the multinational enterprise.

In addition, companies subject to Country-by-Country Reporting (CbCR) must comply with the corresponding reporting obligations through the Escrituração Contábil Fiscal (ECF). The ECF also includes specific transfer pricing schedules requiring taxpayers to disclose information on related parties, controlled transactions, transfer pricing methods applied, and any adjustments made during the fiscal year.

Against this backdrop, companies engaged in international operations should pay particular attention to their compliance and documentation processes, as the new regime has significantly increased the level of transparency expected by the Brazilian tax authorities.

Following Brazil’s alignment with the OECD Transfer Pricing Guidelines, taxpayers must ensure that their transfer pricing policies, economic analyses and supporting documentation fully comply with the current regulatory requirements.

The increasing sophistication of both documentation requirements and tax authority audit procedures further reinforces the importance of adopting a proactive approach to transfer pricing compliance.

What are the risks of non-compliance?

Brazil’s convergence with international standards has also brought significantly stricter compliance and documentation requirements. Under the new framework, the risks associated with an inadequately supported transfer pricing policy extend well beyond traditional tax adjustments.

From a formal perspective, the legislation establishes specific penalties for failing to submit—or for submitting late—the Local File and the Master File. In certain cases, penalties may reach 0.2% of gross revenue per month of delay, in addition to further fines where the documentation provided does not comply with the legal requirements.

For the Master File, inaccurate, incomplete or omitted information may also result in penalties calculated on the basis of the multinational group’s consolidated revenue. However, the consequences are not limited to financial penalties.

The absence of adequate documentation may significantly undermine the taxpayer’s ability to demonstrate that its intercompany transactions comply with the arm’s length principle, increasing the likelihood of transfer pricing adjustments, tax audits and disputes regarding the valuation of controlled transactions.

Moreover, where the available information is considered insufficient, the tax authorities may adopt more conservative approaches in their comparability analyses and may even challenge the economic characterisation of certain transactions, creating consequences that can extend beyond the tax year under review.

For this reason, transfer pricing should no longer be viewed solely as a tax compliance obligation. Instead, it has become a critical component of the overall risk management strategy for multinational groups operating in Brazil.

What should companies do now?

Companies with international operations should periodically review their transfer pricing policies to ensure they remain aligned with the new regulatory requirements.

Businesses are advised to identify all transactions subject to the transfer pricing rules, carry out a robust functional analysis covering the functions performed, assets employed and risks assumed by each group entity, validate the transfer pricing methodology applied, and ensure that all required documentation is prepared in a timely manner.

Companies that still view transfer pricing solely as a year-end tax compliance exercise risk adopting a reactive approach. Under the new framework, transfer pricing should form part of the company’s compliance strategy throughout the financial year, enabling businesses to anticipate potential risks and avoid subsequent tax adjustments.

Brazil’s alignment with the OECD Transfer Pricing Guidelines represents one of the most significant developments in the country’s international tax system in recent years. While this transformation promotes greater integration with global tax practices, it also requires multinational groups to adopt higher standards of governance, documentation and technical preparation.

In addition, companies will face further challenges arising from the gradual implementation of Brazil’s broader tax reform, scheduled to begin in 2027.

Planning ahead

The transition to the new transfer pricing framework should not be viewed simply as a compliance exercise. It presents an opportunity for multinational groups to reassess their global transfer pricing policies, strengthen internal governance, and ensure consistency across jurisdictions.

Given the increasing sophistication of tax authorities and the growing exchange of information between jurisdictions, businesses that proactively adapt to the new Brazilian rules will be better positioned to minimise tax risks, reduce controversy and improve operational certainty.

How Auxadi can help

Are you planning to expand into Brazil and need to align your international operations with the country’s new transfer pricing requirements?

At Auxadi, we have a dedicated Transfer Pricing team working alongside our local specialists in Brazil, providing multinational groups with comprehensive support on transfer pricing compliance, documentation, economic analyses and international tax planning.

Whether you are entering the Brazilian market or reviewing your existing transfer pricing model, our experts can help ensure your business remains compliant while supporting your international growth strategy.

About Auxadi

With 26 subsidiaries across Europe, the United States, and Latin America, Auxadi is today the leading Spanish accounting firm serving multinational companies and real estate investment funds. Through its technology-driven approach and strong client-focused culture, Auxadi acts as an extension of its clients’ finance departments worldwide, providing accounting, tax, payroll, transfer pricing, and corporate legal services.

Its proprietary MySPV technology platform, more than 300 employees, and over 1,700 clients have positioned Auxadi as a benchmark in the tech-enabled services sector, not only in Spain but internationally.

Author:

Andre Victor Cannux Radocza

Tax Manager – BR