Representatives of the Brazilian Internal Revenue Service (Receita Federal do Brasil) met with the Organisation for Economic Cooperation and Development (OECD) on April 12, 2022, to present new transfer pricing rules. The proposed rules could help Brazil join the OECD and make certain Brazilian taxes creditable in the U.S. under the new foreign tax credit (FTC) regulations.
Brazil’s inclusion as a member of the OECD has been discussed since 2018. One of the fundamental criteria for inclusion is the implementation of a new transfer pricing system. The intent is to improve trade agreements between Brazil and countries located abroad, and between linked or interdependent companies, avoiding double taxation or double non-taxation, and simplifying the legislation.
The adoption of the new transfer pricing system is expected to be performed between the years 2022 and 2023. The new rules would still need to be submitted to the Brazilian National Congress and approved to become effective.
Should these rules become effective, aligning the transfer pricing system to the international rules of the OECD could have significant effects on the current interaction of Brazil’s tax system with other jurisdictions. For example, the changes to Brazil’s transfer pricing system may alleviate some issues relating to the creditability of certain Brazilian taxes for U.S. federal income tax purposes.
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