Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

December 30, 2022

Brazilian Government publishes Provisional Measure adopting armís-length principle

After several years of joint work between the Brazilian Federal Revenue Service (RFB, acronym in Portuguese) and the Organisation for Economic Co-operation and Development (OECD), on 29 December 2022, the Brazilian Government published Provisional Measure (PM) No. 1,152 which introduces new transfer pricing (TP) rules in Brazil.

The PM is a type of Decree, signed and published by the President, with the power of Law that needs to be approved by the Congress within 60 calendar days from publication (that is extendable by another 60 calendar days) to be enacted as law. As disclosed by the General Secretariat of the Presidency of the Brazilian Republic, this measure stems from the observation of existing gaps and weaknesses in the current Brazilian TP laws and issues arising from those laws’ misalignment and interactions with the minimum standard established by the OECD. This impacts the (i) business environment for taxpayers conducting business in Brazil; (ii) Brazil's insertion in global value chains; (iii) legal certainty; and (iv) effective collection of tax revenues.

Implementation of this new TP legislation seeks to:

  • Adopt the arm's-length principle to rule all cross-border intercompany transactions
  • Avoid double taxation outcomes, as well as double non-taxation
  • Facilitate the inclusion of Brazil in the global economy principles and increase Brazilian multinational enterprises competitiveness
  • Remove one of the main obstacles to the recognition of tax credits, in the United States, of the income tax paid in Brazil

Among the main points addressed by this PM, key highlights include:

  • Introduction of the arm's-length principle following international principles stated by the OECD
  • Definition of related parties subject to the TP rules
  • Selection of the tested party based on the most reliable data and best method rule
  • Application to this new TP system to all cross-border intercompany transactions
  • Inclusion of all cross-border transactions over Intangible property:
    • Introduction of Intangible property definition
    • Adopting the arm’s-length principle to determine royalty payments, thus eliminating the royalty’s deductibility limitation
    • Inclusion of the DEMPE concept and its relevancy to determine appropriate arm’s-length remuneration
    • Introduction of Cost Contribution Agreements
  • Inclusion of cross-border intercompany services and TP methods for pricing those transactions
  • Inclusion of all cross-border financial transactions such as intercompany loans, guarantees, centralized treasury functions, and insurance transactions
  • Implementation of TP methods according to the OECD standard:
    • Comparable Uncontrolled Price Method
    • Resale Price method
    • Cost Plus Method
    • Transactional Net margin method
    • Transactional Profit Split Method, and
    • Other or unspecified method
  • The PM indicates the CUP method as the most appropriate method when reliable comparables are available for cross-border transactions of commodities; however, taxpayers may apply other methods based on the appropriate facts and circumstances

  • Establishing the need for a functional (risks, functions, and assets) and economic analysis for the application of the new TP documentation rules

  • Introduction of penalties for the lack of TP documentation that is now required for compliance purposes

  • Introduction of unilateral TP agreements with the RFB (similar to Advance Pricing Agreements) and Mutual Agreement Procedures

  • The new TP rules come into effect on 1 January 2024, but can be adopted, as an option, as early as 2023

Additional details are expected to come through a Normative Instruction. Future Alerts will cover developments with respect to the PM including technical considerations and relevant concepts for Brazilian taxpayers.


For additional information with respect to this Alert, please contact the following:

EY Assessoria Empresarial Ltda, São Paulo

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

Ernst & Young LLP (United States), International Tax and Transactions Services, Transfer Pricing


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more