Originally published in the January 5, 2010 edition of World Tax Daily (Copyrights Tax Analysts)
Provisional measure 478/2009, which introduces significant changes to Brazil’s transfer pricing rules for imports, was published in the official gazette December 29.
Among the most relevant aspects of the changes is the revocation of the resale price less profit method (preço de revenda menos lucro, or PRL), which was divided into PRL (Resale) and PRL (Production), the latter available for companies that import items subject to further manufacturing processes in Brazil.
Those two methods have now been replaced by the sales price less profit method (método do preço de venda menos lucro, or PVL). Provisional Measure 478/2009 establishes the terms and conditions for the PVL, and further comments will be provided later on. However, both PRL methods are available for transfer pricing determinations for the 2009 calendar year (for which tax returns must be filed in 2010).
In a message to Congress, sent with Provisional Measure 478/2009, President Luiz Inacio Lula da Silva said the PRL methods were replaced to make transfer pricing control more efficient. According to the message, many of the changes had been previously contemplated in regulations issued by the Federal Revenue Department, but had no basis in law, which generated disputes with taxpayers. The new provisions therefore also aim to reduce litigation.
Another important change, contained in article 10 of Provisional Measure 478/2009, empowers the Ministry of Finance to establish different profit margins based on business sector for transfer pricing purposes.
Article 10 also requires that corporate taxpayers disclose in their annual tax returns the transfer pricing method they have elected for that year. According to the president’s message, the goal is to ensure more effective transfer pricing controls and assessments by imposing a deadline for electing transfer pricing methods.
David Roberto R. Soares da Silva