Newly modified Brazilian CUPs: Bad policy remains

The presidential decree (MP563/12) issued on April 4 introduced deep changes in the Brazilian transfer pricing regulations. If converted into law within 120 days the new regulations will have a considerable negative impact on a multinational doing business in Brazil. In particular, the most used methods for import transactions were modified. The resale price method (PRL), famous for its unique legally prescribed fixed margins was refurbished and new fixed profit margins between 20% and 40% were introduced, together with nastier calculation schemes. The flat interest rate (3% on LIBOR 3 months) for loans not registered in the central bank was substituted by margins to be published by the finance minister. The methods with a link to market prices and, hence, to the arm's-length principle were revisited. However, at least for companies dealing with industrialised goods, the new regulations are not good news....