Newly modified Brazilian CUPs: Bad policy remains
01 June 2012
Napoleão Dagnese head of international tax at OC Oerlikon, a high-tech industrial company, provides a critical analysis of the changes to the Brazilian transfer pricing regime, from the taxpayers’ perspective.
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
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