Brazil: Court decides on third-party freight and insurance issues

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2026

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement


Brazil: Court decides on third-party freight and insurance issues

As widely known, Brazil's transfer pricing rules do not adopt the internationally accepted arm's-length standard.

For instance, for the purposes of applying the Brazilian equivalent to the resale price method (PRL) in transactions involving import of goods between related parties abroad, regulations provide the use of statutory fixed margins to derive a benchmark ceiling price. In these instances, actual transfer pricing practiced by the local tested party must be lower than that derived benchmark price, otherwise tax authorities will impose a transfer pricing adjustment.

In addition to the potential double taxation issues resulting from the non-adoption of the arm's-length standard, there are many controversial legal issues that have been disputed by taxpayers and tax authorities, since rules became effective on January 1 1997. One of the most controversial issues is whether third party insurance and freight services fees, as well as Brazilian import duties, should or should not be included as an integral part of import costs to determine the actual transfer price practiced by a tested party. In many situations such amounts increase actual transfer prices to levels beyond benchmark prices. As a result, arguing that these adjustments are mandatory, tax authorities have been imposing tax assessments against many taxpayers.

Disputing the issue, taxpayers alleged that transfer pricing regulations do not provide that such adjustment is mandatory and that it should not be performed if insurance and freight services are contracted with third unrelated parties. On the other hand, the tax authorities argued that regulations impose such adjustment even if payments are made to third parties, as the only required condition is that the tested party ultimately bears the cost associated with those services.

In a recent decision, the Brazilian Administrative Court (CARF) ruled in favour of the taxpayer. By examining the case, CARF officials decided that insurance and freight services fees, as well as Brazilian import duties, should not be included in the calculations to assess the transfer price practiced by the tested party.

The decision was celebrated by taxpayers in general, though it cannot be used as mandatory precedent to other taxpayers.

Nélio Weiss (nelio.weiss@br.pwc.com) & Philippe Jeffrey (philippe.jeffrey@br.pwc.com)

PwC

Tel: +55 11 3674 2271

Fax: +55 11 3674 2040

Website: www.pwc.com

more across site & shared bottom lb ros

More from across our site

It was also a memorable night for Galicia, KPMG, Skadden and Pinheiro Neto, all of which scooped major awards at a gala ceremony in New York
The former Deloitte UK CEO earned a 45% raise in a year when 1,000 staff reportedly lost their jobs – and the pay gap is only getting bigger
In a seminal development for big law, the 95-year-old firm is set to cease operations after a series of high-profile partner departures
UK Chancellor John Healey extended a VAT cut, suspended tariffs, increased a bank surcharge and vowed to increase funding for HMRC
Kristine Riisberg warned that TP decisions can determine top-up tax exposure under pillar two, while global consensus over the rules remains unsettled
Both Germany’s NIS2 and the EU AI Act now determine whether a tax function can meet its obligations – and both can make management personally accountable
Originators, loan purchasers and securitisation vehicles may need to revisit servicing agreements and pricing after a key judgment narrowed the VAT credit management exemption
Opening doors for existing talent within Baker McKenzie and a desire for enhanced legal capabilities informed Ricardo Perera’s switch from KPMG
Boaz Goren’s move to the upstart PE-backed firm takes the number of senior UK tax professionals who have left EY this year to 13
The allegations against Deloitte Cyprus raise uncomfortable questions about how far the big four can distance themselves from misconduct at member firms
Gift this article