Brazil makes changes to import and export pricing methods

The Brazilian Federal Revenue Secretariat has issued Normative Instruction (NI) 1,498/2014, making changes to the list of commodities for the purpose of applying the PCI (price under quotation on importation) and PECEX (price under quotation on exportation) methods.

These methods are mandatory and exclusive when dealing with import and export transactions between related parties, one of them abroad, including any transactions involving commodities with companies or individuals resident or domiciled in tax havens or jurisdictions with privileged tax regimes.

The list includes the following (Annex I of NI 1,312/2012):

1. Cane or beet sugar and chemically pure sucrose, in solid form (NCM 17.01.1);

2. Cotton (NCM 52);

3. Aluminum and articles thereof (NCM 76);

4. Cocoa and cocoa preparations (NCM 18);

5. Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion (NCM 09.01);

6. Meat and edible offal (NCM 02);

7. Coal (NCM 27.01 a 27.04);

8. Copper ores and concentrates (NCM 2603.00) and copper and article thereof (NCM 74) – changed by NI 1,498/2014;

9. Tin ores and concentrates (NCM 2609.00.00) and tin and article thereof (NCM 80) – changed by NI 1,498/2014;

10. Soybean meal (NCM 2304.00);

11. Durum wheat and meslin flour (NCM 1101.00);

12. Iron ores and concentrates (NCM 26.01) and Iron and steel (NCM 72) – changed by NI 1,498/2014;

13. Petroleum gas and other gaseous hydrocarbons (NCM 27.11);

14. Manganese ores and concentrates (NCM 2602.00) and manganese and articles thereof, including waste and scrap (NCM 8111.00) – changed by NI 1,498/2014;

15. Soybean oil and its fractions (NCM 15.07);

16. Gold (including plated items), in unwrought, semi-manufactured or dust form. (NCM 71.08);

17. Petroleum (NCM 27.09 and 27.10);

18. Silver (including silver plated with gold or platinum), unwrought or in semimanufactured forms, or in powder form (NCM 71.06);

19. Soybeans, whether or not broken (NCM 12.01);

20. Orange juice (NCM 2009.1);

21. Wheat and meslin flour falling within (NCM 10.01);

22. Lead and articles thereof (NCM 78) and lead ores and concentrates (NCM 2607);

23. Nickel and articles thereof (NCM 75) and nickel ores and concentrates (NCM 2604);

24. Zinc and articles thereof (NCM 79) and zinc ores and concentrates (NCM 2608); and

25. Cobalt ores and concentrates (NCM 2605) and other intermediate products of cobalt metallurgy; cobalt and articles thereof, including waste and scrap (NCM 8105).

Some doubts still remain as to whether only the goods eligible to be traded in an organised commodities and futures exchange, or any goods that are traded in large quantities and volumes and can thus be included in the economic concept of commodity, are subject to the PCI and PECEX methods.

But most think that these two methods are mandatory not only for the commodities listed above, but also for any good which falls under the concept of commodity and can be traded in a commodities and futures exchange, even if they are not actually so traded at present.

Besides the discussion about the illustrative or comprehensive nature of the list, this change is important because of the broadened scope of the list in Annex NI 1,312/2012, to include not only unprocessed commodities, but also processed or semimanufactured products derived from them. This list can be changed again at any time, hence the need for constant monitoring of the commodities and derived products for determination of the applicable method of transfer pricing. These chances are applicable as from October 16, 2014.

By Francisco Moreira and Andre Oliveira of Castro, Barros, Sobral, Gomes Advogados