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

Historical claims involving KPMG Australia's tax practice have surfaced as the firm battles a separate parliamentary inquiry into its handling of whistleblowers
While AI is revolutionising tax work, it is also reshaping clients’ willingness to pay for advice and their perception of the value generated by tax advisers
From Dhruva Advisors to Svalner Atlas, Ryan is growing fast. Tom Shave discusses consolidation, competition, and tax’s private equity debate
Awards
ITR is delighted to reveal the shortlisted nominees for the Middle East Tax Awards
The UK has confirmed its approach to the OECD’s side-by-side deal, but US-parented groups may find pillar two compliance remains far from straightforward
Fragmented pillar two taxation and increased use of AI by tax authorities have left clients fearful of heightened disputes exposure
Grant Thornton Advisors’ latest acquisition has produced the fifth-largest US advisory firm by revenue, but there’s still a clear gulf between it and the big four
Crowe joins Grant Thornton, WTS and Ryan in attracting PE investment, suggesting that dealmakers remain bullish on the tax advisory sector
HMRC expects advisers to meet ever-higher compliance criteria. After 24 consecutive qualified audit opinions, many will ask whether HMRC should hold itself to the same standards
The purchase of Marosa represents the second major tax tech consolidation this week, raising questions of a broader industry trend
Gift this article