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

Former IRS commissioner Danny Werfel argues that the biggest obstacle to AI adoption in tax is not technology, but trust, and introduces a practical AI risk framework to help
Howell takes a deep dive into how he led the landmark PepsiCo dispute, discusses the ATO's enforcement priorities, and emphasises KordaMentha's market ambitions
Global tax leader David Linke said that the TaxSim gaming programme could replace aspects of traditional face-to-face learning
Former ATO economist Craig Silverwood is joining from Australian firm MinterEllison
The rebranding, which will see changes to signage, visual identity and digital properties, is scheduled to be completed by the end of this year
The software space was previously more fragmented, but that model is becoming more difficult to sustain as tax administration becomes increasingly digitised
While some may argue that heads should roll following KPMG Australia’s audit leak scandal, client and revenue data emphasises that tax team stability is paramount
A landmark ruling on LLP taxation has clarified who truly holds ‘significant influence’ and which partnership structures are most likely to withstand HMRC scrutiny
Chris Jordan promoted tax schemes to clients and received illicit payments, it has also been alleged
Solving the UK's fiscal deficit requires an ‘ease of doing taxes’ framework driven by tax-as-code – not thousands of additional auditors
Gift this article