Transfer Pricing in Brazil: Compliance Under the New Arm's Length Rules

OverviewWhat changed in Brazil's transfer pricing rules

For decades, Brazil ran one of the few transfer pricing systems in the world that didn't follow the OECD's arm's length principle. Instead of comparing related-party prices to open-market transactions, Brazil applied fixed statutory margins — a simpler system, but one that created friction for multinational groups trying to reconcile Brazilian filings with their global transfer pricing policy.

That changed with Law 14.596/2023 and the regulations that followed (Normative Instruction RFB 2,161/2023), which brought Brazil's transfer pricing rules in line with the OECD arm's length standard, effective for fiscal year 2024 onward (with an optional early-adoption window for 2023). For any multinational group with related-party transactions involving Brazil, this is one of the most significant compliance changes in years.

01Who needs transfer pricing documentation

The rules apply to controlled transactions: any transaction between a Brazilian entity and a related party abroad, including parent companies, subsidiaries, and other entities under common control or significant influence. This covers the sale and purchase of goods, services, royalties, intangibles, and intercompany financing arrangements such as loans and guarantees.

Companies importing or exporting between related entities, licensing intellectual property from a foreign parent, or receiving intercompany loans from abroad are all typically in scope and need to evaluate whether their pricing meets the arm's length standard.

02Transfer pricing methods under the new rules

Brazil's updated framework adopts the OECD's standard methods for testing whether related-party pricing reflects what independent parties would have agreed to:

• Comparable Uncontrolled Price (CUP) — compares the price charged to a comparable transaction between unrelated parties
• Resale Price Method — works back from the resale price to unrelated customers, less an appropriate margin
• Cost Plus Method — starts from the supplier's cost, plus an appropriate markup
• Transactional Net Margin Method (TNMM) — compares net profit margins to those of comparable independent companies
• Profit Split Method — divides combined profits between related parties based on their relative contribution

Selecting the right method — and building a defensible benchmarking study to support it — is where most of the technical work happens.

03Documentation and compliance requirements

Under the new regime, companies need contemporaneous documentation that supports the pricing method chosen and demonstrates how it was applied — not just a policy statement, but a benchmarking analysis with comparable transactions or companies. This documentation feeds into Brazil's corporate tax reporting through the ECF (Escrituração Contábil Fiscal), where transfer pricing adjustments are declared annually.

04Risks of non-compliance

Why this fits into your broader tax strategy in Brazil

Transfer pricing rarely sits in isolation — it interacts with how your Brazilian entity is taxed overall, how intercompany balances are consolidated, and how your accounting team reports to headquarters. That's why Gescon handles transfer pricing alongside broader tax consulting and accounting BPO, rather than as a standalone, disconnected service.

Frequently asked questions