Given the need to adapt internal tax laws to the global guidelines on the subject, Brazil has been working together with the OECD to implement a simpler legislation on transfer pricing.
The latest developments took place on September 15, when a virtual meeting was held between the OECD and representatives of the Brazilian Revenue Service (“RFB”).
After the meeting, the representative of RFB, Cláudia Pimentel, commented on the five main areas being developed together with the OECD: i) prevention of base erosion and profit shifting (“BEPS”); ii) legal certainty; iii) prevention of double taxation; iv) simplicity for the authorities; and v) simplicity for taxpayers.
The Brazilian tax authorities have raised, throughout studies on the subject, the existence of certain conditions that would imply gaps in both the Brazilian and the global systems. In this scenario, as the tax authorities evaluated, there would be a loss of revenue for the Brazilian State since these same gaps would lead to a double non-taxation.
In addition, another hurdle noted by Brazilian tax authorities is the difficulty of the internal adaptation to the global guidelines. Even with a gradual merger between the two systems, the training of tax authorities would not accompany the implementation of a different transfer pricing regime.
Simplicity
One of the several implementations to be carried out based on the joint project involves the adoption of simpler transfer pricing rules for both authorities and taxpayers. However, the advantages provided by the simplification could disappear with the possible loss of revenue to the Brazilian tax authorities, according to Pimentel’s assessment.
According to the RFB’s representative, the main focus is to provide a simplification in the system while ensuring that legal certainty in transfer pricing operations could be related to the use of Advanced Pricing Agreements (APAs), she said.
In objective terms, an APA is an agreement between the tax authorities of a given country and the taxpayer. Pricing methods are pre-established so that the taxpayer can, on a proactive and cooperative basis, resolve or avoid disputes involving transfer pricing operations.
Safe harbours
Safe harbours are defined as legal provisions that release certain taxpayers from compliance obligations regarding transfer pricing operations.
Although certain countries have removed the laws that allow safe harbours in their legislative systems, the OECD transfer pricing guidelines have recently recommended the adoption of safe harbours more frequently. Therefore, the Brazilian model, which encompass the adoption of such safe harbours, would not need to be eliminated if the global transfer pricing system was adopted.
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Published on October 5, 2020