Brazil: local rules

Brazil moved to arm's length rules based on the OECD standard with Law 14,596/2023, which applies from 1 January 2024. Taxpayers could opt in from 1 January 2023 by filing an irrevocable option between 1 September and 31 December 2023 (Law art. 45, IN RFB 2,161/2023 art. 69). The Law covers corporate income tax (IRPJ) and the social contribution on net profit (CSLL). It replaced the old fixed-margin rules of Law 9,430/1996. Related parties are broadly defined (art. 4), for example control, 25% of profits, or 20% common ownership. The tax office can ignore or replace a transaction that unrelated parties would not have done (art. 8). IN RFB 2,161/2023 is the main regulation and treats the OECD Guidelines 2022 as a secondary source (art. 1 para. 4). The rules also reach any transaction with a tax haven or a privileged tax regime entity, even if it is not related (Law 9,430/1996 arts. 24 and 24-A).

A company with controlled transactions of R$ 15m or more in the prior year must file a Global File (master file) and a Local File through an e-CAC digital process (IN 2,161 arts. 56 and 57). A full Local File is needed at R$ 500m or more, and a short one from R$ 15m to below R$ 500m. Below R$ 15m both are waived. The deadline is 3 months after the ECF deadline. With the ECF due 31 July, that is 31 October, moved to the next working day when it falls on a weekend or national holiday (CTN art. 210), so 3 November 2026 for 2025. For 2024 only, the date was the last business day of 2025. Part of the transfer pricing data is also filed in the ECF, per the ECF layout manual (art. 56 para. 1). Supporting documents must be kept up to date and given to the tax office on request (art. 62). A Global File in English or Spanish, and some Local File attachments and supporting documents in those languages, need a Portuguese translation only if the tax office asks (arts. 58, 59 and 62). Controlled commodity import and export contracts must also be registered in the e-CAC by the 10th day of the month after the contract (art. 64).

The Law lists five methods: comparable independent price (PIC), resale price less profit (PRL), cost plus profit (MCL), transactional net margin (MLT) and profit split (MDL). A sixth, other methods, is allowed if the result matches what unrelated parties would reach (Law art. 11). The most appropriate method is chosen. PIC is preferred when reliable price data exists, and it is also the lead method for commodities. If the result is outside the range, the adjustment is to the median. The range is the interquartile range if comparability is uncertain, and the full range if comparables are equally good (art. 16). A tested party, the delineation of the transaction and a comparability analysis come first (arts. 6 to 9, 15). IN 2,161 art. 53 gives an optional 5% markup for low value-added services.

Late Global or Local File: 0.2% of the company's gross revenue per month or part month. Filed but not meeting the filing rules: 3% of gross revenue. Wrong, incomplete or missing data in the Global File: 0.2% of the group's prior year revenue. Missing data requested in an audit: 5% of the transaction value. Every fine has a floor of R$ 20,000 and a cap of R$ 5,000,000 (Law art. 35, IN art. 66). If the tax office disagrees, the company can often correct the ECF and DCTF within 30 days without a penalty, if it was cooperative and acted in good faith (Law art. 36, IN art. 67). Late filing of the ECF carries separate fines under Decree-Law 1,598/1977 art. 8-A and Law 8,218/1991 art. 12.

Brazil applies only a qualified domestic minimum top-up tax, called the Additional CSLL (Law 15,079/2024, IN RFB 2,228/2024). It applies from 1 January 2025 to groups with consolidated revenue of at least EUR 750m in two of the four prior years. It tops up Brazilian profits to an effective rate of 15%. The tax is paid by the last business day of the seventh month after the year end, so 31 July 2026 for a 2025 calendar year (DARF code 1809). The amount is also reported in the DCTFWeb for the sixth month, due the last business day of the next month, which is the same date. A separate information return has not been issued yet. For the first year it will not be due before the 18th month after year end, so not before 30 June 2027 for 2025. No Brazilian IIR or UTPR was found. Law 15,079 art. 40 only asked the government to propose an IIR and a CFC regime.

The ECF (Escrituração Contábil Fiscal) is the annual income tax return for companies on real, presumed or arbitrated profit. It is due by the last business day of July of the next year (IN RFB 2,004/2021 art. 3), and the Simples Nacional, inactive companies and public bodies are exempt. The Country-by-Country report and the notice of who the reporting entity is are both made inside the ECF, so they share its deadline (IN RFB 1,681/2016 arts. 5 to 7). The CbC threshold is R$ 2.26bn for a Brazilian parent and EUR 750m for a foreign parent. The Receita may set up a consultation process on the method for future controlled transactions, with a fee of R$ 80,000 and a validity of 4 years plus 2 more (Law art. 38). The tax office must implement results agreed in a mutual agreement procedure (art. 39). Interest paid to related parties abroad is limited by a 2 to 1 debt to equity test (Law 12,249/2010 art. 24). Under CTN art. 210, a deadline set by tax law falls on a normal working day, so a deadline on a weekend or national holiday moves to the next one. The ECF and Pillar Two deadlines are already set to a business day and do not move.