Worldwide transfer pricing reference guide 2014

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Brazil Taxing authority and tax law Taxing authority: Department of Federal Revenue of Brazil (Receita Federal). Tax law: Internal Revenue Code by Decreto 3000, 26 March 1999 (RIR99). Relevant regulations and rulings • Law No. 9.430, enacted 27 December 1996, introduced transfer pricing rules in Brazil by providing three different methods on imports and exports of assets, goods and services: • Imports: • Comparable independent price method (PIC) defined as the weighted average sales price for similar products/services to unrelated parties or between unrelated parties • Resale price minus gross profit method (PRL) defined as weighted average sales price minus certain adjustments less a statutory gross profit margin • Production cost plus profit method (CPL) defined as the weighted average actual costs incurred during the year to produce the same or similar product/services plus taxes and a gross profit markup of up to 20% • Exports: • Export sales price method (PVEx) defined as weighted average sales price to other customers or between unrelated parties during the same year • Resale price method defined as weighted average sales prices in the country of destination under similar payment terms minus taxes imposed by that country and a gross profit margin of 15% (for wholesale) or 30% (for retail) • Purchase or production cost method (CAP) defined as weighted average cost of acquisition or production increased by taxes and duties imposed by Brazil plus a gross profit mark up of at least 15% on the sum thereof • Normative Instruction 243/02 provided the most relevant interpretations and was valid until the issuance of Normative Instruction 1.312/12 in 2012 with further amendments by Normative Instruction 1.321/13, 1.322/13 and 1.395/13 • Federal Law 12.715, published on 17 September 2012, introduced significant changes to the Brazilian transfer pricing rules. The amendments included: • Imports: • Introduction of a minimum requirement for the application of the Brazilian uncontrolled price method (PIC), for internal comparables, on imports • New minimum statutory gross profit margin is required when applying the PRL method, for the import of goods, services or rights, ranging from 20%–40% depending on the company’s industry • FOB price as basis for PRL calculation • Transfer pricing methods for commodities: • Intercompany imports and exports of commodities will have to be tested using PCI (quotation on imports) and PECEX (quotation on exports), respectively. Additionally, the law authorizes the Brazilian tax authorities to determine what will be considered as commodities, and which commodity exchange should be recognized for applying the newly introduced methods. • The safe harbor rules no longer apply for the importation and exportation of commodities • Procedural changes: • Inability to change previously selected transfer pricing methodology once the tax inspection has been initiated, unless the method is disqualified by the tax authorities • In December 2012, the Law 12.766 introduced further changes to the Brazilian transfer pricing rules for interest paid to related parties • The calculation of the maximum amount of deductible expenses and minimal revenue arising from interest, subject to transfer pricing regulations, should observe the following: Worldwide transfer pricing reference guide 44
Brazil (continued) Relevant regulations and rulings (continued) • In case of transactions in US Dollars (US$) at a fixed rate, the parameter rate is the market rate of the sovereign bonds issued by the Government on the external market, indexed in US$ • In case of transactions in Brazilian Real (BRL) at a fixed rate, the parameter rate is the market rate of the sovereign bonds issued by the Government on the external market, indexed in BRL • In case of transactions concluded abroad in BRL at a floating rate, the Ministry of Finance will determine the parameter rate; and for all other cases, the parameter rate is LIBOR • Normative Instruction (IN) 1.312/12 was also published in December 2012, and it consolidates Brazil’s transfer pricing legislation and revokes all previous Normative Instructions related to transfer pricing (including IN 243/02). Moreover, IN 1.312/12 provides guidance on the application of the new Law 12.715/12, and exercises the power to determine certain rules, where the law provides the authority. • On 18 January 2013, the Brazilian tax authorities issued IN 1.321/13 and IN 1.322/13, which provided further guidance on two issues related to the recently enacted changes to the Brazilian transfer pricing rules: • Safe Harbor Provisions: • IN 1.322/13 clarified that for calendar year 2012, the former safe harbor rules, as described by IN 243/02, should be applied. IN 243/02 established as the profitability safe harbor, states that the Brazilian taxpayer must earn a net profit before income taxes of 5% on export revenues to related parties. IN 1.321/13 also allows the option of applying either a three-year analysis (current year and two previous years) or a one-year analysis using the relevant year under consideration • Therefore, the changes to the safe harbor introduced by IN 1.312/12 are effective from January 2013 • Interest Bearing Intercompany Agreements: • Intercompany agreements entered into before 31 December 2012, will follow the previous rules (Law 9,430), whereby the interest, paid or received by the Brazilian taxpayers, registered with the Brazilian Central Bank, are not subject to transfer pricing rules. If the agreement is not registered, then taxpayers will be subject to the limitation of LIBOR with deposits in US$ for six months + 3% • Intercompany agreements entered into as of 1 January 2013 or after, will be subject to the new Law 12.766/12 that differentiates interest rates depending on the underlying currency of each agreement and also allows for a variable spread to be issued by the Brazilian Ministry of Finance. Please note, that the renewal or re-negotiation of existing agreements should be considered as a new transaction, and therefore, subject to the new regulations • Brazilian taxpayers who opt for the application of the new transfer pricing rules of the Law 12.715/12 — e.g., reduced profit margins on the application of the Brazilian “resale minus method” (PRL method), should then, in the opinion of the Brazilian tax authorities, be subject to the limitation of six month US$ LIBOR plus a spread of 3%, regardless of the registration with the Brazilian Central Bank. This interpretation is not included in the Law and therefore subjected to different interpretations • On 2 August 2013, the Brazilian Ministry of Finance issued ordinance 427/2013, which provided the interest rate spread, which was mentioned but not specified in Law 12.766/2012. The annual spreads that depends on the Brazilian taxpayer’s position on the loan, are as follows: • Brazilian entity as the borrower — Starting on 1 January 2013, the spread should be no more than 3.5% • Brazilian entity as the lender — From 1 January 2013 to 1 August 2013, no interest rate spread is required on the transaction. Starting on 2 August 2013, the spread is required to be no less than 2.5% • As specified in IN 1.322/13, intercompany agreements entered into as of 1 January 2013 or after will be subject to the new Law 12.766/12. Whereas, agreements previously entered into and registered with the Brazilian Central Bank will be grandfathered by the previous rules and will not be subject to the new requirements. Please note, that the renewal or re-negotiation of existing agreements should be considered as a new transaction, and therefore, subject to the new regulations • IN 1.395/2013 provided further guidance regarding the application of the PCI and PECEX methods • Defined that commodities subject to the application of the PCI and PECEX methods are products listed in Appendix I and products traded in the commodities and futures exchanges listed in Appendix II • Established the possibility of adjustments in relation to variations of quality, features, and content of the substance of the product sold Worldwide transfer pricing reference guide 45
Page 1 and 2: Worldwide Transfer Pricing Referenc
Page 3 and 4: Worldwide transfer pricing referenc
Page 5 and 6: Nigeria 215 Norway 217 Oman 220 Pak
Page 7 and 8: The content is current as of 28 Feb
Page 9 and 10: CUP (comparable uncontrolled price)
Page 11 and 12: Albania (continued) Priorities/pric
Page 13 and 14: Algeria Taxing authority and tax la
Page 15 and 16: Algeria (continued) Return disclosu
Page 17 and 18: Angola (continued) Transfer pricing
Page 19 and 20: Argentina Taxing authority and tax
Page 21 and 22: Argentina (continued) Transfer pric
Page 23 and 24: Australia Taxing authority and tax
Page 25 and 26: Australia (continued) Priorities/pr
Page 27 and 28: Australia (continued) Documentation
Page 29 and 30: Australia (continued) Frequency of
Page 31 and 32: Austria (continued) Documentation r
Page 33 and 34: Bahrain Taxing authority and tax la
Page 35 and 36: Bangladesh (continued) Penalty reli
Page 37 and 38: Belgium Taxing authority and tax la
Page 39 and 40: Belgium (continued) Statute of limi
Page 41 and 42: Bolivia Taxing authority and tax la
Page 43: Botswana Taxing authority and tax l
Page 47 and 48: Brazil (continued) Priorities/prici
Page 49 and 50: Brunei Taxing authority and tax law
Page 51 and 52: Bulgaria (continued) Transfer prici
Page 53 and 54: Bulgaria (continued) Return disclos
Page 55 and 56: Cameroon Taxing authority and tax l
Page 57 and 58: Canada Taxing authority and tax law
Page 59 and 60: Canada (continued) Documentation re
Page 61 and 62: Chile Taxing authority and tax law
Page 63 and 64: Chile (continued) Return disclosure
Page 65 and 66: China (continued) Documentation req
Page 67 and 68: Colombia Taxing authority and tax l
Page 69 and 70: Colombia (continued) Penalty relief
Page 71 and 72: Republic of Congo Taxing authority
Page 73 and 74: Costa Rica Taxing authority and tax
Page 75 and 76: Croatia Taxing authority and tax la
Page 77 and 78: Croatia (continued) Frequency of ta
Page 79 and 80: Czech Republic Taxing authority and
Page 81 and 82: Denmark Taxing authority and tax la
Page 83 and 84: Denmark (continued) Documentation d
Page 85 and 86: Dominican Republic Taxing authority
Page 87 and 88: Dominican Republic (continued) Expe
Page 89 and 90: Ecuador (continued) Priorities/pric
Page 91 and 92: Ecuador (continued) Return disclosu
Page 93 and 94: Egypt Taxing authority and tax law
Page 95 and 96:
Egypt (continued) Frequency of tax
Page 97 and 98:
El Salvador (continued) Transfer pr
Page 99 and 100:
Estonia Taxing authority and tax la
Page 101 and 102:
Fiji Taxing authority and tax law T
Page 103 and 104:
Fiji (continued) Frequency of tax a
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Finland (continued) Documentation r
Page 107 and 108:
France (continued) Transfer pricing
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France (continued) Documentation re
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France (continued) Expected reactio
Page 113 and 114:
Gabon (continued) Transfer pricing-
Page 115 and 116:
Georgia (continued) Documentation r
Page 117 and 118:
Germany Taxing authority and tax la
Page 119 and 120:
Germany (continued) For late filing
Page 121 and 122:
Ghana Taxing authority and tax law
Page 123 and 124:
Ghana (continued) APA opportunity T
Page 125 and 126:
Greece (continued) Transfer pricing
Page 127 and 128:
Guatemala Taxing authority and tax
Page 129 and 130:
Honduras Taxing authority and tax l
Page 131 and 132:
Hong Kong (SAR) Taxing authority an
Page 133 and 134:
Hong Kong (SAR) (continued) APA opp
Page 135 and 136:
Hungary (continued) Priorities/pric
Page 137 and 138:
Hungary (continued) Documentation r
Page 139 and 140:
Iceland Taxing authority and tax la
Page 141 and 142:
India Taxing authority and tax law
Page 143 and 144:
India (continued) Documentation req
Page 145 and 146:
Indonesia Taxing authority and tax
Page 147 and 148:
Indonesia (continued) Frequency of
Page 149 and 150:
Ireland Taxing authority and tax la
Page 151 and 152:
Ireland (continued) Frequency of ta
Page 153 and 154:
Israel (continued) Priorities/prici
Page 155 and 156:
Italy Taxing authority and tax law
Page 157 and 158:
Italy (continued) Transfer pricing
Page 159 and 160:
Italy (continued) Frequency of tax
Page 161 and 162:
Japan (continued) Transfer pricing
Page 163 and 164:
Japan (continued) APA opportunity U
Page 165 and 166:
Kazakhstan Taxing authority and tax
Page 167 and 168:
Kazakhstan (continued) Frequency of
Page 169 and 170:
Kenya (continued) Documentation req
Page 171 and 172:
Kosovo (continued) Documentation re
Page 173 and 174:
Kuwait (continued) Documentation re
Page 175 and 176:
Latvia Taxing authority and tax law
Page 177 and 178:
Lebanon Taxing authority and tax la
Page 179 and 180:
Lithuania Taxing authority and tax
Page 181 and 182:
Luxembourg Taxing authority and tax
Page 183 and 184:
Former Yugoslav Republic of Macedon
Page 185 and 186:
Malaysia Taxing authority and tax l
Page 187 and 188:
Malaysia (continued) Frequency of t
Page 189 and 190:
Maldives (continued) Statute of lim
Page 191 and 192:
Malta (continued) Return disclosure
Page 193 and 194:
Mauritius (continued) APA opportuni
Page 195 and 196:
Mexico (continued) Transfer pricing
Page 197 and 198:
Mexico (continued) Return disclosur
Page 199 and 200:
Montenegro (continued) Frequency of
Page 201 and 202:
Morocco (continued) Transfer pricin
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Myanmar Taxing authority and tax la
Page 205 and 206:
Namibia Taxing authority and tax la
Page 207 and 208:
Netherlands Taxing authority and ta
Page 209 and 210:
Netherlands (continued) Statute of
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New Zealand Taxing authority and ta
Page 213 and 214:
New Zealand (continued) Frequency o
Page 215 and 216:
Nigeria Taxing authority and tax la
Page 217 and 218:
Norway Taxing authority and tax law
Page 219 and 220:
Norway (continued) Frequency of tax
Page 221 and 222:
Oman (continued) Frequency of tax a
Page 223 and 224:
Panama Taxing authority and tax law
Page 225 and 226:
Panama (continued) Expected reactio
Page 227 and 228:
Papua New Guinea (continued) Docume
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Peru Taxing authority and tax law T
Page 231 and 232:
Peru (continued) Frequency of tax a
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Philippines (continued) Transfer pr
Page 235 and 236:
Poland Taxing authority and tax law
Page 237 and 238:
Poland (continued) Transfer pricing
Page 239 and 240:
Poland (continued) Return disclosur
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Poland (continued) APA opportunity
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Portugal (continued) Transfer prici
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Portugal (continued) APA opportunit
Page 247 and 248:
Qatar (continued) OECD guidelines t
Page 249 and 250:
Qatar (continued) Return disclosure
Page 251 and 252:
Romania (continued) Documentation r
Page 253 and 254:
Russian Federation Taxing authority
Page 255 and 256:
Russian Federation (continued) Freq
Page 257 and 258:
Saudi Arabia (continued) Transfer p
Page 259 and 260:
Senegal (continued) Documentation r
Page 261 and 262:
Serbia Taxing authority and tax law
Page 263 and 264:
Singapore Taxing authority and tax
Page 265 and 266:
Singapore (continued) Frequency of
Page 267 and 268:
Slovak Republic (continued) Documen
Page 269 and 270:
Slovenia Taxing authority and tax l
Page 271 and 272:
Slovenia (continued) Transfer prici
Page 273 and 274:
South Africa (continued) Penalty re
Page 275 and 276:
South Korea (Republic of Korea) Tax
Page 277 and 278:
South Korea (Republic of Korea) (co
Page 279 and 280:
Spain (continued) Penalty relief So
Page 281 and 282:
Spain (continued) APA opportunity T
Page 283 and 284:
Sri Lanka (continued) Return disclo
Page 285 and 286:
Sweden (continued) Documentation re
Page 287 and 288:
Switzerland Taxing authority and ta
Page 289 and 290:
Taiwan Taxing authority and tax law
Page 291 and 292:
Taiwan (continued) Return disclosur
Page 293 and 294:
Tanzania Taxing authority and tax l
Page 295 and 296:
Thailand Taxing authority and tax l
Page 297 and 298:
Thailand (continued) Frequency of t
Page 299 and 300:
Turkey (continued) Priorities/prici
Page 301 and 302:
Uganda Taxing authority and tax law
Page 303 and 304:
Ukraine Taxing authority and tax la
Page 305 and 306:
Ukraine (continued) Transfer pricin
Page 307 and 308:
United Kingdom Taxing authority and
Page 309 and 310:
United Kingdom (continued) Transfer
Page 311 and 312:
United States (continued) Transfer
Page 313 and 314:
Uruguay Taxing authority and tax la
Page 315 and 316:
Uruguay (continued) APA opportunity
Page 317 and 318:
Venezuela Taxing authority and tax
Page 319 and 320:
Venezuela (continued) Expected reac
Page 321 and 322:
Vietnam (continued) Relevant regula
Page 323 and 324:
Vietnam (continued) Documentation d
Page 325 and 326:
Zimbabwe Taxing authority and tax l
Page 327 and 328:
Zimbabwe (continued) Relevant regul
Page 329 and 330:
Transfer pricing contacts Area cont
Page 331 and 332:
Jurisdiction contacts • El Salvad
Page 333 and 334:
Jurisdiction contacts • Rep. of C
Page 335:
EY | Assurance | Tax | Transactions
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Worldwide transfer pricing reference guide 2014

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