Worldwide transfer pricing reference guide 2014

Brazil (continued)
Documentation deadlines
The contemporaneous documentation required as part of the DIPJ usually has to be filed by the end of June of the following
calendar year. Taxpayers are expected to have the detailed calculations and documentation necessary to support the information, filed
as part of the DIPJ. ready for potential inspection, as of the declaration’s filing date.
Statute of limitations on transfer pricing assessments
A general statute of limitations applies, which is five years from the first day of the following fiscal year. In case of filling of amended tax
returns the statute starts with the filling of the latest amended return.
Return disclosures/related party disclosures
The transfer pricing adjustments must be effectuated in December and reflected in the annual income tax return (usually due by June
of the next calendar year), when the company will also have to disclose the transfer pricing methods chosen and any other related
information.
Transfer pricing-specific returns
The DIPJ contains five specific forms that require taxpayers to disclose detailed information regarding their main intercompany import
and export transactions. For more information refer to the “Documentation Requirements” section above.
Frequency of tax audit and transfer pricing scrutiny by the tax authority
In an effort to expedite audits in Brazil’s data-intensive transfer pricing documentation environment, Brazilian audit teams have been
equipped with new computers and specialized software applications, including internally-developed systems capable of analyzing and
auditing large volumes of accounting and transaction data.
The Brazilian tax authority expects the International Affairs Special Office (DEAIN) and the regional audit groups to continue to increase
their numbers of specialized transfer pricing auditors. It is believed that the DEAIN and the regional transfer pricing auditors are
becoming increasingly sophisticated in their audit approaches as they grow in number and experience.
Although large companies are more likely to be audited than small ones, in general, the likelihood of general tax audits in Brazil is
characterized as medium. The likelihood of transfer pricing being reviewed as part of an audit is also characterized as medium, as so is
the likelihood of transfer pricing methodology being challenged. For certain industries, e.g., automotive, pharmaceutical, chemical and
oil and gas industry, and intragroup services into Brazil (services, cost allocations) the likelihood of a transfer pricing audit is high. The
risk of a transfer pricing audit is high if the tax authorities identify inconsistencies in the information filed electronically, e.g., customs
declaration, financial statements and other filing requirements like SISCOMEX/SISCOSERV.
APA opportunity
Currently, there is no opportunity to pursue an APA.
In certain cases, unilateral rulings on the interpretation of law, not on the actual price to be applied, are possible.
Tax payers may request under the Law 9.959 to alter the fixed statutory profit margins. However, none has been granted till date
due to formal limitations imposed. The current law 12.715/12 also provides the possibility to apply for alternative profit margins,
but no regulations have been issued yet.
Expected reaction to OECD Report on BEPS
The Brazilian transfer pricing documentation approach follows statutory margins on a transaction by transaction basis which requires a
fundamentally different documentation compared to the OECD transfer pricing documentation. The Brazilian tax authorities gather data
from multiple sources to verify and audit a taxpayer’s transactions. These include numerous databases which track the importation and
exportation transactions occurring in Brazil. The inclusion of sharing information with other countries would not benefit the Brazilian tax
authorities given the focus of the transfer pricing rules on fixed pre-determined profit margins. In the short term, it is unlikely that Brazil
will amend its transfer pricing rules as a result of the OECD Report on BEPS.
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