Instruction Normative 2,161/23, published in the Official Gazette on September 29, consolidates and details the rules recently established by Law 14,596/23. The law and the IN address guidelines for the taxation of international operations between interlinked companies.
Key Updates:
Simplification of obligations: The IN introduces a significant simplification of ancillary obligations related to transfer pricing.
Extended deadline: The deadline for companies to opt for the new rules has been extended to December 31, 2023. Otherwise, the new regime will be mandatory from 2024
Impact on Multinationals: Transfer pricing control acts as a key tool to prevent tax manipulations, especially for multinationals, thus avoiding disguised profit transfers to regions with favorable tax regimes.
Alignment with the OECD: Brazil now follows the arm’s length principle, widely used by OECD member countries. This method requires that companies determine taxes using values that would be applied in transactions between independent entities. While based on the OECD model, the IN emphasizes the supremacy of Brazilian legislation, treating OECD guidelines as “subsidiary sources.”
Precision and Definitions: The IN, comprehensive in scope, brings clearer definitions of what are considered controlled operations and who are considered related parties. The Revenue Service also details situations and criteria for analyzing controlled transactions.
Simplification: The IN introduces a scale of obligations based on the volume of operations. Hence, companies with transactions less than R$ 15 million are exempt from obligations, while those between R$ 15 million and R$ 500 million have simplified requirements. Operations above R$ 500 million require more comprehensive documentation.
Flexibility in Adoption: Companies have the option to adopt the new rules early by the end of 2023. This system is particularly beneficial for companies with significant expenditures on royalties, allowing a potential reduction in the tax base calculation.
Conclusion: In conclusion, the new Instruction Normative represents a significant step in the evolution of transfer pricing regulation in Brazil. With it, the aim is to align Brazil with international practices, simplify obligations, and at the same time, provide greater clarity and legal security to companies. Adapting to these changes is essential not just for compliance with regulations, but also for the continued success of companies in a globalized environment.