By Francisco Moreira, Partner, Bocater Advogados, São Paulo, Brazil
On July 30, the OECD and Brazil’s tax authority, Receita Federal, jointly issued an invitation to the public to contribute to research regarding harmonizing the safe harbors existing in the Brazilian transfer pricing legislation with the OECD transfer pricing guidelines.
It is interesting to note that this represents a continuation of the joint project between the OECD and Brazil, launched in February 2018 and feeds off conclusions presented in the final assessment report issued on December 18, 2019, in Brasília.
Those conclusions state that safe harbors are one of the strengths of the Brazilian transfer pricing regime as they provide simplicity and legal certainty.
From a political standpoint, Brazil is now headed towards tax reform, mainly reform of the PEC 45, PEC 110, and PL 3887, with the possibility of merging all indirect taxes into one single tax.
A return of Brazil’s dividend withholding tax is also under discussion. It represents a very strong gesture to see the joint OECD-Brazil transfer pricing project being continued amidst a different political focus and in the middle of the COVID-19 pandemic.
The introductory letter to the research explains that “The consideration of developing safe-harbour regimes strives to achieve the policy objectives of tax certainty and simplicity of compliance administration.”
The simplicity provided to tax authorities, who can easily review a transfer pricing calculation without spending many resources, must also be considered.
Thus, from a tax policy standpoint, the adoption of safe harbors may be a way to keep the current system simple, but harmonizing the safe harbors existing in the Brazilian legislation with the OECD transfer pricing guidelines remains a challenge.
A review of the questionnaire reveals that more direct and tailored safe harbors could be implemented, and this could represent a shift from the “one size fits all” approach of the Brazilian methods.
The invitation to comment was published online, and contributions can be submitted until September 18.
Francisco Lisboa Moreira is a tax lawyer with 17 years of experience with Brazilian taxation, having participated in various projects involving a broad range of tax questions, including international tax planning, transfer pricing, general tax consulting, due diligence projects and cross-border transactions.
His credentials include an LLM International Taxation at NYU and a Master´s Degree (ongoing) at the University of São Paulo.
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