In 2018, the OECD and the RFB launched a joint project to examine differences in cross-border tax rules, which now would result in an alignment of Brazilian transfer pricing rules with OECD standards. In 2019, announcements were made and an in-depth report was published which identified a pathway for Brazil to converge with OECD transfer pricing standards. Since 2019, little news was announced on the matter (also considering the impact of the pandemic during this period) until now. According to the press release of the OECD, the efforts of the OECD and Brazil have continued during 2020 and 2021 to finalize the tax policy design of the new system.
Brazil recognizes that there is still some work to be done in order to avoid double taxation and double non-taxation but believes that overcoming these elements will attract more investments, would allow Brazil to be more integrated into global economic chains and would also develop, expand and protect its tax base. The OECD says it is ready to support Brazil in operationalizing the new system and stated that this will facilitate the Two-Pillar Solution to address the tax challenges of digitalisation.
Actions are expected in the next years, although no clear timeline was communicated at this stage. Legislation still must be formally approved by the Brazilian Government. Important to note is that elections will be held in Brazil during 2022. The results of these elections may have an impact on whether an agreement will be reached or not.
A swift approval and implementation of these new rules is obviously to be welcomed as it would clearly facilitate transfer pricing matters for e.g. Belgian multinational companies with a tax presence in Brazil.
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This newsflash is for information purposes only and cannot be relied upon as legal advice.