Legislation - Laws

Amends Law no. 9430 of December 27, 1996, and provides for other matters


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Article 48. Articles 12, 18, 19 and 22 of Law 9430, of December 27, 1996, become effective with the following wording: Effective Date

"Article 12. .......................................................................

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Par. 2 In loan transactions conducted by financial institutions authorized to operate by the Central Bank of Brazil, when there is a debt restructuring, income is recognized for income tax and social contribution on net income levy purposes when the loan is actually received." (Regulatory Standard)

"Article 18. .......................................................................

I - Comparable Independent Price (PIC) Method: defined as the weighted arithmetic mean of the prices of identical or similar goods, services or rights in the Brazilian or foreign markets, charged in purchase and sale transactions carried by the stakeholder or third parties, under similar payment terms;

II - Resale Price Less Profit (PRL) Method: defined as the weighted arithmetic mean of the sales prices in Brazil of imported goods, rights or services, under similar payment conditions, and calculated using the following methodology:

a) net sales price: the weighted arithmetic mean of the sales prices a good, right or service less unconditional discounts granted, taxes and duties on sales, and brokerage commissions paid;

b) the percentage share of the imported goods, rights or services in the total cost of the good, right or service sold: the ratio between the weighted average cost of the imported good, right or service and total weighted average cost of the good, right or service sold, calculated according to the company's costs spreadsheet;

c) percentage share of the imported goods, rights or services in the total cost of the good, right or service sold: the percentage share of the imported good, right or service is applied to the total cost, calculated as described in letter b, on net sales price calculated as described in letter a;

d) profit margin: the percentages set forth in Par. 12, depending on the industry of the corporate entity subject to the transfer pricing control, on the percentage share of the imported good, right or service on the sales price of the good, right or service sold, calculated as described in letter c; and

1. (repealed);

2. (repealed);

e) benchmark price: the difference between the percentage share of the imported good, right or service in the sales price of the good, right or service sold calculated, according to letter c, and the 'profit margin', calculated according to letter d; and

III - Production Cost plus Profit (CPL) Method: defined as the weighted average cost to produce identical or similar goods, services or rights in the country of origin, plus taxes and duties charged by that country on exports and a profit margin of twenty-percent (20%) on the calculated cost.

Par. 1. The weighted averages of the prices addressed in items I and II of the heading and the weighted average cost of the production addressed in item III of the heading shall be calculated taking into consideration of the prices charged and the costs incurred during the entire calculation period of the income tax base that includes the related costs, expenses or charges.

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Par. 6. Freight and insurance defrayed by the importer are not included in cost for purposes of the calculation defined in the heading, item II, letter b, provided that both freight and insurance are obtained from:

I - unrelated parties; and

II - parties that are not domiciled in a tax haven or that do not enjoy privileged tax regimes.

Par. 6-A. Taxes levied on imports and customs clearance expenses are not included in cost for purposes of the calculation defined in the heading, item II, letter b.

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Par. 10. With respect to the method set forth in the heading, item I, the transactions used for calculation purposes must:

I - represent at least 5 percent of the import transactions subject to transfer pricing control undertaken by the legal entity during the calculation period in terms of the type of imported good, right or service, in case all the data used for calculation purposes concern the legal entity's own transactions; and

II - correspond to independent prices charged in the same calendar year of the related import transactions subject to transfer pricing control.

Par. 11. In the case addressed in Par. 10, item II, if there is no independent price in the same calendar year of the import, a legal entity can use an independent price related to the transaction undertaken in the calendar year immediately previous to the import, adjusted using the foreign exchange fluctuation for the period.

Par. 12. The margins addressed in the heading, item II, letter d, shall be applied according to the industry of the Brazilian legal entity subject to transfer pricing control, and shall be levied regardless of whether or not a product is processed in Brazil, using the following percentages:

I - 40 percent for the:

a) pharmachemical and pharmaceutical industry;

b) the tobacco industry;

c) optical, photographic and cinematographic equipment and instrument industry;

d) dents, medical and hospital machinery, device, and equipment industry;

e) oil and natural gas extraction industry; and

f) oil byproducts industry;

I - 30 percent for the:

a) chemical industry

b) glass and glass products industry;

c) pulp and paper, and paper products industry; and

d) steel industry; and

III - 20 percent for the other industries.

Par. 13. Whenever a legal entity engages in activities classified in more than one of the industries described in Par. 12, the profit margin assigned to the industry that uses the imported good, in accordance with the provisions of Par. 14.

Par. 14. If the same imported good is resold and used in the production of another or more products, or if the imported good undergoes different production processes in Brazil, the final benchmark price shall be the weighted average of the amounts determined using the PRL method, according to their related purpose.

Par. 15. If the PRL method, the benchmark price shall be calculated taking into consideration the sales prices for the period when the products are transferred from inventory to profit or loss.

Par. 16. In the case of the import of commodities quoted in an internationally recognized commodities and futures exchange, an entity shall use the Price under Quotation on Import (PCI) Method, defined in Article 18-A.

17. In the case defined in Par. 10, I, if there are no transactions accounting for at least 5 percent of the amount of imports subject to the transfer pricing control during the calculation period, the percentage can be reached by adding the transactions carried out in the immediately previous calendar year, adjusted using the foreign exchange fluctuation for the period." (Regulatory Standard)

"Article 19. .......................................................................

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Par. 9. In the case of the export of commodities quoted in an internationally recognized commodities and futures exchange, an entity shall use the Price under Quotation on Export (PECEX) Method, defined in Article 19-A." (Regulatory Standard)

"Article 22. Interest paid or credited to a related party, when arising on an intragroup loan agreement, are only deductible for actual taxable income calculation purposes up to the amount that does not exceed the amount calculated using the London lnterbank Offered Rate (LIBOR) for six-month US dollar deposits, plus 3 percent per year as spread, prorated to the interest period.

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Par. 5. The Minister of Finance can reduce the spread percentage and increase it up to the ceiling set forth in the heading." (Regulatory Standard)

Article 49. Articles 20 and 28 of Law 9430, of December 27, 1996, become effective with the following wording:

"Article 20. The Minister of Finance can, in justified circumstances, change the percentages set forth in Articles 18 and 19, by operation of law or upon request, as described in Article 21, Par. 2." (Regulatory Standard)

"Article 28. The provisions of prevailing legislation and those set forth by Articles 1-3, 5-14, 17-24-B, 26, 55, and 71 are applied to the determination and payment of the social contribution on net income tax base." (Regulatory Standard)

Article 50. Law 9430, of December 27, 1996, is effective added of Articles 18-A de 19-A: Effective Date

"Article 18-A. The Price under Quotation on Import (PCI) Method is defined as the average daily amounts of the goods or rights subject to prices publicly disclosed in internationally recognized commodities and futures exchanges.

Par. 1. The prices of the goods imported and declared by individuals or legal entities resident or domiciled in Brazil shall be compared with the quotation prices of such goods, disclosed in an internationally recognized commodities and futures exchange, adjusted to the average market premium or discount on the transactions date, in the cases of imports from:

I - related individuals or legal entities;

II - individuals or legal entities resident or domiciled in tax havens; or

III - individuals or legal entities that enjoy privileged tax regimes.

Par. 2 - Should there be no available quotation for the transaction day, the last known quotation is used.

Par. 3 - If the transaction date is not identified, the conversion is made taking into consideration the date the good import declaration is registered.

Par. 4. If the imported goods are not quoted in an internationally recognized commodities and futures exchange, the prices of the imported goods referred to in Par. 1 can be compared to those obtained in independent data sources provided by internationally recognized industry data survey institutions.

Par. 5. The Brazilian Ministry of Finance's Federal Revenue Service shall regulate the enforcement of the provisions set forth in this article and shall also disclose of the internationally recognized commodities and futures exchange and industry data survey institutions to be used for price quotations."

"Article 19-A. The Price under Quotation on Export (PECEX) Method is defined as the average daily amounts of the goods or rights subject to prices publicly disclosed in internationally recognized commodities and futures exchanges.

Par. 1. The prices of the goods exported and declared by individuals or legal entities resident or domiciled in Brazil shall be compared with the quotation prices of such goods, disclosed in an internationally recognized commodities and futures exchange, adjusted to the average market premium or discount on the transactions date, in the cases of exports from:

I - related individuals or legal entities;

II - individuals or legal entities resident or domiciled in tax havens; or

III - individuals or legal entities that enjoy privileged tax regimes.

Par. 2 - Should there be no available quotation for the transaction day, the last known quotation is used.

Par. 3 - If the transaction date is not identified, the conversion is made taking into consideration the date the exported goods are shipped.

Par. 4. Revenue earned on the transactions addressed in the heading are subject to transfer pricing stipulation and the 90 percent rate prescribed in the heading of Article 19 is not applied.

Par. 5. If there is no quotation in an internationally recognized commodities and futures exchange, the prices of the exported goods referred to in Par. 1 can be compared to:

I - those obtained in independent data sources provided by internationally recognized industry data survey institutions; or

II - the prices set by regulating agencies or bodies, published in the Federal Official Gazette.

Par. 6. The Brazilian Ministry of Finance's Federal Revenue Service shall regulate the provisions set forth in this article and shall also disclose of the internationally recognized commodities and futures exchange and industry data survey institutions to be used for price quotations.

Par. 7 (VETOED)."

Article 51. Law 9430, of December 27, 1996, is effective added of Articles 20-A de 20-B:

"Article 20-A. Beginning in calendar 2012, the option for one of the methods established in Articles 18 and 19 is made for the entire calendar year and cannot be changed by the taxpayer once the tax procedure is initiated, except if in the meantime wither the method or some of its criteria is disqualified by tax auditors, in which case the taxpayer would be asked to file, within thirty (30) days, a new calculation using any other method prescribed by the law.

Par. 1. The tax auditor shall provide a justification for disqualifying the method elected by a legal entity.

Par. 2. The tax authority responsible for the audit can stipulate the benchmark price based on the documentation available and apply one of the methods prescribed by Articles 18 and 19 whenever, after the deadline set forth in the heading, the taxpayer:

I - fails to file the documentation supporting the determined the price charged or the related calculation schedules used to calculate the benchmark price, according to the elected method;

II - files unusable or insufficient documentation to support the correction of the benchmark price calculation under the elected method; or

III - fails to provide any elements useful to check the calculations used to determine the benchmark price under the elected method, when requested by the tax authority.

Par. 3. The Brazilian Ministry of Finance's Federal Revenue Service shall set the deadline and regulate the conditions set forth by the heading."

"Article 20-B. The use of the benchmark price calculation method, addressed in Articles 18 and 19, shall be consistent by good, service or right for the entire calendar year."

Article 52. A legal entity can elect to apply the provisions of Articles 48 and 50 hereof for transfer pricing rules application purposes for calendar 2012.

Par. 1. The option is irreversible and shall require the compliance with all the changes introduced by Articles 48 and 50 hereof.

Par. 2. The Brazilian Ministry of Finance's Federal Revenue Service shall set the deadline and regulate the conditions set forth by the heading." DILMA ROUSSEFF