Machado Meyer tax partner Fernando Colucci joins Skadden’s David Farhat, Loren Ponds, Eman Cuyler and Stefane Victor to explore Brazil's historic shift from a 27-year formulaic transfer pricing system to full OECD compliance. As he explains, “We moved from a very strict, very formulaic approach to a simple, a direct import of the arm's-length principle.” Tune in for his insights on dramatic changes facing multinational enterprises and Brazil's notorious 75% penalty system that raises the stakes on compliance decisions.
🗝️ Key Points 🗝️
Top takeaways from this episode
- The Formula-to-Function Flip: Brazil abandoned 27 years of fixed profit margins in favor of the full OECD arm's-length principle, requiring companies to conduct detailed functional analyses for the first time.
- All-or-Nothing Penalties: Brazil's unique 75% penalty system creates stark choices: Accept the tax authority's adjustment with no penalty or challenge it and face penalties on any sustained portion.
- Intangibles Enter the Game: Previously excluded from transfer pricing rules, intangible transactions are now subject to OECD guidelines, creating new compliance challenges.
- Limited Relief Mechanisms: While Brazil introduced its first APA program, it operates more like a written consultation process than traditional APAs, and the country has never executed a MAP case despite having treaty provisions.
💡 Featured Guest💡
Name: Fernando Colucci
What he does: Fernando provides legal and tax assistance in M&A operations, restructurings, international taxation, international treaties, transfer pricing, tax planning, international investments taxation, asset and succession planning.
Organization: Machado Meyer
Words of wisdom: “My recommendation here is to start with a thorough risk assessment. So, understand your intercompany transactions, identify potential areas of concern. Getting prepared, that's the motive.”
Connect: LinkedIn
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