On January 30, 2019, Normative Instruction n° 1,870/2019, issued by the Federal Revenue Office (RFB), was published in Brazil’s Official Gazette, amending several provisions of Normative Instruction n° 1,312/2012, which regulates the Brazilian transfer pricing rules.

Among the most noteworthy changes, we highlight the following:

  • Changes were introduced related to the timing of the benchmark price calculation for the following methods for importation transactions: (i) Independent Prices Compared Method (PIC); (ii) Production Costs plus Profit (CPL); and (iii) Price in Commodities Exchange (PCI). According to the new regulations, for these methods, the benchmark prices must be calculated in the same calendar-year as the importation process. On the other hand, the benchmark prices for the Resale Price minus Profit Method (PRL) should continue to be calculated upon inventory turnover.
  • In regard to the Resale Price minus Profit Method (PRL), the new regulations determine that the benchmark price shall be calculated based on resale transactions carried-out in the domestic market.
  • Normative Instruction n° 1,870/19 also introduces a list of commodities subject to the Price in Commodities Exchange (PCI) and Quoted Price in Exchange Market (PECEX) methods. The calculation of the benchmark price for the listed commodities will have to be made under the PCI (importation) and PECEX (exportation) when prices are listed in selected international pricing lists and certain commodities exchanges. It also provides for clarification in regards the date for the quotation and/or listing to be used in the TP calculation.
  • Lastly, new regulations also introduced changes to calculation method of the safe harbor rule/discrepancy margin of 5 percent.

The new regulations are effective as of the publication date.

For more details, please feel free to get in touch.

Rosana Jayme, Humberto Marini, Alex Jorge, and Renato Lopes