Law with new legal framework for transfer pricing is sanctioned in Brazil
On June 15, 2023, without any presidential vetoes, Law No. 14,596/23, which provides for amendments to the Brazilian transfer pricing legislation, was sanctioned.
Its content was initially presented by Provisional Measure nº 1.152 (“MP nº 1.152/22”), published by the Executive Branch on December 29, 2022, and, subsequently, analyzed and occasionally amended by the Legislative Branch.
Briefly, the Law enacted maintains the essence of the long-awaited measure, which seeks greater convergence between Brazilian rules on the subject and those guidelines published by the Organization for Economic Cooperation and Development (“OECD”), and the purpose previously announced plan to treat taxpayers who are subject to transfer pricing controls in Brazil in a similar way to what happens in jurisdictions where people linked to them are located, in order to avoid economic double taxation.
From a practical perspective, it is worth remembering that the new rules introduced by Law No. 14,596/23 will only become mandatory for Brazilian taxpayers as of the calendar year 2024. Their application for the current calendar year 2023 is at the discretion of the taxpayers and it depends on them opting, irrevocably and in the month of September, for its adoption this year – as provided in Normative Instruction RFB nº 2.132/23.
Now, it is expected that the Federal Revenue of Brazil will publish new normative instructions regulating the application of the new transfer pricing rules, both for the current year of 2023, for taxpayers who wish to anticipate their application, and for subsequent years, when they will become general observance.
Income Tax New Progressive Table
According to Provisional Measure No. 1,171, of April 30, 2023, published in the DOU Extra of April 30, 2023, Law No. 11,482/2007 was amended to provide for the new monthly progressive Individual Income Tax (IRPF) table, as of May of the calendar year 2023, so for payments made in May, the new table should already apply:
| Applied Rate % | Installment to be deducted | Monthly calculation basis in BRL |
| - | - | Up to 2.112,00 |
| 7,50% | 158,4 | From 2.112,01 up to 2.826,65 |
| 15,00% | 370,4 | From 2.826,66 up to 3.751,05 |
| 22,50% | 651,73 | From 3.751,06 up to 4.664,68 |
| 27,50% | 884,96 | Above 4.664,68 |
As an alternative to the aforementioned deductions, a simplified monthly discount may be used, corresponding to 25% of the maximum value of the range with zero rate of the monthly progressive table, if it is more beneficial to the taxpayer, waiving proof of expense and indication of its type.
Central Bank maintains Selic rate at 13.75% per year
The Monetary Policy Committee (Copom) of the Central Bank of Brazil (BC) decided to maintain the basic interest rate at 13.75% per year, as expected by the market. However, this occurs amidst pressure from governments, businessmen and entities representing the productive sectors to start the cycle of ending the monetary tightening.
This is the seventh time in a row that the Copom decides to maintain the rate. Thus, the level of interest in the country remains at the highest level since December 2016. The expectation among economists was unanimous that the collegiate would again maintain the Selic at the same 13.75% per annum. For a large part of experts, however, this will be the last time.
A large part of the market believed that the Central Bank should start cutting interest rates as of its next meeting, in early August.
Number of foreign entrepreneurs grows 73% in Brazil
A survey carried out by Sebrae reveals that there are 74,200 active Individual Microentrepreneurs (MEI) of other nationalities, a number 73% higher than that recorded in 2019, the pre-pandemic period.
The study, based on data from the Federal Revenue of May 2023, also investigated the activities in which foreign entrepreneurs operate. One in four work in clothing trade or manufacturing. The beauty area is also among the most sought after, with a universe of 6% of foreigners, followed by teaching activities, with 5%, and food and drink, with 4%. Among the ten nationalities that have the most foreign entrepreneurs in Brazil, seven are from Latin America. Together, Venezuela, Bolivia, Colombia, Argentina, Uruguay, Peru and Uruguay concentrate 56% of foreign MEI.
Tax reform: points presented in the bill's substitutive text were discussed
The rapporteur for the tax reform in the Chamber of Deputies, Aguinaldo Ribeiro, read the entirety of its substitute in session on the 13th of June.
The new proposal includes the adoption of a Value Added Tax (VAT) system divided into two modalities, the creation of a selective tax on products harmful to health, the implementation of the "cashback" program for low-income families, and the application differentiated rates in sectors such as health and education.
It is important to note that the tax reform working group in the Chamber is still analyzing the proposal's guidelines. Therefore, the text is not yet the final opinion of the Proposed Amendment to the Constitution (PEC). The vote should take place in plenary in the first week of July.
Including the forementioned above, the topics below were also presented and discussed:
These are some of the proposals under discussion in the working group of the Chamber of Deputies, which seeks to advance the tax reform aimed at greater simplification of the system and a fairer distribution of the tax burden.
It is important to emphasize that the text presented is just a proposal that is still under discussion in society and should change a lot as it advances in congress, and that in congress it should not only change and evolve but take time for its final approval.
