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The Brazilian Federal Revenue Service published yesterday, 28.08.2024, a Public Consultation on the Normative Instruction that will regulate the specific consultation procedure for proposing an Advance Pricing Agreement (APA). Taxpayers and interested parties will be able to send comments and suggestions on the text proposed by the tax authorities until 30.09.2024.

Among the main provisions of the text, we highlight the proposed term for the APA, which will be 4 years with the possibility to be extended for a further 2 years, and the proposed date for the Normative Instruction to enter into force: January 1, 2025.

The absence of a deadline for concluding the consultation process of the APA by the tax authorities and the possibility of the Revenue Services defining the maximum number of APA proposals per year, considering its operational capacity, are noteworthy points that will certainly be the subject of comments from taxpayers.

New to Brazil, the APA is widely used by MNE groups as an instrument to avoid double taxation and guarantee legal certainty regarding transfer pricing results. Specifically in Brazil, it can be of great value when the group elects transactional methods, which were not previously adopted by Brazilian law, especially the Profit Split Method.

Below is a summary of the APA proposal procedure:

The procedure will be divided into 4 phases:

• Preliminary, in which the feasibility of the APA will be assessed, in light of the taxpayer’s transfer pricing policy and the facts and circumstances of the controlled transactions;
• Analysis, in which the taxpayer must submit the APA proposal, containing detailed information and documentation supporting the application of the transfer pricing method used and the conclusions reached, within 90 days of the positive decision of the preliminary phase;
• Conclusion, in which the RFB decides on the APA, and may (a) agree with the proposal; (b) propose a modified or alternative agreement; and (c) reject the APA;
• Formalization, in which all the terms, definitions and conditions of the APA will be confirmed.

The proposal stipulates that the approved APA may be subject to review at the initiative of the Revenue Servies or the taxpayer in the event of a change in the critical premises on which the APA was based or if legislation modifies any of the matters covered by the APA.

The APA may also be revoked or canceled by the RFB, the former due to the taxpayer’s failure to comply with the agreement, among other reasons, and the latter due to erroneous, false or misleading information or omissions on the part of the taxpayer.

In order to submit the APA proposal, the taxpayer must have been part of the Tax Cooperative Compliance Program for at least six months and pay the fees provided for in Law No. 14,596/2023.

For more information, please consult Heitor César Ribeiro, Marcos Catão and Veronica Melo de Souza, Tax Consulting professionals at Gaia Silva Gaede Advogados.