Transfer Pricing and Customs Valuation Rules in Brazil: A Challenging Reconciliation

Abstract

In 2022, the Brazilian customs authority issued regulations on customs valuation, explicitly allowing the use of transfer pricing rules to determine whether the relationship between parties influenced the prices applied in import transactions. The regulation allows the utilization of the computed value method, as indicated in the calculation statements of the cost of imported goods, for transactions conducted with related parties. This same information can also be employed to ascertain the actual profit, as outlined in the domestic transfer pricing legislation. However, months before the release of the regulation, the Administrative Council of Tax Appeals (CARF) issued a decision supporting the actions taken by the customs authority. The customs authority utilized the arbitration method of customs valuation, relying on artificial profit parameters derived from the transfer pricing legislation. Despite being confirmed by CARF, the use of transfer pricing provisions in the valuation process seems to be far from the brief authorization for their use in assisting the determination of related party relationships or the cost of goods sold. The practice, therefore, is far from being in compliance with the Customs Valuation Agreement (CVA) of the World Trade Organization (WTO), representing a return to arbitrary or fictitious bases in valuation Customs Valuation, Transfer Pricing, Taxation, WTO, OECD