Provisional Presidential Decree 1,152 (“MP 1,152/22”), published on December 28, 2022, introduced the new Brazilian transfer pricing policy, in line with the guidelines of the Organization for Economic Cooperation and Development (OECD) and the arm's length principle (Article 2).[1] The objective of this policy is to enable Brazil's accession to the OECD, in addition to attracting foreign investments.

Currently, the conversion of MP 1,152/22 is being analyzed by the National Congress, which already has 107 requests for parliamentary amendments on several of its provisions. According to Article 62, §§ 3 and 7[2], of the Constitution, the conversion process must be completed within 60 days, extendable only once for the same period, under penalty of loss of efficacy of the provisional decree.

On March 29, 2023, the President of the Bureau of the National Congress issued Ruling No. 16, which extends the validity of MP 1,152/22 for 60 days, so that the term ends on June 1st, 2023.

Despite the uncertainty, political indicators point so far to the conversion of the provisional decree, even with some amendments. The conversion is already submitted to the approval of the Plenary of the Chamber of Deputies and, subsequently, shall be submitted to the approval of the Senate.

Because of this context, the Federal Revenue of Brazil (RFB) has already informed that the regulation of the new transfer pricing policy will occur only after the completion of the conversion process.

However, due to the alignment with the OECD model, it is expected that the experience of other jurisdictions that already adopted this standard will be an important reference for the delimitation of the controlled transaction, the selection of the most appropriate method, and the preparation of documentation, observing the particularities of the Brazilian perspective on the business.

Still, Article 48 of MP 1,152/22[3] determines that the new transfer pricing policy will take effect from January 2024, considering the non-retroactive legislation and the complexity of the policy.

However, taxpayers may opt for the application of the new policy for the current calendar year, through an irrevocable option formulated from September 2023 (Article 46 of MP 1,152/22 and Articles 2 and 3 of Normative Instruction RFB 2,132/23).[4]

Another relevant issue of the provisional decree refers to business restructuring when it results in the transfer of benefits and/or losses between related parties. It is treated by Article 27 of MP 1,152/22.[5]

This rule aims to capture, essentially, the transfers of gains and losses between entities of the same economic group caused by business restructuring. As a legislative innovation not yet mandatory, we understand it to be an especially propitious time for businesses to be reassessed and reorganized without the aforementioned tax burden.


[1] "Article 2. For the purpose of determining the tax base following the paragraph of Article 1, the terms and conditions of a controlled transaction shall be established in accordance with those that would be established between unrelated parties in comparable transactions."

[2] "Article 62. In important and urgent cases, the President of the Republic may adopt provisional decrees with the force of law and shall submit them to the National Congress immediately. [...]

  • 3 - With the exception of the provisions mentioned in paragraphs 11 and 12, provisional presidential decrees shall lose effectiveness from the day of their issuance if they are not converted into law within a period of sixty days, which may be extended once for an identical period under the terms of paragraph 7, and the National Congress shall issue a legislative decree to regulate the legal relations arising therefrom. [...]
  • 7 - If the voting of a provisional presidential decree is not concluded in both Houses of the National Congress within sixty days as of its date of publication, its period of effectiveness may be extended once for an identical period."

[3] "Article 48. This Provisional presidential decree takes effect on January 1st, 2024.

Paragraph. To taxpayers who make the option provided for in Article 46, the following shall apply, as of January 1st, 2023:

I - Articles 1 to 45; and

II - the repeals provided for in Article 47.

[4] "Article 2. The option referred to in Article 1 shall be formalized in the period from September 1st to 30, 2023, through:

I - opening a digital process through the Portal of the Virtual Service Center (e-CAC Portal); and

II - annexation of the option term contained in the Annex.

  • 1 - In the event of the start of the activity or the emergence of a new legal entity due to merger or spin-off in the period from September to December of the calendar year 2023, the option referred to in the caput shall be formalized in the 1st (first) month of activity.
  • 2 - In the case of extinction of the legal entity in the period from January to August of the calendar year 2023, the option referred to in the caput shall be formalized in the month of extinction.

Article 3. The option made pursuant to Article 2 shall be irrevocable and will entail, as of January 1, 2023, compliance with the provisions of Articles 1 to 45 and the effects of Article 47, all of Provisional Presidential Decree No. 1,152, 2022."

[5] "Article 27. Business restructurings are changes in commercial or financial relations between related parties that result in the transfer of potential profit or benefits or losses to any of the parties and that would be remunerated if they were made between unrelated parties in accordance with the principle provided for in Article 2.

  • 1 - The potential profit referred to in the caput comprises the expected profits or losses associated with the transfer of functions, assets, risks, or business opportunities.
  • 2 - The restructurings referred to in the caput include hypotheses in which the potential profit is transferred to a related party because of the renegotiation or termination of commercial or financial relations with unrelated parties.
  • 3 - To determine the compensation for the benefit obtained or for the loss suffered by any of the parties of the transaction, the following shall be considered:

I - the costs incurred by the transferring entity because of the restructuring; and

II - the transfer of potential profit.

  • 4 The compensation for the transfer of the potential profit shall consider the value that the transferred items have together."