Brazil’s Economy Minister Paulo Guedes said today (Apr. 12) the creation of a new transfer pricing system in Brazil represents “a decisive step” in the country’s admission to the Organization for Economic Cooperation and Development (OECD).

The transfer pricing system is a procedure by which multinational corporations move profits from one country to another—usually from a subsidiary to the parent company, or to countries where legislation allows for more favorable tax treatment, such as tax havens.

According to the Ministry of the Economy, the new system stems from a 2018 initiative, “which examined similarities and differences between transfer pricing approaches in Brazil and the OECD and led to the convergence to OECD standards.”

“The old system left the possibility of double taxation open, which would impact European companies seeking to invest in Brazil. On the other hand, it also made tax evasion possible, which is the transfer of profits between different jurisdictions,” Paulo Guedes explained while the new system was being unveiled.

“The stride made today will avert two evils: excessive taxation, which prevents investments; and evasion, through the transfer of profits where legislation has more favorable taxation,” he added.

Minimum taxing

The global community, Guedes said, is “embracing itself” through these practices. “I’d like to emphasize the special moment in which this happens,” he said as he noted that the negotiation of the new global tax agreement prioritizes “minimum taxing on large multinationals.”

He reaffirmed that Brazil is “quite advanced in this final stage of access to the OECD,” adding that the step taken today is “decisive” in helping the country converge with international standards.

“We want[…] to lubricate investment channels so that Brazil may benefit from Europe’s search for new areas of investment in energy and food security,” he argued, after discussing the current geopolitical landscape in that continent, assailed as it is by political pressure, economic sanctions, and ruptures aggravated by the Russia–Ukraine war.

Source: Agência Brasil