Law No. 12,766, of December 27, 2012: Changes to Brazilian Tranfer Pricing Rules applicable to Interest
December 28, 2012
Today (December 28, 2012) Law No. 12,766, of December 27, 2012 (“Law No. 12,766/2012”) was published in the Brazilian Official Gazette, establishing certain provisions which, among other things, change the Brazilian “Transfer Pricing Rules”, currently provided for by Law No. 9,430, of December 27, 1996 (“Law No. 9,430/1996”),
applicable to interest paid or credited to: (i) individuals or legal entities resident or domiciled abroad (“Foreign Related Parties”); or (ii) beneficiaries located in Tax Favorable Jurisdictions (“TFJ”) or under a Privileged Tax Regime (“PTR”) (as listed by Brazilian Federal Revenue Normative Instruction No. 1,037, of June 07, 2010) – altogether, the “Persons subject to TP Rules”.
Law No. 12,766/2012 has amended the heading of and added paragraphs 6 through 11 to article 22 of Law No. 9,430/2012, establishing that the limit for the deductibility of interest paid or credited to a Person subject to TP Rules shall be calculated by means of the application of a “rate” plus a spread margin that shall be defined by the Minister of Treasury based on the market average, both calculated proportionally in relation to the period to which the interest relate.
With regard to the aforementioned rate, paragraph 6, included into article 22 of Law No. 9,430/1996 by Law No. 12,766/2012, establishes the following:
(i) In the case that the relevant transaction is United States Dollars (“USD”) based: the rate shall correspond to the market rate of Brazilian sovereign bonds issued in the international market in USD;
(ii) In the case that the relevant transaction is Brazilian Reais (“BRL”) based: the rate shall correspond to the market rate of Brazilian sovereign bonds issued in the international market in BRL; and
(iii) In any other case: the rate shall correspond to the London Interbank Offered Rate (“LIBOR”) for the period of six months.
In the case of BRL-based transactions abroad with a floating rate, the rate mentioned above may be established by the Minister of Treasury, as provided for by article 7 of Law No. 12,766/2012.
As to transactions carried out in other currencies and in relation to which no LIBOR rate has been provided, paragraph 8 establishes that the LIBOR rate applicable to USD deposits shall be the applicable rate.
Moreover, according to paragraphs 9 and 10, these new Transfer Pricing rules brought about by Law No. 12,766/2012:
(i) Shall apply to loan contracts/agreements executed as of January 01, 2013 (“new loan agreements”), being that the events of re-pricing (repactuação) and renewal (novação) of pre-existing loan agreements shall be considered as the execution of “new loan agreements” for the purposes of applying the new Transfer Pricing Rules; and
(ii) Shall be verified/applied on the date of execution of the loan transaction.
Lastly, please note that the aforementioned new Transfer Pricing Rules brought about by Law No. 12,766/2012 shall be regulated by the Brazilian Federal Revenue, as established in the newly enacted paragraph 11 of Law No. 9,430/1996.
THIS IS MERELY AN INFORMATIVE NEWSLETTER, RESTRICTED TO VELLOZA & GIROTTO CLIENTS. QUESTIONS AND CLARIFICATIONS ON THE MATTERS CONTAINED HEREIN SHOULD BE ADDRESSED TO OUR OFFICE.
