[ESTABLISHING A BUSINESS ENTITY IN BRAZIL] 76
of 0.3 to 1, in case the related entity is domiciled in a blacklisted jurisdiction or is subject to a privileged taxation regime. The debt/equity ratio above must be tested every month, considering both the amount of accrued interest, as well as the net equity of the previous year or month (if available). In this sense, profits accumulated during the year may reduce the debt/equity ratio. For 2024, new transfer pricing rules provided by Law no. 14.596/2023 will be in force. The new transfer pricing rules in Brazil align the national practice to the OECD guidelines. On the basis of OECD Guidelines, to calculate the transfer pricing margins of foreign loans, it will be necessary to observe whether the conditions of financial transactions between associated enterprises are consistent with the arm’s length principle. It is expected the new regulations to provide for a safe harbor rule under which foreign loans are automatically in compliance with the transfer pricing rules. However, new rules are pending on tax authorities' regulations. The adoption of the new transfer pricing rules is optional for 2023 and mandatory for 2024.
ILN Corporate Group – Establishing a Business Entity Series
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