Machado Meyer tax partner Fernando Colucci joins Skadden’s David Farhat, Loren Ponds, Eman Cuyler and Stefane Victor to explore Brazil's historic shift from a 27-year formulaic transfer pricing system to full OECD compliance. As he explains, “We moved from a very strict, very formulaic approach to a simple, a direct import of the arm's-length principle.” Tune in for his insights on dramatic changes facing multinational enterprises and Brazil's notorious 75% penalty system that raises the stakes on compliance decisions.

🗝️ Key Points 🗝️

Top takeaways from this episode

• The Formula-to-Function Flip: Brazil abandoned 27 years of fixed profit margins in favor of the full OECD arm's-length principle, requiring companies to conduct detailed functional analyses for the first time.
• All-or-Nothing Penalties: Brazil's unique 75% penalty system creates stark choices: Accept the tax authority's adjustment with no penalty or challenge it and face penalties on any sustained portion.
• Intangibles Enter the Game: Previously excluded from transfer pricing rules, intangible transactions are now subject to OECD guidelines, creating new compliance challenges.
• Limited Relief Mechanisms: While Brazil introduced its first APA program, it operates more like a written consultation process than traditional APAs, and the country has never executed a MAP case despite having treaty provisions.

💡 Featured Guest💡

Name: Fernando Colucci

What he does: Fernando provides legal and tax assistance in M&A operations, restructurings, international taxation, international treaties, transfer pricing, tax planning, international investments taxation, asset and succession planning.

Organization: Machado Meyer

Words of wisdom: “My recommendation here is to start with a thorough risk assessment. So, understand your intercompany transactions, identify potential areas of concern. Getting prepared, that's the motive.”

Connect: LinkedIn

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GILTI Conscience is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. Skadden’s tax team is recognized globally for providing clients with creative and innovative solutions to their most pressing transactional, planning, and controversy challenges. The insights and views presented in GILTI Conscience are for general information purposes only and should not be taken as legal advice for any individual case or situation. The information presented is not a substitute for consulting with an attorney, nor does tuning into this podcast constitute an attorney-client relationship of any kind.