Authorities use confidential information to ascertain prices
June 15, 2009
Cristiane Magalhães and Fábio Lima da Cunha of Machado Associados in Brazil report on how the authorities have been using information not accessible to taxpayers to determine arm’s-length prices.
By analysing the Brazilian transfer price rules, especially if comparing the various methods used to ascertain parameter prices, it can be said that the PIC (comparable independent prices) and the PVEx (export sales price) are the only ones for which there is a real comparison between transactions with related parties (which includes residents in low tax jurisdictions and beneficiaries of privileged tax regimes) and transactions with non-related parties. According to the other methods, the parameter price is ascertained based on the costs of acquisition or manufacturing of goods, services or rights or, in other cases, on the sales prices of such items.
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