The decisive question is not which entity has the deepest balance sheet. It is what changed between related parties: who stopped or began performing a function, who controlled each risk, which asset or opportunity moved and what independent parties would have negotiated under the same alternatives.
The regulatory event triggers the analysis; it is not the controlled transaction
| Object | Decision | Primary file | Common failure |
|---|---|---|---|
| Brazil event | What ends, survives or transitions? | Official act, authorization and local close | Using a headline as the complete fact pattern |
| Controlled change | What relationship, function, asset, risk or opportunity changed? | Contracts, actual conduct and FAR before/after | Assuming a transfer because the market closed |
| Tax consequence | Is compensation due, at what price and with what payment character? | Method, valuation, agreement, invoice and ledgers | Calling every payment an indemnity |
The local execution steps are covered by the Brazil betting market exit checklist. This page owns the related-party decision that follows.
Article 26 does not presume an exit charge
| Stage | Question | Evidence | Possible result |
|---|---|---|---|
| Modification | Which related-party commercial or financial relation changed? | Agreement versions, flows, organization and approvals | Defined transaction or no controlled change |
| Transfer | Did a function, asset, risk, opportunity, benefit, loss or profit potential move? | Value chain and FAR before/after | Transfer, destruction or mere loss of use |
| Independent-party test | Would independent parties accept the change without compensation? | Rights, costs, benefits and realistic alternatives | Payment, no payment or renegotiation |
| Valuation | Which method values the identified item? | Contemporaneous forecasts, comparables and sensitivities | Defensible range and price |
Law 14,596/2023, article 26, covers modifications of related-party commercial or financial relations that transfer potential profit, benefits or losses remunerable between independent parties. Paragraphs 1 to 4 focus on transferred functions, assets, risks, opportunities, costs and potential profit. The payer’s financial capacity is not a substitute for that test.
The OECD Transfer Pricing Guidelines 2022, paragraphs 9.76 to 9.79, likewise reject an automatic indemnification presumption. Brazilian law is the binding starting point; the Guidelines help explain the independent-party logic.
The entity named in the agreement may not be the entity that controlled the risk
| Question | Contemporaneous proof | Warning sign | TP consequence |
|---|---|---|---|
| Who monitored Brazil regulation? | Committees, advice, reporting and escalation | Brazil only executed global decisions | Reassess the risk controller |
| Who could mitigate or accept the risk? | Authority limits, budgets and actual decisions | Local contract without decision power | Conduct may override the contract |
| Who had financial capacity? | Capital, guarantees and funding access | Risk assigned to an entity unable to bear it | Contractual allocation may fail |
| Who received the pre-exit return? | Margins, royalties, services and dividends | Return and risk described inconsistently | Reconcile historic remuneration and exit |
Under article 7, paragraphs 1 to 4, the written agreement is tested against actual conduct. Risk is attributed to the party that controls it and has the financial capacity to assume it. The file therefore needs named people, decisions, authority and funding — not a retrospective clause drafted after the prohibition.
Loss of value in Brazil is not the same as a transfer of value out of Brazil
| Item | Factual test | Possible transfer | Different event |
|---|---|---|---|
| Software and algorithm | Who owns, develops, improves and uses it after the exit? | Code, licence, enhancement or DEMPE function | Brazil access is merely disabled |
| Brand and domain | Was a local right assigned, returned or newly exploited elsewhere? | Right or economically relevant licence | Same owner retains an unusable Brazilian right |
| Data and customers | What may legally move and who benefits later? | Asset or access with future benefit | Mandatory retention without exploitation |
| People and know-how | Did a team, decision process or knowledge move? | Organized function or intangible | Redundancy with no recipient |
| Contracts and opportunities | Did another entity assume a supplier, customer or right? | Right, obligation or profit potential | Contract simply terminates |
| Capital and risk | Did guarantees, funding or exposure move? | Risk linked to real control and function | Loss remains with the historic risk controller |
Destruction, obsolescence, local derecognition and related-party transfer are different events. One market exit may contain more than one; each requires its own evidence, valuation and accounting. A before-and-after inventory prevents the group from charging for value that nobody received or ignoring value that clearly moved.
Characterize the payment before applying withholding taxes
| Label used | Prior question | Required evidence | Next analysis |
|---|---|---|---|
| Termination indemnity | Which right was breached and which loss is restored? | Agreement, governing law and damage model | Legal nature, withholding and deductibility |
| Asset payment | Which identifiable asset moved and from whom? | Ownership, delivery, valuation and acceptance | TP method, gain and withholding |
| Transition service | What service, period and recipient benefit exist? | SOW, hours, deliverables and benefit test | Price, import taxes and withholding |
| Residual royalty | Which right remains in use after the cutoff? | Subject matter, territory, period and logs | Royalty base, treaty and Brazilian taxes |
| Cost recharge | Is it pure reimbursement or a service with margin? | Debit note, ledger, allocation key and beneficiary | Substance and component-by-component treatment |
The invoice label does not decide IRRF, CIDE, PIS/Cofins-Importation, ISS, deductibility or foreign-exchange treatment. Those consequences depend on the legal and economic character of the flow, jurisdiction, agreement and applicable treaty. The transfer pricing file and the withholding memorandum must use the same description of the transaction.
For the underlying vendor and counterparty file, use the Brazil betting supply chain contract and tax matrix. Return to this transfer pricing analysis only for a delineated controlled transaction; a supplier termination does not by itself establish a related-party transfer.
Local File, Master File, agreements and ledgers need one version of the facts
| Prior-year controlled transactions before adjustments | Local File | Decision limit |
|---|---|---|
| BRL 500 million or more | Full | Document the detailed restructuring and method |
| BRL 15 million inclusive to below BRL 500 million | Simplified | A specific restructuring attachment still exists |
| Below the documentation band | Test the applicable exemption | File exemption does not erase substantive TP rules |
Article 34 of Law 14,596/2023 requires documentation of the transactions, parties, group structure and activities. The Federal Revenue filing instructions provide a specific “business restructuring transactions” attachment for both full and simplified Local Files.
Use the general Brazil transfer pricing documentation guide for filing mechanics, and the Brazil Master File guide to reconcile the group narrative with the Brazilian transaction.
Pillar Two applies only in scope — and does not repair an unsupported transaction
| Layer | Input | Question | Reconciliation risk |
|---|---|---|---|
| Transfer pricing | Compensation or no compensation | Is the outcome arm’s length? | Adjustment not reflected in entity results |
| Accounting | Impairment, derecognition, provision and recovery | Which entity and period record the effect? | Duplicate or omitted event |
| Covered taxes | Current and deferred tax | Which tax follows the income or loss? | Unsupported DTA or classification |
| GloBE | Income, loss and jurisdictional adjustments | What changes the ETR and additional CSLL? | Global conclusion without entity modelling |
Law 15,079/2024, articles 2 and 4, targets a 15% effective minimum and applies to groups with at least €750 million of annual consolidated revenue in at least two of the four preceding fiscal years. Scope does not establish an amount due. GloBE income, covered taxes, temporary differences and the jurisdictional calculation must still be modelled.
For the wider mechanics, use the Brazil Pillar Two guide.
Gaming duties under Pillar Two: a decision tree before the ETR
Short answer: GGR does not decide GloBE treatment. Establish each levy’s nature, deductions and relationship with corporate income tax by entity, jurisdiction and period. A licence fee does not inherit the classification of a gaming tax.
- Legal basis: retain the provision, version, effective date, product and taxpayer; distinguish tax, regulatory contribution, service fee, deposit and penalty.
- Substance: test the economic obligation beyond its name. Substance here means the character of the levy, not the substance-based income exclusion (SBIE).
- Deductions: map stakes, prizes, bonuses, commissions and deductible expenses. The 2026 OECD Commentary on Article 4.2, paragraphs 23–32, permits
some but not all expenses
in paragraph 27: a reasonable simplified estimate of net profit can qualify without deducting every cost. - CIT relationship: test income/profit and in lieu of separately. Substitution for generally applicable CIT differs from coexistence or expense deductibility. Record credits and limitations.
- Accounting: bridge liability, account and period to financial statements and GloBE adjustments. Neither an accounting label nor cash payment settles classification.
- Entity/jurisdiction: identify who owes, records and pays, including permanent establishments and allocation issues. A group licence is not a GloBE perimeter.
- Covered Tax? record the inclusion route, exclusions, reviewer and gaps; pending is a legitimate result. The September 2026 OECD guidance, paragraphs 23.1–23.6, excludes an
Explicitly Conditional Tax
under criteria concerning foreign IIR/UTPR and SbS, separability and transitional rules. No such finding is made for the levies below. - ETR: reconcile both sides of the jurisdictional fraction before computing top-up tax. Model Rules Articles 4.1–4.3 and 5.1–5.3 distinguish adjustments, allocations, ETR and SBIE. Adding headline rates does not reproduce that calculation.
Portugal, Malta and Great Britain: separate working papers
- Portugal — IEJO
- RJO Article 87 removes directly IEJO-taxed income from IRC, making substitution a relevant line of enquiry, not an automatic Covered Tax conclusion. Articles 89–90 distinguish product bases. The opened SRIJ consolidation is dated 31 March 2020; amendments, product, entity and period must be closed before a current opinion. Fees and deposits need separate analysis.
- Malta — gaming tax and other charges
- S.L. 583.10, regulations 2(2) and 3, define gaming revenue and nexus. For exclusively remote services, the second proviso uses establishment, permanent address or usual residence in Malta, rather than simple physical presence. Prize/bonus deductions inform the test but do not establish CIT substitution. Keep device levy, compliance contribution and licence fee separate. The MGA change announced for 1 October 2026 is future at the 27 September cutoff.
- Great Britain / United Kingdom — Remote Gaming Duty
- HMRC Notice 455a, section 3, uses gaming payments, prizes and UK person. GB regulatory territory does not replace UK tax nexus. Domestic profits terminology and prize deductions do not settle GloBE character. Corporation Tax substitution has not been established here. GBD, PBD, machines and land-based casinos need separate files; this RGD review does not classify them.
Limit, sources opened 27 September 2026: no definitive inclusion or exclusion is reached for these three jurisdictions. Obtain the legal and accounting memorandum before using a result in valuation or ETR. New OECD guidance is not automatically Brazilian domestic law; the Pillar Two owner must verify implementation and the relevant period.
Restructuring and exit file: Brazil–HQ RACI and reconciliation
- Freeze: fact version, entities, period and owners.
- Demonstrate: FAR before/after, contracts and the item actually transferred or extinguished.
- Reconcile: price, invoice, journal entries, Local File, Master File and applicable returns.
- Close: explained differences, approval and change log.
This is a TaxUp governance model to adapt to the group. R performs the work; A owns approval of that deliverable; C is consulted; I receives the result. The allocation does not move the Brazilian entity’s legal obligations or replace the professional responsibility of the person signing each document.
- Facts, FAR and contracts
- R: Brazilian operations and TP; A: Global TP lead; C: local legal, product owners and finance; I: Brazil CFO. Deliverable: functions, assets, risks, people, opportunities and profit potential before/after, actual risk control, dates, realistic options, terminated or renegotiated contracts and factual owner sign-off.
- Pricing and financial execution
- R: TP and controllership; A: Brazil tax lead; C: legal, treasury and Global Tax; I: Local File and Master File owners. Deliverable: identified transfer, method or supported no-charge conclusion, valuation, invoice or debit note, currency, counterparty, withholding analysis and matching entries in both entities.
- Files and returns
- R: Brazil TP compliance and the Master File team; A: the owner of each local or global submission; C: accounting and the GloBE team; I: finance leadership. Deliverable: precise Local File section/attachment, corresponding Master File update and Brazilian ECF bridge. Include the GIR and GloBE calculation only where the group, entity and period fall within the applicable scope.
One evidence index
Assign one ID to each event, for example REORG-01. Record origin and destination entities, jurisdiction, effective date, FAR before/after, asset/risk/opportunity, agreement, decision owner, alternatives and price. Link the ID to the invoice, ledger and counter-entry, then to the exact Local File and Master File sections and the applicable ECF/GIR reconciliation. A “not applicable” entry needs a reason and an owner.
The change log records version, effective date, change, rationale, supporting evidence, preparer, approver and affected files/returns. Currency, period, entity perimeter and measurement basis may explain legitimate differences; quantify and explain them instead of forcing unlike reports to match. Preserve the prior version so that contemporaneous evidence is not replaced by a retrospective story.
Hypothetical reconciliation example
Brazilian access to software is switched off while a team starts serving another group entity. Record the events separately: termination of access does not itself prove an intangible transfer; the team move requires examination of functions, decisions, risks and benefits received. The delineated facts may support compensation, no charge or another adjustment. Document the conclusion in both entities before issuing an invoice and changing the returns.
Download the restructuring and exit file CSV template. Blank template without formulas or client data. Its fields and workflow are described above; this is not an official Federal Revenue form.
Module update: 27 September 2026. Revisit after changes to restructuring facts, contracts, Federal Revenue guidance or GloBE reporting. Suggested functional owners: Brazil TP and Global Tax. This date does not represent a complete revalidation of the inherited sections.
Legal requirement and boundary: under IN RFB 2,161/2023, Articles 58(II)(e) and 59(I)(c), the Master File covers significant current-year restructurings; the full Local File also considers the preceding year where the taxpayer was involved or affected. Apply the relevant documentation regime, including Article 61 for the simplified file. Article 62 calls for contemporaneous support. This RACI is TaxUp’s proposed control, not a legally prescribed organisation chart. ECF, LF/MF submission and GIR/local GloBE obligations are separate deliverables; GIR applies only for the relevant group, jurisdiction and period, with no assumed universal Brazilian deadline.
The deliverable is a file that global tax, the Brazilian ledger and an auditor can all reperform
| Workstream | Decision | Owner | Close evidence |
|---|---|---|---|
| Regulatory chronology | Cutoff, surviving duties and scenarios | Brazil legal and regulatory | Official acts, individual authorization and timeline |
| FAR before/after | Functions, assets, risks and people that changed | Business and TP | Interviews, systems, organization and approvals |
| Compensation | Right, method, range and price | Tax, finance and legal | Agreement, comparables, valuation and counter-case |
| Payment character | Withholding, foreign exchange and deductibility | Brazil tax and controller | Memorandum, invoice and accounting bridge |
| Documentation | Local File, Master File and affected returns | TP compliance | Reconciled versions and filing evidence |
| Pillar Two | ETR, DTA and additional CSLL if in scope | Global tax | Entity and jurisdiction bridge |
MP 1,394/2026, article 10, preserves prior and transition tax, monetary, information and record-keeping duties. Its five-year minimum does not validate an allocation or shorten a longer retention period. Preserve the file while the people who made the decision can still explain it.
Build one Brazil exit file before contracts, invoices and returns diverge
The TaxUp Team connects the regulatory chronology, FAR, agreements, valuation, withholding, Local File, Master File, ledgers and Pillar Two into one controlled version of the facts.
Build the Brazil exit TP filePrimary sources: Law 14,596/2023, articles 7, 26 and 34; Federal Revenue transfer pricing documentation instructions; Law 15,079/2024, articles 2 and 4; MP 1,394/2026, article 10. The OECD Guidelines are interpretive context, not a substitute for Brazilian law. Cutoff: 26 September 2026.
Frequently asked questions
Does the Brazil betting exit automatically create an exit charge?
Does the intercompany agreement decide who bore the regulatory risk?
Must a restructuring appear in the Brazilian Local File?
Does every multinational betting group face Brazil Pillar Two consequences?
Continue through the Brazil betting decision file
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