Transfer Pricing
for companies BRL 15M-100M.

The market gap

Brazil has approximately 30,000 companies with revenue between BRL 15M and BRL 100M that maintain cross-border intercompany operations. For all of them, Transfer Pricing compliance after Law 14.596/2023 is mandatory. But the consulting market is bipolarized:

For a company with intercompany operations of BRL 5-50 million/year, doing the Local File wrong exposes it to an ex officio penalty of 75% (raised to 100% for fraud or collusion and 150% only on recidivism) on the adjustment — it can add up to more than the intercompany revenue itself.

Who is required even without EUR 750M

The threshold of EUR 750M in global revenue is only for the Master File and the Country-by-Country Report. For the Local File, the obligation is broader:

• Every Brazilian legal entity that carries out operations with related parties abroad above a minimum level (defined by a Normative Instruction — typically BRL 15M of intercompany operations in the year)
• Operations with persons located in tax havens or privileged tax regimes — regardless of any corporate tie

Practical result: a mid-market company that imports 30% of its inputs from the parent company abroad, or that pays a 5% royalty to the parent, or that has cost sharing with a subsidiary — all are subject to full OECD Transfer Pricing.

Methodology proportional to company size

For a mid-market company, producing a Local File in the Big 4 format (300+ pages, 15+ comparables, 8 independent FAR analyses) is overkill. IN RFB 2.161/2023 allows a structure proportional to the size and complexity of the operation.

For companies of BRL 15M-100M, a lean and robust Local File contains:

• Description of the company and the group (up to 15 pages)
• Mapping of intercompany operations (up to 10 pages)
• FAR analysis specific to the main operations (not all of them)
• Selection of the OECD method with justification
• Benchmark with 5-10 comparables (not 30+)
• Demonstration of adherence to the arm’s length range

Total: 50-80 technical pages, cost between BRL 25k and BRL 60k. Appropriate for the company size and technically robust.

Risks of not doing it (or doing it wrong)

Not filing the Local File

A specific penalty for non-compliance with an ancillary obligation: 0.2% to 3% of revenue, depending on the infraction. But the greater risk is the ex officio adjustment by the Revenue Service — without a Local File, the tax authority arbitrates the method and margin to the taxpayer’s detriment.

Filing a poorly done Local File

Riskier than not filing. A Local File with the wrong choice of method, weak comparables or superficial FAR analysis is an “invitation to inspection.” The Federal Revenue Service is increasing audit rigor after Law 14.596.

Ex officio penalty on the adjustment

When the tax authority adjusts the operation, the ex officio penalty is 75% of the tax, increased to 100% (fraud/collusion) and 150% only in recidivism (Law 9,430/96, am. Law 14,689/2023), without prejudice to Selic interest. For an intercompany operation of BRL 30M, a 5% adjustment generates additional tax of ~BRL 510k (34% on the BRL 1.5M adjustment) + a 75% penalty = BRL 893k. Not including Selic.