IN RFB 2,161/2023.
The transfer pricing regulation, translated.

What IN 2,161 regulates

Law 14,596/2023 introduced the principles of the new regime — arm's length, OECD methods, layered documentation. IN RFB 2,161/2023 (28/09/2023) is the operational regulation: it walks through the regime in the order of the law, from the scope of application and the general provisions to the practical application of the arm's length principle, and it goes down to the level the tax authority applies line by line — delineation of the controlled transaction, comparability analysis, method selection, and the block most consulted in practice: documentation, deadlines and penalties.

In length, the IN is long: it is organized into Titles that run from the general provisions (related parties, controlled transactions, the arm's length principle) to the methods and the comparability analysis, to the simplification measures, and close with documentation and penalties. For a company's day-to-day, however, what is most consulted is the tail end — who has to document, at what level, by when and under what penalty. That is why this page gives weight to that part, without losing sight of the fact that it only makes sense supported by the substantive regime that precedes it.

The regulated regime is mandatory from calendar year 2024 (the law allowed early election for 2023). One transition detail that still catches companies in the placement test: in the year of initial adoption, the documentation thresholds of art. 57 are calculated on the transactions that were subject to transfer pricing control under the old law (Law 9,430/96), pursuant to art. 57 § 4.

It is also important to know what the IN did not exhaust. Art. 52, II recognizes that the Federal Revenue Service may issue specific rules for topics that 2,161 only touched on: hard-to-value intangibles, cost contribution arrangements (cost sharing), business restructurings and centralized treasury management. The exception the IN itself already brought is the safe harbour for low value-adding services (art. 53, a 5% margin, addressed in intragroup services). And commodities had the registration of transactions regulated later, by IN 2,246/2024 and IN 2,249/2025. In short: 2,161 set the backbone of the regime; the detailing of certain special topics is still under construction.

This division of labor between law, regulation and future specific rules is exactly why reading IN 2,161 in isolation is not enough. The substantive engine — what arm's length means, how a transaction is delineated, which method fits — lives in the body of the IN and in the principles of Law 14,596/2023; the operational ribs the tax authority checks first — thresholds, file content, deadlines and penalties — live at the end. A company that jumps straight to the threshold table without anchoring it in the substantive regime tends to file a Local File that looks complete on the surface but does not survive a functional analysis under inspection. The order of this page mirrors the order of the rule on purpose: understand the regime, then locate yourself within its documentation duties.

Delineation, comparability and methods

Before any calculation, the IN requires the delineation of the controlled transaction: identifying the operation as it actually is (not just as it appears in the contract), with a functional analysis — functions performed, assets used and risks assumed by each party. It is on this basis that the comparability analysis and method selection are carried out.

The detailed application of each stage is covered in the dedicated pages: the arm's length principle in practice (comparability factors, interquartile range, adjustments) and the transfer pricing methods (PIC, PRL, MCL, MLT and MDL, with numerical calculation examples). For commodities, the IN governs the use of quoted prices and the timely registration of transactions — an area that has already been amended twice (see the last section). Topic-specific transactions also have their own dedicated treatment, the same chain of analysis applied to each: intangibles, financial transactions and intragroup services — and, for large groups, the interaction with Pillar Two and the option of an advance pricing agreement to fix the method in advance.

Comparability, in the detail of the IN, weighs the relevant economic factors — characteristics of the goods or services, functions and risks, contractual terms, economic circumstances and business strategies — and allows adjustments to neutralize differences between the controlled transaction and the comparables. When a market range is used, the result of the tested party must fall within it; outside the range, the adjustment is made to the most appropriate point (as a rule, the median). It is this chain — delineation → comparability → method → range → adjustment — that the Local File materializes and that the tax authority walks back through to validate (or redo) the declared result. Documenting well is, at bottom, leaving that path auditable before the tax authority reconstructs it on its own.

The three layers of documentation

The documentation regime is not a single file. Following the standard of the OECD's BEPS Action 13, Law 14,596/2023 and IN 2,161 (arts. 54 and 55) organize the demonstration of arm's length into three layers, each with a different audience and degree of detail:

The Country-by-Country Report (CbCR) is the top-down view: the global allocation of revenue, profits, taxes paid and employees of the multinational group, jurisdiction by jurisdiction. It serves the tax administration for risk assessment — and, by OECD standard, cannot on its own ground an adjustment. This is where the market's most common confusion lives: the CbCR was not created by Law 14,596 and is not in IN 2,161. It has existed in Brazil since IN RFB 1,681/2016 (to which art. 55, § 1 of 2,161 expressly refers), is filed in Block W of the ECF and has its own threshold — consolidated group revenue above EUR 750 million (or R$2.26 billion, when the ultimate parent is resident in Brazil). Attributing that threshold to an article of 2,161 is a factual error.

The Master File, defined in art. 58, describes the group as a whole: organization chart, activities, intangibles, intragroup financing and the global transfer pricing policy. The Local File, in turn, is the document of the Brazilian entity — the controlled transactions, the parties involved, the functional analysis and the demonstration that each operation respected arm's length. It is the Local File that tiers by the art. 57 thresholds, in the next section; the Master File accompanies it whenever the company is required to file the Local File.

The three layers are meant to be read together, not in isolation. The CbCR answers where in the world the group books revenue, profit and tax; the Master File answers how the group is structured and priced globally; the Local File answers whether this specific Brazilian transaction is at arm's length. An inspector who finds a Brazilian margin that looks thin will reach for the Master File to see whether the global policy explains it, and for the CbCR to see whether profit is being parked in a low-tax jurisdiction. Inconsistency between the layers is itself a red flag — a Local File that contradicts the group's own Master File narrative invites exactly the adjustment the documentation was supposed to prevent. The practical takeaway: the layers must tell one coherent story, even though they are prepared by different parts of the group and filed under different rules.

The art. 57 thresholds and the file content

Art. 57 tiers the documentation obligation by the total controlled transactions of the previous calendar year, considered before the transfer pricing adjustments:

The full Local File (arts. 59 and 60) requires a functional analysis per transaction, comparables and a quantitative demonstration of the range. The simplified one (art. 61) reduces the level of detail, but does not eliminate the need for arm's length consistency — the tax authority may adjust the operation even of those exempt from documenting. The proportionate version for the mid-market is detailed in simplified Local File, and the three-layer view (with the Country-by-Country report) in transfer pricing documentation.

Two points make a difference in the placement test. First, the calculation is on the total controlled transactions — adding up all the operations with related parties abroad, not each one in isolation — which brings more companies into the required band than is usually imagined. Second, the basis is the value before the adjustments of transfer pricing: the total is not reduced to escape the threshold. Companies at the edge of a band have to redo the math each financial year, because one year of higher intragroup volume can promote the obligation from simplified to full — with a real jump in effort, cost and preparation time.

There is a third trap that the table alone does not show: being exempt from documentation is not the same as being exempt from the rule. A company below R$15 million in controlled transactions owes no Local File and no Master File — but its intercompany prices still have to respect arm's length, and the tax authority can still adjust them in an inspection. The threshold governs the paperwork burden, not the substantive obligation. In practice that means a small importer with a single related-party supplier can be exempt from filing yet exposed to an adjustment if its import margin is out of line — and, without a Local File on hand, it walks into that inspection with nothing prepared to defend the margin it already booked.

What goes inside the Local File

Knowing that you are required is half the path; the other half is the content. The full Local File (arts. 59 and 60) is not a generic report — it is the demonstration, transaction by transaction, that the company respected arm's length. In practice, it brings together:

• Structure and context — identification of the entity, local organization chart, description of the business and the strategy, and the related parties involved;
• The controlled transactions — nature, amounts, contracts and flows of each intragroup operation (imports, royalties, interest, services);
• Delineation and functional analysis — functions performed, assets used and risks assumed by each party, the basis of all comparison;
• Comparability and method — the selection of the most appropriate method, the comparables adopted and the justification for the choice;
• The quantitative demonstration — the calculation, the range and any adjustments that bring the result into compliance.

The simplified Local File (art. 61), available for the R$15 to 500 million band, reduces the level of detail — but does not waive the arm's length logic or the consistency with the ECF. It is a leaner document, not a more fragile one: the Federal Revenue Service may ask for any point to be opened up in a tax procedure. That is why the TaxUp team treats the simplified file with the same analytical rigor as the full one, only with a presentation proportionate to the size required. A well-built Local File is also the best piece of defense: if an assessment comes, it is the file that sustains the method and the margin already adopted, instead of leaving the entire narrative to the tax litigation stage.

Deadline and form of filing (art. 56)

The Local File and the Master File are submitted via a Digital Process, through e-CAC, up to 3 months after the deadline for transmitting the ECF for the corresponding calendar year. Since the ECF is due on the last business day of July, in practice the TP documentation window runs until the end of October of the year following the base year.

The two-step calendar is not a mere formality. The ECF, due in July, is where the transfer pricing adjustment is actually booked into the IRPJ and CSLL base; the Local File, due three months later, is where that adjustment is justified. The order matters: the adjustment a company declares in the ECF has to be the one its Local File can defend, because a benchmark finished only in October cannot retroactively change a margin already filed in July. The disciplined practice is to run the functional analysis and the benchmark before closing the ECF, so that the number declared and the number documented are the same — and to use the three-month gap to finish the write-up, not to discover the result.

Pay attention to the transition rule (art. 56, § 2): in the first cycle of the new regime the deadlines were shifted. Those who adopted the regime in 2023, by early election, filed the documentation by the last business day of 2024; for calendar year 2024 — the first of mandatory application — the Master File and the Local File had as their deadline the last business day of 2025. From the turn of 2025 onward, the permanent rule of the caput applies: three months after the ECF. Confusing the transition deadline with the permanent regime is an easy mistake to make reading only the original wording of the rule.

The documentation penalties

Failure to comply with the documentation obligations carries its own sanctions (art. 66 of the IN, mirroring art. 35 of Law 14,596/2023), with a floor of R$20K and a cap of R$5 million per penalty:

• Failure to file the Local File on time: penalty of 0.2% per calendar month or fraction thereof on the gross revenue of the period;
• Filing that does not meet the requirements: penalty of 3% on the gross revenue of the period;
• Master File with inaccurate, incomplete or omitted information: penalty of 0.2% on the consolidated revenue of the multinational group for the previous year;
• Failure to provide information during a tax procedure (or obstruction of the inspection): penalty of 5% on the value of the transaction concerned, as priced by the authority.

And the documentation penalties are the lesser risk: without consistent documentation, the tax authority arbitrates the method and margin when adjusting the operations — with an ex officio penalty of 75% on the tax due, qualifiable to 100% (fraud/collusion) and 150% only in recidivism (Law 14,689/2023). The defense in assessments is covered in tax litigation.

Practical case: placement and schedule

To make it concrete, a scenario of the type the TaxUp team encounters in practice (illustrative figures). A Brazilian manufacturer, a subsidiary of a European group, imports inputs from the parent company and pays brand royalties to an affiliate abroad. Added together, the controlled transactions of the previous calendar year reach R$320 million — calculated, as art. 57 requires, before any transfer pricing adjustment.

Which layer does it fall into? R$320 million is between R$15 and R$500 million: under art. 57, II, the company needs the simplified Local File (art. 61) and the Master File. The European group earns more than EUR 750 million worldwide, so the CbCR also exists — but, as the ultimate parent is resident in Europe, it is the parent that files it, in its own jurisdiction. The Brazilian subsidiary only has to notify in the ECF which group entity is the reporting entity and in which country. That notification is mandatory, and the omission is punishable even though the company is not the reporting entity.

And the cost of getting it wrong is not only the documentation penalty. Without a consistent Local File, the inspection arbitrates method and margin when reviewing the import of inputs and the royalties — and the discussion migrates to the base of IRPJ and CSLL, with an ex officio penalty of 75%. For the manufacturer in the example, an adjustment of a few percentage points in the margin of the imports represents, on its own, a value far higher than the R$5 million cap of the documentation sanctions. In the end, the documentation is the cheapest piece of the regime.

What has changed since 2023

IN 2,161 is not static. So far, it has been amended by IN RFB 2,246/2024 and by IN RFB 2,249/2025 — both focused on the registration of commodities transactions (arts. 38 and 64) and on Annex III. The documentation thresholds of art. 57 and the deadline of art. 56 remain in their original wording.

In detail, the two amendments aimed at the most sensitive point of commodities: the timely registration of transactions — date and conditions of the operation — and the treatment of quoted prices, with adjustments in Annex III. For those operating with exchange-traded products, this changes a concrete ancillary obligation, hence the importance of reading the consolidated rule. The move also reveals the Federal Revenue Service's method: regulate the backbone first (2,161) and, later, calibrate by specific instruction the sectors and operations that require their own rule. It is reasonable to expect that intangibles, financial transactions and services will, over time, receive the same detailed treatment.

The practical consequence for the compliance calendar is that the rule a company applied in one year may not be the rule in force in the next. A team that drafts the Local File from the 2023 PDF risks registering a commodities transaction under conditions that the 2024 or 2025 amendment has already changed — and the registration penalty falls on the transaction, not on good faith. The safe practice is to re-check the consolidated wording at the start of each documentation cycle, before the functional analysis begins, rather than at the moment of filing.

The point of attention is ongoing: the Federal Revenue Service adjusts the regulation as the regime matures (including through public consultations), and each adjustment may change ancillary obligations for the current year. Monitoring the consolidated rule — and not the 2023 version that circulates as a PDF — is part of the compliance of anyone operating intercompany.