Brazilian Government Enacts New Rules for Royalty Deductibility and Remittance

by | Jun 16, 2023 | Articles, Client Alert

After the National Congress approved the final text on May 05, 2023, Provisional Measure No. 1,152/2022 was sanctioned by the Brazilian Government and enacted into law (Law no. 14.596/2023) on June 14, 2023.

As we anticipated in our previous communications, the new legislation amends the transfer pricing rules in Brazil. Among the changes adopted, the following topics stand out:

  • Adoption of the arm’s length principle for controlled transactions, bringing greater freedom in the negotiation of contractual conditions in commercial relations between related parties;
  • Change of remittance rules in Brazil, with the revocation of the royalty ceilings for intercompany agreements; and
  • Revocation of the limits of deductibility arising from the payment of royalties for the exploitation of trademarks and patents, technical, scientific, administrative or similar assistance.

Law no. 14.596/2023 is another important step towards a scenario of greater alignment with the practices already adopted by the international market, promoting greater commercial freedom for companies to exploit their assets with their Brazilian affiliates. The repeal of the deductibility and remittance limits provides a new opportunity for companies to review and eventually renegotiate their intra-group contracts for the exploitation of their intangible assets.
This new law will come into force on January 01, 2024. Our team will follow up with further analyses of these legislative changes, setting out all the impacts, consequences, and business opportunities arising as a result.

We are available to clarify any doubts that arise on the subject.


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