The Second Chamber of the Supreme Court of Brazil issued an interpretation of Normative Instruction SRF n. 243/2002 concerning the legal basis for application of the sixth method – RPL60 – under the Brazilianarm’s length provision contained in art. 18 of Law no. 9430/1996.
The Second Champer of the Supreme Court concluded that the interpretation adopted by the Brazilian Federal Revenue Service through Normative Instruction SRF n. 243/2002 did not violate art. 18 of Law n. 9.430/1996.
Excerpts
“This is a writ of mandamus filed for the purpose of ensuring the right to calculate transfer prices using the PRL method according to the criteria established by art. 18 of Law no. 9430/1996, excluding those contained in SRF Normative Instruction no. 243/2002.
The main objective of the transfer pricing methodology is to ensure that taxable events do not escape the state’s taxing power due to the allocation of profits by taxpayers with international business projections. It is an instrument to combat the erosion of tax bases resulting from the transfer of values to other jurisdictions, which the Organization for Economic Cooperation and Development (OECD) has been working on through the Action Plan on BEPS (Base Erosion and Profit Shifting). In practical terms, the system is based on a comparison between a transaction under normal market conditions and a transaction between bound parties, determining the value involved in the transaction based on what usually happens in unbound situations (parameter price). In other words, states adopt this system in order to find out or confirm the real price of the imported good, thus avoiding the undue export of profits.
In Brazil, the transfer pricing methodology was instituted by Law No. 9430/1996, a rule which includes the concept of related parties and lists the established methods, including the PRL, which is the subject of discussion in this case. Under the wording of Law No. 9,430/1996 in force at the time the writ of mandamus was filed, the PRL was a method of predetermined margins through the imposition of a presumed profit coefficient, to which the taxpayer agreed when choosing to apply it to its transactions with related parties.
The interpretation adopted by the Brazilian Federal Revenue Service through Normative Instruction SRF n. 243/2002, endorsed by the Court of origin, does not violate art. 18 of Law n. 9.430/1996, nor the other legal provisions indicated. This is a logical interpretation, based on the ratio legis, i.e. the purpose of the rule. The function of a normative instruction is not to merely repeat the text of the law, but to regulate it, clarifying its practical function.
The purpose of SRF Normative Instruction no. 243/2002 was simply to substantiate the correct interpretation that should be made with regard to the methodology provided for in art. 18 of Law no. 9430/1996, in compliance with art. 100, I, of the CTN, without unduly increasing the tax. The calculation method provided for by law and detailed in art. 12 of SRF Normative Instruction
n. 243/2002 meets the purpose enshrined in the transfer pricing system, and the interpretation defended by the appellant is a real cause of disrespect for articles 43 and 97 of the CTN, as it seeks to reduce its tax burden by unduly deducting amounts.
The advent of Law No. 12.715/2012 with the intention of including the provisions of SRF Normative Instruction No. 243/2002 in the text of Law No. 9.430/1996 should not be seen as recognition by the tax authorities that the infralegal rule went beyond the legal provision. Notwithstanding the correct position of the Brazilian Federal Revenue Service, as set out in this vote, it is at least appropriate to amend the rule in order to stop the countless battles in the administrative and judicial spheres, as a measure to reduce tax damages and costs with tax litigation.