Petroleo Brasileiro S.A. (Petrobras), the Brazilian state-controlled oil company, entered into charter contracts for offshore oil exploration platforms with related parties abroad. For the 2019 calendar year, Petrobras applied the Comparable Uncontrolled Price (PIC/CUP) method to determine transfer prices for these controlled transactions, making similarity adjustments based on the ratio between the daily charter rate and the replacement value of the platforms, using four contracts with independent parties as comparables. Since the actual charter rates were lower than the calculated benchmark prices, no upward adjustments were made.
The Brazilian tax authorities accepted the use of the CUP method and the daily rate/replacement value ratio but considered these insufficient to ensure comparability. The tax authorities argued that the daily charter rate also reflected the expected rate of return (IRR) and the initially agreed contract term, and proposed a recalculated benchmark price incorporating these additional factors. Critically, the tax authorities used only the initial contractual term as a proxy for the investment payback period, disregarding contractual extensions. This resulted in a higher benchmark price and partial disallowance of charter expenses, leading to assessments of IRPJ and CSLL totalling approximately R$1.24 billion, including separate fines for failure to pay monthly estimated tax.
Petrobras challenged the assessment, arguing that in the platform chartering sector, investment is not recovered within the initial contract term but over extended periods coinciding with the asset’s useful life. Petrobras presented contractual clauses providing for automatic extensions and empirical data showing that independent party contracts had remained in force well beyond initial terms. Petrobras also argued the initial contract term was not a valid adjustment element under Articles 9 and 10 of RFB Normative Instruction No. 1,312/2012. Additionally, Petrobras contested the cumulative imposition of the isolated fine for unpaid monthly estimates alongside the ex officio fine for the annual adjustment, invoking the principle of absorption and CARF Precedent No. 105.
Judgment
The tribunal unanimously dismissed the appeal filed by the National Treasury regarding the transfer pricing adjustment, upholding the lower decision that had ruled in favour of Petrobras on that issue. The tribunal found that the initial contractual term could not be used as a proxy for the expected investment payback period without demonstrating its correspondence with the economic useful life of the asset. It held that Articles 9 and 10 of IN RFB No. 1,312/2012 did not provide for the contract term as a valid comparability adjustment element, and that by disregarding contractual extensions that were standard practice in the platform charter market, the tax authority had compromised the representativeness of the benchmark contracts and distorted the adjustment factor. The tribunal cited prior consistent precedents from both the DRJ and CARF reaching the same conclusion.
Regarding the voluntary appeal on the isolated fine, the tribunal dismissed it by casting vote. The majority held that, following the 2007 legislative amendment to Article 44 of Law No. 9,430/1996, the isolated fine and the ex officio fine constituted distinct impositions with different triggering events and legal bases, and CARF Precedent No. 105 did not apply to post-2007 taxable events. The dissenting rapporteur had argued that the principle of absorption remained applicable regardless of the legislative change, as the failure to pay monthly estimates was a preparatory act absorbed by the penalty for failure to pay the annual adjustment.
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