Functional Analysis of the Controlled Transaction in New Transfer Pricing Law

Abstract

The enactment of Law 14,596/23 finally conformed the Brazilian transfer pricing rules with the arm’s length standard. An essential stage of the analysis involving this standard is the accurate delineation of the controlled transaction. This article examines in detail the elements that must be identified in that stage, namely, the commercial or financial relations and the economically relevant characteristics. Then, it introduces the fundamentals of the commercial rationality test which is required on the delineated transaction by the law and discusses its compatibility with the general anti-avoidance rules (GAARs).