Recently, the Superior Chamber of Tax Appeals (CSRF), responsible for harmonizing the rulings of the Administrative Board of Tax Appeals (CARF), published Decision 9101-005.666, which rejected the requirement for transfer pricing adjustments to loan agreements with related parties abroad.

In this case, the divergence of previous decisions involved whether or not the loan agreement has to be submitted to the analysis of the Brazilian Central Bank(BACEN) before closing the foreign exchange transaction to remit payments abroad. The appellant company had been penalized for not adding amounts under title of revenues from interest on loans granted to related companies domiciled abroad to its net income for determining Corporate Income Tax (IRPJ) and Social Contribution on Net Profit under the real profit regime, as per Article 22, First Paragraph, of Law 9,430/1996, which states that:

(i) the interest paid to a related person, when resulting from an agreement not registered with the Brazilian Central Bank, shall only be deductible for determining the real profit up to the amount that does not exceed the value calculated based on the Libor; and

(ii) in the case of a loan with a related party, the lender domiciled in Brazil must recognize as financial revenue corresponding to the transaction at least the amount ascertained according to the provisions of this Article.

The appellant alleged inapplicability of those provisions to the case, since the money was remitted to the related parties abroad through international transfers in Brazilian Reais, submitted for registration in the Information System of the Brazilian Central Bank (SISBACEN), and thus had been submitted to the oversight of the regulatory authority, so there was no obligation to register the respective loan agreement with the BACEN, with application of Article 22, Forth Paragraph, of Law 9,430/1996.

In analyzing the matter, Councilor Andrea Duek Simantob held that Article 22, Forth Paragraph, of Law 9,430/1996 is not applicable to the case in question, stating that the mere registration of the remittance of money to related parties abroad in the SISBACEN is not the same as registration with the BACEN, and does not have support from any legal rule, thus voting for rejection of the appeal.

In turn, Councilor Luis Henrique Marotti Toselli adopted the interpretation previously expressed by the CARF, through Decisions 9101-00.722 and 1103-00.263, in the sense of the absence of any regulatory provision or even the possibility of registering a loan agreement with interest being paid with the BACEN, despite the control exercised by it over the matter, voting to grant the appeal.

In the judgment, the voting was tied, so the decision was favorable to the company.

The lawyers of the Tax Department of Castro Barros Advogados are ready to provide any clarifications on the theme.