Brazil, the largest economy in South America, has taken a significant step in its tax policy. Brazil has enacted a law (Law 14,596/23) that transitions the country towards the Arm’s Length Principle (ALP). This change underscores Brazil’s commitment to aligning its taxation policies to global standards. While this development is promising for the national economy, fostering an environment that encourages international trade and investment, the transition towards the ALP represents a significant change. It may come with several challenges, given the distinct characteristics of Brazil’s tax system.
This pivotal shift will significantly impact multinational companies operating in Brazil and marks a watershed moment in Brazil’s taxation history. With less than six months left until this new legislation takes effect, it is crucial for multinationals to take immediate and actionable steps to ensure readiness by the mandatory deadline of 1 January 2024 (but with an early adoption available for calendar year 2023).
