If you’re considering starting a company in Brazil, there are a few things you’ll want to make sure you consider. Protecting your intellectual property rights, for example, should be at the top of your list. And so too should the tax implications of your new business venture.

In this case, we’re not talking about ISS (the tax on services) or ICMS (the tax on goods). You can read more about those taxes HERE. Instead, we’re talking about transfer pricing. It’s not exactly a tax, but it can certainly have significant tax repercussions if you ignore it.

Transfer pricing rules apply where two entities from the same economic group are buying and selling goods or services from one another. For instance, your US parent company is selling products to its Brazilian subsidiary. Brazil has an economic interest in ensuring the sale is structured as an arms length transaction.

Just because the companies are related, you can’t charge $0.00 for the sale. If you could, no tax would be generated and the Brazilian government would lose out.

What’s important isn’t that you understand all of the transfer pricing rules. They’re complicated. But you should be able to spot the issue. That way you can have a conversation with your tax attorney or accountant and structure your business in a way that complies with Brazilian law.

There’s a lot to consider when you’re starting a business in Brazil. Just make sure you’ve thought through all of the issues from the get-go.