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The UN Practical Manual on Transfer Pricing for Developing Countries endeavors to provide “clearer guidance on the policy and administrative aspects of applying transfer pricing analysis.” Chapter 10 is particularly noteworthy. It sets out specific country practices. The rules in Brazil, China, India and South Africa are offered as templates for developing countries to follow.

This article considers the Brazilian contribution to Chapter 10. Although some writers believe that developing countries should adopt the Brazilian model this article suggests otherwise. Even though it is a theoretically simple system, some aspects of the Brazilian model consistently work to the fiscal disadvantage of the country adopting it. As a general matter, this is not a transfer pricing regime that should be widely emulated by developing countries.

In particular, developing countries that offer low cost manufacturing opportunities to MNEs and those that offer market access to an expanding middle class may be disappointed to learn that the Brazilian transfer pricing regime systematically shifts income out of the country. The problem is mainly with the import rules.

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