Clarification on use of auction prices for transfer pricing purposes

On 14 May 2007, a decision from the General Tax Coordination department (COSIT, Coordenação – Geral de Tributação) was published in the Brazilian Official Gazette which stated that sales carried out through a bidding process (licitações) are not considered as atypical transactions for transfer pricing purposes.

According to Art. 31 of Normative Instruction 243/2002 (which deals with transactions subject to transfer pricing rules), "in no event shall the prices o…