Transfer Pricing

[brazilacct]

Hello,

My wife and I have an ecommerce site in Brazil that sells imported clothing from the US. I also have a small ecommerce company in the US. When we import clothing from the US, the Brazilian customs charges us taxes based on the invoice price we paid for the clothing in the US. Depending on what it is, the taxes can be quite high ranging from 60% to 120%.

My question is this. Are either of these scenarios legal?

1) My US company buys the clothing and then sells the clothing to our Brazil company at a discount. The effect being that the Brazilian customs would see a cheaper invoice price and thus charge us less customs taxes.

2) I've heard that it might not be allowed for a US company to sell items for less than what it paid for them. If that's the case, what if our Brazilian company paid a fee to the US company to get cheaper clothing prices, kind of like a Sam's Club or Costco membership. The effect being the US company doesn't lose money but it's still able to offer a lower invoice price the Brazilian company and thus paying less in customs fees.

Thanks in advance.

 

[kirby]

Before you do any of this do an internet search on the name of "Pedro Ripper", former CEO of Cisco do Brasil. See if his experience with the Brazilian authorities can help you reach a decision on this.

 

[brazilacct]

So you're saying both options are illegal?

 

[kirby]

I do not know Brazilian law. I just know what happened to Ripper and want you to be aware of that.

But it seems you wish to test the Brazilian authorities.

Now as Dirty Harry said, "You've got to ask yourself one question: 'Do I feel lucky'?"