during a tax audit. Depending on the applied method, documentation may vary. Usual documents include commercial invoices, the import and export declarations, and related documents and analysis used to reach the values declared on the tax return For tax audits, the burden of proof falls on the taxpayer. The enterprise has to point out the method applied and provide documentation that supports its computation Penalties Penalties for adopted procedures include e a fine of 20 percent for not making an automatic payment o a fine between 75 percent and 150 percent for each transgression, depending on evident fraud intent O imprisonment between two and five years, plus fine(for cases of Q suspension of the accountant' s license Moreover, failing to comply with the transfer pricing rules also can result in an extended inspection(some cases have taken more than 40 months). As transfer pricing embraces several areas of a company, failing to provide documentation promptly may cause tax officials to investigate other areas of a taxpayers situation, such as its indirect taxes, cost analysis, customs, etc Cost Share Agreements Brazilian transfer price regulations do not mention the treatment of cost share agreements. In practice, such agreements have been addressed through dministrative decisions 35 For transfer pricing matters, it is necessary to determine if the shared costs are deductible, since non-deductible costs are not relevant to transfer pricing ssues To deduct shared costs, the Brazilian resident taxpayer has to consistently document that such costs were usual and necessary-to reach the objectives of the company. Furthermore, the taxpayer must prove through physical evidence that the services involved were effectively rendered and that the share criteria was previously determined by means of a contract. This kind of contract is often used by companies sharing publicity costs Another problematic aspect is that cost funding agreements are based on future results, e.g., centralized research by a nonresident related party, which does not fulfill the requisite of physical evidence that the services were The second step is to check out if the costs are related to royalties; scientifi technical or administrative assistance; or if they refer to technology transfer. Such cases must be filed by the National Institute of Intellectual Property (INPI)and registered by the Central Bank of Brazil, and have restrictions on the amount which can be deducted. In these cases, transfer price regulationsduring a tax audit. Depending on the applied method, documentation may vary. Usual documents include commercial invoices, the import and export declarations, and related documents and analysis used to reach the values declared on the tax return. For tax audits, the burden of proof falls on the taxpayer. The enterprise has to point out the method applied and provide documentation that supports its computation.33 Penalties Penalties for adopted procedures include: a fine of 20 percent for not making an automatic payment; a fine between 75 percent and 150 percent for each transgression, depending on evident fraud intent; imprisonment between two and five years, plus fine (for cases of fraudulent intention);34 suspension of the accountant's license. Moreover, failing to comply with the transfer pricing rules also can result in an extended inspection (some cases have taken more than 40 months). As transfer pricing embraces several areas of a company, failing to provide documentation promptly may cause tax officials to investigate other areas of a taxpayer's situation, such as its indirect taxes, cost analysis, customs, etc. Cost Share Agreements Brazilian transfer price regulations do not mention the treatment of cost share agreements. In practice, such agreements have been addressed through administrative decisions.35 For transfer pricing matters, it is necessary to determine if the shared costs are deductible, since non-deductible costs are not relevant to transfer pricing issues. To deduct shared costs, the Brazilian resident taxpayer has to consistently document that such costs were usual and necessary36 to reach the objectives of the company. Furthermore, the taxpayer must prove through physical evidence that the services involved were effectively rendered and that the share criteria was previously determined by means of a contract. This kind of contract is often used by companies sharing publicity costs. Another problematic aspect is that cost funding agreements are based on future results, e.g., centralized research by a nonresident related party, which does not fulfill the requisite of physical evidence that the services were rendered. The second step is to check out if the costs are related to royalties; scientific, technical or administrative assistance; or if they refer to technology transfer. Such cases must be filed by the National Institute of Intellectual Property (INPI) and registered by the Central Bank of Brazil, and have restrictions on the amount which can be deducted. In these cases, transfer price regulations do not apply