Acquisition or Production Cost Plus Taxes and Profit The Acquisition or Production Cost Plus Taxes and Profit Method (CAPF utilizes the average of the acquisition or production cost of exported items plus taxes and contributions levied in Brazil, plus a 15 percent profit margin on the sum For the case of an intermediate export enterprise, related or not, the result of he calculation above may be used. No additional margin to the engaged export enterprise may be added Comparison of Methods There is no priority of methods in Brazilian legislation and taxpayers are more expressly allowed to choose the method that rides to the minor(or to any at all) price correction. Thus, there is no best method rule. When relating import and export methods, comparison criteria could be resumed as follows Product PVEx Resale Price PVA 15 Resale pricecosts Costs CPL 20%a CAP 1S% Special case: Interest Interest paid or credited to related parties under loan agreements are differentiated in two groups o interest resulting from loan agreements registered with the Central Bank of Brazil(Bacen) and 9 interest from unregistered loans The first one is integrally deductible for income tax purpose. On the other hand the second one falls under transfer pricing rules which also impose a minimum floor pursuant Brazilian law The deductible prorated value of interest paid abroad may not exceed the interest rate of LIBOR for six-month deposits in U.S. dollars, plus a 3 percent annual spread. The same calculation is applied in cases of a receiving interest from nonresident related parts In this case the difference between received interest values and the value reached through the method above when negative, have to be added to the earnings Changing Prescribed Profit Rates Brazilian rules allow tax authorities to change the above rates in a general sector, or specific character, when the changes are justified by specialAcquisition or Production Cost Plus Taxes and Profit The Acquisition or Production Cost Plus Taxes and Profit Method (CAP)22 utilizes the average of the acquisition or production cost of exported items plus taxes and contributions levied in Brazil, plus a 15 percent profit margin on the sum. For the case of an intermediate export enterprise, related or not, the result of the calculation above may be used. No additional margin to the engaged export enterprise may be added.23 Comparison of Methods There is no priority of methods in Brazilian legislation and taxpayers are more expressly allowed to choose the method that rides to the minor (or to any at all) price correction. Thus, there is no best method rule. When relating import and export methods, comparison criteria could be resumed as follows: Special Case: Interest Interest paid or credited to related parties under loan agreements are differentiated in two groups: interest resulting from loan agreements registered with the Central Bank of Brazil (Bacen) and interest from unregistered loans. The first one is integrally deductible for income tax purpose. On the other hand, the second one falls under transfer pricing rules, which also impose a minimum floor pursuant Brazilian law.24 The deductible prorated value of interest paid abroad may not exceed the interest rate of LIBOR for six-month deposits in U.S. dollars, plus a 3 percent annual spread. The same calculation is applied in cases of a receiving interest from nonresident related parts. In this case the difference between received interest values and the value reached through the method above, when negative, have to be added to the earnings. Changing Prescribed Profit Rates Brazilian rules allow tax authorities to change the above rates in a general, sector, or specific character, when the changes are justified by special Import Export PIC PVEx CPL 20% CAP 15% Costs PRL 20% PVA 15% PVV 30% Resale Price PRL 60% Not applicable Resale Price/Costs Product