administrative or equity control, joint administrative or corporate control, as well as joint ventures fall under the definition of related parties Furthermore, the definition of related parties also includes relatives up to the third degree, spouse or common-law spouse of any officer, partner, or dired or indirect controlling shareholder of a company. Brazilian rules further include agents, distributors, or concessionaires when they work exclusively for a company. Moreover, the existence of any relationship with nonresident individuals, or gal entities with respect to purchase and sale operations performed during the calendar year, must be documented and reported annually in the corporate income tax return Besides related parties, Brazilian transfer pricing rules apply to transactions between individuals or legal entities resident or domiciled in Brazil with any individual or legal entity, whether related or unrelated, that resides or is domiciled in countries or territories with favored taxation these are locations that impose no taxation on income, or taxation at a rate of less than 20 percent, or with domestic legislation that allows secrecy about the legal entities capital composition or ownership Methods Even though the motivation behind Law 9. 430/96 was to promulgate Brazilian transfer price rules that would conform with those of Organization for Economic Cooperation and Development countries, in fact, Brazil has hybrid methods that are inspired partially by the oECD guidelines, but otherwise strongly look for a minimum and maximum profit margins, which conflicts with the arms-length principle Determining precise percentages within a limited number of applicable methods, the rules establish exact values of transfer prices to be However, Brazil's approach often results in one of the following e sometimes due to transactions characteristics there is no applicable method the concept of a range of applicable prices is strongly reduced(see elow Price Range) o increased danger of double taxation cases, since a market-based transfer price in an OECD-conforming country rarely will ensure the requested preset margins for the Brazilian company; and e if the real margins are not in accordance with the preset margins, it will lead to an income adjustment that will impose a tax that is not based on profit, but on patrimony, conflicting with constitutional principles of taxation. This problem may theoretically be passed over since margins can be changed, what actually is difficult to occur (see below Change of the Preset Profit Rates Brazilian rules may have been intended to simplify inspections by authorities, to reduce interpretative discussions, and to ensure minimum revenue. However, even if the inspection process is simplified for the tax authority, checking not-so-precise market prices, functions, and risks createsadministrative or equity control, joint administrative or corporate control, as well as joint ventures fall under the definition of related parties. Furthermore, the definition of related parties also includes relatives up to the third degree, spouse or common-law spouse of any officer, partner, or direct or indirect controlling shareholder of a company. Brazilian rules further include agents, distributors, or concessionaires when they work exclusively for a company. Moreover, the existence of any relationship with nonresident individuals, or legal entities with respect to purchase and sale operations performed during the calendar year, must be documented and reported annually in the corporate income tax return. Besides related parties, Brazilian transfer pricing rules apply to transactions between individuals or legal entities resident or domiciled in Brazil with any individual or legal entity, whether related or unrelated, that resides or is domiciled in countries or territories with favored taxation. These are locations that impose no taxation on income, or taxation at a rate of less than 20 percent, or with domestic legislation that allows secrecy about the legal entities' capital composition or ownership.4 Methods Even though the motivation5 behind Law 9.430/96 was to promulgate Brazilian transfer price rules that would conform with those of Organization for Economic Cooperation and Development countries, in fact, Brazil has hybrid methods that are inspired partially by the OECD guidelines, but otherwise strongly look for a minimum and maximum profit margins, which conflicts with the arm's-length principle. Determining precise percentages within a limited number of applicable methods, the rules establish exact values of transfer prices to be observed. However, Brazil's approach often results in one of the following: sometimes due to transactions characteristics there is no applicable method; the concept of a range of applicable prices is strongly reduced (see below Price Range); increased danger of double taxation cases, since a market-based transfer price in an OECD-conforming country rarely will ensure the requested preset margins for the Brazilian company; and if the real margins are not in accordance with the preset margins, it will lead to an income adjustment that will impose a tax that is not based on profit, but on patrimony, conflicting with constitutional principles of taxation. This problem may theoretically be passed over since margins can be changed, what actually is difficult to occur (see below Change of the Preset Profit Rates). Brazilian rules may have been intended to simplify inspections by tax authorities, to reduce interpretative discussions, and to ensure minimum revenue. However, even if the inspection process is simplified for the tax authority, checking not-so-precise market prices, functions, and risks creates