In a public ruling, the General Tax Coordination Office in Brazil (COSIT) found that a transaction labled as a “cost sharing agreement” between a foreign group and its Brazilian subsidiary, was in fact a mere agreement for provision of services.
COSIT pointed to the key characteristics of cost sharing agreements. These had been listed in a prior ruling from 2012:
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- Segregation of costs and risks inherent in the development, production or acquisition of goods, services or rights;
- Consistent contribution by each entity with expected and effectively-received benefits by each entity;
- Identification of the benefit to each participant entity;
- Mandatory reimbursement of costs incurred with no mark-up;
- Advantages offered to all participating group entities; and
- Payments for support activities whether such activities were actually used.