Brazilian tax authorities (“RFB”) changed their interpretation regarding the levy of PIS and COFINS-Import on international remittances for software licensing fees

The Brazilian tax authorities have modified their understanding regarding the levy of the Program of Social Integration Tax Import (“PIS-Import”) and Contribution for the Financing of Social Security Import (“COFINS-Import”) on international remittances for software licensing fees, through the COSIT Tax Ruling No 107, published on June 13, 2023. The ruling is based on the decision issued by the Federal Supreme Court (“STF”) in Direct Actions of Unconstitutionality (“ADI”) No 5,659/MG and No 1,945/MT, which determined the levy of the Service Tax (“ISS”) on software licensing operations, whether standardized (off-the-shelf) or custom-developed, regardless of the means of acquisition (download or physical support).

The Tax Ruling analyzed a question from a manufacturer of electro-electronic devices regarding the levy of the Withholding Income Tax (“WHT”), Contribution for Intervention in the Economic Domain (“CIDE”), and PIS and COFINS-Import on remittances abroad for payment of non-customized software licensing fees obtained through downloads, as well as for licensed software updates.

Regarding the WHT, the tax authorities presented the understanding previously expressed in the recent COSIT Tax Ruling No 75, published on March 31, 2023, according to which “amounts paid, credited, delivered, employed, or remitted to a resident or domiciled abroad, by the end-user, for the purpose of acquiring or renewing a software license, regardless of customization or the delivery method employed, qualify as royalties” subject to the general WHT of 15%, increased to 25% in the case of a recipient resident or domiciled in a tax-favored country. This classification also applies to the “acquisition” of software updates through a new license or extension of the original license period.

Based on STF precedents and on the provisions of Laws No 9.610/1998 (“Copyright Law”) and No 9.609/1998 (“Software Law”), the Brazilian tax authorities emphasized that the software is the result of human intellect, as developing software requires human involvement. Thus, they concluded that operations involving software can be considered as the provision of services.

The tax authorities also stated that the WHT levied on remittances abroad for onerous software maintenance services, including software version updates, provided that the update does not result in a new license or extension of the original license period, classifies as technical services and accordingly; subject to WHT at the rate of 15%. The rate is increased to 25% in case of a recipient resident or domiciled in a tax-favored country.

Regarding the CIDE, the tax authorities presented the already consolidated understanding that the contribution is not levied on the remuneration paid to a resident or domiciled abroad for software licensing, including the acquisition of software version updates through a new license or extension on the original license period ,unless it involves the transfer of corresponding technology. This understanding is based on the explicit provision of §1º-A, Article 2 of Law No 10.168/2000, which regulates the contribution. On the other hand, onerous software maintenance services, classified as technical services, are subject to a contribution at the rate of 10%, except in case where they result in a new licensing operation.

Regarding the PIS and COFINS-Import contributions, there has been a change in the understanding previously presented by the tax authorities, through the COSIT Tax Rulings No 303/2017 and No 71/2015, analyzed by the agency. These Tax Ruling had previously stated that international remittances for software license fees were not subject to the mentioned contributions due the following reasons:

  1. In the case of standardized software acquired through download, where there is no physical support, there would be no customs value to be taxed (as per COSIT Tax Ruling No 303/2017); and
  2. As royalties for a simple license to use software, the remittances did not constitute consideration paid for the provision of services (as per COSIT Tax Ruling No 71/2015).

It should be noted that, in addition to the two above-mentioned Tax Rulings, other Tax Rulings had also concluded that the PIS/COFINS- Import contributions are not levied on royalties derived from copyright related to software since it did not constitute consideration for services rendered (COSIT Tax Rulings No 2/2019, No 316/2017, No 262/2017, No 374/2017, No 448/2017, and DISIT Answer to Advance Tax Ruling Request No 1025/2017).

Based on precedents from the Federal Supreme Court (“STF”) and asserting that software licensing involves an obligation to perform corresponding to the licensor’s intellectual effort, the Brazilian tax authorities have now classified remittances for software licensing fees as remuneration for imported services, thus subject to the PIS/COFINS-importation contributions. The same classification was applied to maintenance, update, support, and training services related to the licensed software.

It is important to mention that The COSIT Tax Ruling No 107/2023 revokes all Tax Rulings previously issued on this matter.

Furthermore, concerning a change in interpretation unfavorable to taxpayers, the new interpretation applies only to taxable events occurring after the publication of the COSIT Tax Ruling in the official press, i.e., as of June 13, 2023.

There are arguments to question the understanding presented, considering the different legal natures attributed by the Brazilian tax authorities for the purpose of defining the incidence of WHT (under the classification of royalties) and PIS/COFINS-Import (under the classification of services), as well as the precedent of the STF and the provisions in the Software Law.

We recommend that companies review their operations involving software and assess the impacts of this new Tax Ruling. We are available to support you in assessing the impacts and analyzing alternatives, including legal questioning of the understanding of the Brazilian tax authorities.

Julia Silva e Lima



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