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| Fernando Giacobbo |
Mark Conomy |
On March 29 2017, the Brazilian tax authorities (RFB)
published Solução de Consulta 191/2017 (SC
191/2017) (dated March 23 2017), confirming that withholding
tax and Contribuição sobre
Intervenção no Domínio
Econômico (CIDE) should apply on payments made in
relation to importations of software as a service (SaaS) from
abroad.
The tax treatment of payments in relation to software has
been a controversial issue over the years. Common issues
include whether the software should be considered as an
off-the-shelf product versus a customised technical service
versus a royalty type license to use. Depending on the nature
of the payments, the tax consequences can differ substantially,
reinforcing the need for careful analysis and definition of
what is being imported.
In the particular circumstances contemplated by SC 191/2017,
the company making the importation of the SaaS was involved in
the commercialisation of access/usage authorisations acquired
from abroad for resale to users/clients in Brazil. The SaaS
could be accessed by users from any computer/mobile device
using a password. Authorisation for access occurred remotely
via the internet where the users could access a databank in the
'cloud' rather than a determined location. The access
authorisations contemplated two elements:
- Network protection against viruses, spam
and other threats; and
- Access to online conferences, meetings,
training and internet projects and information for real time
sharing.
It was highlighted that while offered to clients on a broad
basis, the SaaS was not a product made to order or a
multiple-copy software that should be considered an
off-the-shelf product. The RFB also clarified that in the
present case, the SaaS being imported was a licence to use for
resale as opposed to a license to commercialise/distribute.
The RFB examined the elements of what was being imported,
concluding that the monthly payment for the SaaS was in
consideration for diverse services similar to a package of
utilities. When determining whether the SaaS should be
considered a technical service, the RFB relied on the concept
of a technical service set out in Normative Instruction
1,455/2014 which included activities rendered through automated
structures with clear technological content within the relevant
definition.
Pursuant to SC 191/2017, the RFB concluded that withholding
tax and CIDE should be levied at source on amounts paid,
credited, delivered, employed or remitted abroad as
compensation for the SaaS, which they considered as technical
services, depending on specialised knowledge in computer
science and coming from automated structures with clear
technological content.
By way of background, a Solução de
Consulta is a formal response by the RFB to consultation
made by a taxpayer and although this document does not
represent legal precedent, it does provide further support and
guidance for Brazilian entities in relation to how the RFB are
treating such arrangements from a transactional tax.
Fernando Giacobbo (fernando.giacobbo@pwc.com)
and Mark Conomy (mark.conomy@pwc.com)
PwC
Tel: +55 11 3674-2582 and +55 11 3674-2519
Website: www.pwc.com.br