Brazil: Tax authorities issue guidance on the treatment of software as a service

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Brazil: Tax authorities issue guidance on the treatment of software as a service

intl-updates-small.jpg

The Brazilian tax authorities attempt to resolve the withholding tax treatment of payments in relation to software, which has been a controversial issue for several years.

Giacobbo
Conomy

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

more across site & shared bottom lb ros

More from across our site

Uncertainty isn’t always a bad thing, but it’s easy to see how the Trump administration’s IRS commissioner merry-go-round may serve to undermine business confidence
The EU defended its ‘sovereign right’ to impose the tax in the face of US tariff threats; in other news, the US deputy Treasury secretary resigned after just five months
Ascoria’s chief revenue officer shares her career wisdom garnered from the disparate worlds of tax technology, electric cables, radio DJing and more
Businesses no longer have a choice when it comes to tax technology transformation. Pavlo Boyko of TMF Group says the question is simply: sink or swim?
The firm is hunting for a senior TP manager in its quest to build a full-service practice in Indonesia, A&M Tax’s Jakarta head Jaap Zwaan tells ITR
With a new government in place, the evolving tax landscape presents both opportunities and challenges for taxpayers
Major economies have expressed concerns, with China arguing a US global minimum tax exemption would be a violation of the principle of fair competition – ITR understands
Senator Richard Colbeck told ITR he was concerned by the decision to let PwC Australia tender for government contracts again after a scandal-induced ban
Whether it be due to a fragmented advisory market or a rise in M&A, Italy’s frenetic hiring has not gone unnoticed by ITR’s Talent Tracker
The deal gives Azets 14 new partners and boosts its Swedish revenues to over $100 million; in other news, Svalner Atlas launched in Copenhagen
Gift this article