The RFB published Solução
de Consulta 6,014/2018 (dated August 17 2018) on
September 12 2018, confirming their position that withholding
tax should not apply on payments abroad in relation to
off-the-shelf software that is acquired for personal use and
does not relate to the commercialisation for third parties (SC
By way of background, SC 6,014/2018 is linked to a series of
recent decisions concerning the treatment of payments made
abroad to distribute and commercialise off-the-shelf software.
This includes Declaratory Interpretative Act 7/2017,
Solução de Divergência 18/2017 and
Solução de Consulta 154/2016, which
confirm the application of withholding tax in situations where
payments abroad relate to the right to distribute or
commercialise software. See previous article at: http://www.internationaltaxreview.com/Article/3784107/Brazil-Withholding-tax-rules-on-license-to-distribute-or-commercialise-software.html.
In the particular case in Solução de
Consulta 6,014/2018, the off-the-shelf software acquired
via a download from the internet was to be used for the
taxpayer’s own use – more specifically,
for students to have contact with educational instruments in a
foreign language, and not relating to commercialisation or
passing the software to third parties. It was not produced
specifically for the particular educational facility but rather
for any educational facility in the world.
While the manner in which the request by the taxpayer was
presented created some administrative difficulties, the
Brazilian tax authorities ultimately decided to review and
decide on the question posed. It concluded that payments,
credits or remittances to a non-resident in consideration for
off-the-shelf software for personal use should not be
classified within the concept of royalty and therefore subject
to income withholding tax.
The decision distinguished the treatment between three types
of contracts related to rights over computer programs,
- Contracts for the license to use programs in Brazil;
- Contracts for the license of the right to commercialise
programs originated abroad; and
- Contracts for the transfer of technology (generally
considered transfer of the 'source code’).
In the present case, SC 6,014 considered that the payment
for off-the-shelf software for exclusive own use and not for
commercialisation, should not be classified as remuneration for
ownership rights (royalties) and therefore should not be
subject to withholding tax. Further, the decision confirmed
that the incidence of withholding tax does not depend on the
media in which the off-the-shelf software is provided and
licensed (i.e. discs, tapes, downloads, etc.).
While a Solução de Consulta does not
represent law or a legal precedent, it does provide further
support and guidance for Brazilian entities in relation to how
the RFB are treating such arrangements.
Fernando Giacobbo (firstname.lastname@example.org)
and Mark Conomy (email@example.com)