The growth of the digital economy is the result of
transformative processes brought about by information and
communication technology (ICT) and is changing business models.
This is very important from a tax perspective. Because of this,
the OECD issued BEPS Action 1, which deals with the tax
challenges of the digital economy.
In accordance with this report, the rapid technological
progress that has characterised the development of the ICT has
led to several emerging trends and potential developments that
may prove influential in the near future. It is necessary to
adapt the tax rules to the digital economy because the
development of new products, or means of delivering services,
creates uncertainties in relation to the proper
characterisation of the business.
As an example of a transformative process, the BEPS Action 1
Report quotes the advance in 3D printing that has the potential
to enable manufacturing close to the customer, with the direct
interaction with consumers impacting the design of product
features. Accordingly, if 3D printing continues to advance, the
Action 1 report exposes that it is conceivable that some
manufactures could eventually transition away from assembling
products themselves and could instead license plans and
specifications to third-party manufacturers or even retailers
who will 'print’ the products on demand, closer to
In this scenario, when a retailer has its own 3D printer and
sells a product that was 'manufactured’ by this
equipment, what is the tax treatment? Is the retailer a
manufacturer for tax purposes and, therefore, a taxpayer of
excise tax (IPI)?
In accordance with tax legislation, IPI is a federal tax
levied on the shipment of manufactured goods and its taxpayer
in any establishment that carries out any type manufacturing
process. For IPI purposes, this is defined as the operation
that modifies the nature (transformation), functioning,
finishing, presentation or purpose of a product or that
improves a product for consumption, such as its conversion,
improvement, assembly, packaging, repackaging or
Thus, to verify if the retailer may be considered as an IPI
taxpayer, it is necessary to analyse if 3D printing may be
construed as a manufacturing process.
On March 25 2019, the Brazilian Federal Revenue Service
(RFB) issued Tax Ruling 97/2019, analysing this issue. In
accordance with the ruling, a 3D printer is like a machine to
manufacture products, in which raw materials are transformed
into new products. Therefore, this process may be considered as
a "transformation", once it modifies the nature of the product,
creating a new one.
However, it is important to mention that tax legislation
provides some exceptions in which, even if there is a
transformation of products, this activity would not be
considered as a manufacturing process. As an example, item V of
Article 5 of the IPI Regulations (Decree 7212/2010) provides
that the making a product by direct order of the consumer or
user, in the home of the producer or in a small factory, is not
considered as a manufacturing process because the handwork is
preponderant. It should be noted that a "small factory" is
defined as an establishment that has up to five employees and
uses power (driving force) that does not exceed five
As a result, we understand that in the case of a retailer
that receives a licence from a third party allowing the 3D
printing of a new product, there is no preponderance of
handwork in this operation because the machine will manufacture
the product by itself, needing only raw materials, power and a
licence to manufacture the product.
In this sense, in accordance with the understanding of the
RFB, most of the retailers that sell products manufactured
within their establishment by a 3D printer will be considered
as IPI taxpayers.
This article was written by Carolina Romanini Miguel and
Sergio Villanova Vasconcelos from Machados Associados.