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

Jennifer Best was most recently the acting commissioner of the IRS’s large business and international division
Section 899’s exclusion from the One Big Beautiful Bill does not mean it has been nipped in the bud, Aruna Kalyanam also tells ITR
Thanks to operational slickness and sheer force of will, A&M Tax will continue hoovering up talent across the globe
Setu Kamal became the first practising barrister to be added to the UK’s tax avoidance promoter list; in other news, UHY expanded its network in Canada
US President Donald Trump’s tariffs may get thrown out by courts in the future and taxpayers should already be planning for that possibility, BDO’s Dustin Stamper tells ITR
Awards
ITR is delighted to reveal the first shortlisted nominees for the Middle East Tax Awards
The firm has appointed Deloitte’s former tax leader for Thailand to lead the new operation, which builds on considerable Asian investment in recent months
The Donald Trump administration could use legislation from 1930 if the Supreme Court blocks its tariffs; in other news, China has updated its VAT refund procedures
Braun gives ITR an exclusive insight into WTS Digital’s UK launch of its AI product, which can free up more than 1,500 hours per month by reducing routine tasks
Long tells ITR about her varied role, why curiosity is a key characteristic for the tax professional, and what she’d be doing if she wasn’t working in tax
Gift this article