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Brazil: Computer software included in the concept of copyrights for the purposes of the double tax convention between Brazil and Finland


Michela Chin

Ruben Gottberg

The Brazilian Federal Revenue (RFB) has issued tax ruling COSIT n. 4/2016, allowing the application of a 10% withholding tax (WHT) rate on payments for the use of computer software as provided by the double tax treaty (DTT) between Brazil and Finland.

By way of background, under the DTTs Brazil has in place with both Finland and France, taxation on royalties at source is limited as follows:

  • 10% on the royalties which refer to copyright;

  • 25% on royalties which refer to industry and commercial trademark use; and

  • 15% on royalties that do not qualify as either (a) or (b).

Although the provisions contained in both DTTs are similar, the RFB has expressed different positions in the past. Under tax ruling n. 52/2007, the RFB determined that payments for the use of computer software were subject to 15% WHT (as provided by the DTT between Brazil and Finland) whereas under tax ruling n. 262/2003, the position was that such payments were subject to 10% WHT (as provided by the DTT between Brazil and France).

Now, tax ruling COSIT n. 4/2016, issued on May 13 2016, solves the divergence by clarifying that licenses for computer software should be included in the concept of copyright licenses and that a 10% WHT rate should apply on payments for the use of computer software under the DTT between Brazil and Finland.

Brazilian tax authorities release a public consultation on the understanding of significant economic activities

The Brazilian tax authorities (RFB) have released Public Consultation n. 007/2016 expressing their initial understanding on what should be viewed as "significant economic activities" for the purpose of article 2 of Normative Instruction n. 1,037/2010.

The Normative Instruction provides a list of low-tax and privileged tax regime jurisdictions from a Brazilian tax perspective.

As per the content of the Consultation, released on May 30 2016, holding companies with significant economic activity should be those having, in its domicile, operational capacity to manage the group. That is, the holding company should have the ability to decide how to manage its assets and investments. Operational capacity should be tested by the existence of a fixed place (i.e. physical place of business) as well as having qualified employees to effectively manage the group.

According to the consultation, Brazilian taxpayers had until June 10 2016 to provide comments on this subject before the enactment of the Normative Instruction by the RFB.

Multinationals are encouraged to monitor the progress of this consultation and to analyse how this will impact their specific structures.

Michela Chin ( and Ruben Gottberg (



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