terça-feira, 30 de outubro de 2012
segunda-feira, 29 de outubro de 2012
THE BRAZILIAN LAW ON MONEY LAUNDERING AND THE PRECAUTIONS INVESTORS MUST TAKE WHEN INVESTING IN BRAZIL | Brazilian Law Blog
Here is another article that has been published at Alternative Latin Investor. You may download it here.
Adler Martins has teamed up with Alternative Latin Investor (ALI) to contribute to their cutting edge coverage of Latin America . ALI’s newest issue, August/ September 2012, takes a look at the retail sector in Latin America.
Click here to read Adler’s article “Software Importation by End Users in Brasil” in Alternative Latin Investor:
About Alternative Latin Investor: ALI is the first digital and print publication to offer highly coveted information and actionable analysis regarding alternative investments in Latin America. Topics include Wealth Advisory, Commodities, Forex, Private Equity, Wine, Art, Regulation, Philanthropy, Hedge Funds, Agribusiness, Renewable Energy, Emerging Markets and Real Estate.
For more information, contact – Tiffany Swenson – tiffany@
sexta-feira, 26 de outubro de 2012
Taxation of software importation by end users in Brazil
UPDATE: A lot has changed since this article has been published. Specially, the more widespread use of SAAS and simple licensing, instead of tailor made software.
Please read Reduction in the Brazilian taxation of imported services - if you are from the right country
I have published an article about that at Alternative Latin Investor, an excellent magazine.One of the questions I have been receiving a lot lately is how to sell/import software to Brazil.
I hope it helps you to understand at least part of the regulations. You will find a link to download the article at the end of the post.
_________________________________________________________________
As Brazil watches the growth and
professionalization of the retail industry, especially regarding big players
such as supermarket chains and drugstores, a second phenomenon can also be
noticed. The use of management, ERP, logistics and financial software is also
growing.
The reasons are many, but above all the
need for gains of scale and efficiency.
Brazil produces a good part of the
software consumed here. But the importation of computed programs or managerial
systems is also common. This article will describe how those imports are taxed
in Brazil. This article aims at the importation by the end users, and will not
detail taxation over distributor or master licensees.
1. IMPORTATION OF TAILOR MADE
SOFTWARE X OFF THE SHELF SOFTWARE
1.1
General
thoughts
In what comes to software importation, the
taxation will depend on the nature of the software. As in the rest of world,
software in Brazil can be classified either as an off the shelf program, that
is, a software which is not specifically designed for a customer’s requirements,
or as a custom made software, designed for a specific client, according to its
needs.
Off the shelf software is classified as
regular merchandise, and is subject to the same import taxes as any other
product: Import Tax, IPI (industrialized products tax), PIS Importação, COFINS
Importação and ICMS (state VAT). All duties shall be collected when the product
is cleared at the customs.
After some debate, nowadays both courts
and the Federal Revenue Service understand that off the shelf software shall be
treated as if medium and program were a single unit. This means the duties will be assessed over
the aggregate value of the software plus the value of its medium. That is, the price of the software and
the price of the DVD or pen drive which contains it.
The
treatment of off the shelf software as a regular merchandise is valid even for
software imported through download, without any material medium. This situation
stirred debate a few years ago, but is now pacified.
On the other hand, tailor made software
has been understood by Brazilin courts as a special kind of service. Thus, it
is taxed as services are. Instead of collecting Import Tax and IPI, it is taxed
by the Federal Income Tax. Instead of
paying State VAT, it is taxed by the City tax on services (ISSQN, or simply
ISS). Both social contributions (Pis-Importação and Cofins-Importação) are
still applicable. Finally, technical services are subject to a special
contribution called CIDE, which is very similar to the Income Tax.
Another difference is that taxes must be
collected when the payment is made to the service provider. There is no need
for customs clearance.
One should also notice that, if the
service provider (the software developer or seller) is located in a country
with which Brazil maintains a non double taxation agreement, the payment of the
income tax in Brazil may be eliminated. More on that later.
1.1.1 Actual taxation of off the shelf software.
Off the shelf programs shall be taxes as
any other commodity. As a general rule, this kind of product is classified
under subchapter 85.23 or 85.24 (media for recording) of the Harmonized System,
even if the importation is made via download, without the actual physical
media.
Since this article is too short to cover
the taxation in detail, it suffices to say that the final price in Brazil,
after applying all import duties, could easily reach about 1.85 to 1.93 times
the FOB price, considering importation through a hard medium.
If importation is made through download,
the lack of international freight, insurance and customs brokerage costs might
reduce this ratio to 1.80 times the FOB price.
1.1.2 Custom made
software
Tailor made software is regarded as a
special kind of service. Its taxation is outlined below:
IRRF (Income Tax)
|
15%*
|
CIDE
|
10%
|
PIS/Importação
|
1,65%**
|
Cofins/Importação
|
7,6%**
|
ISSQn (Service Tax)
|
5%***
|
IOF (Tax on the exchange of
foreign currency)
|
0,38%
|
*In
case of payments made to Tax Havens, taxation will be 25%.
**Both
Pis-Importação and Cofins-Importação are calculated over the software value,
plus the ISS, plus the value of PIS and Cofins themselves (calculation on the
inside). In consequence of this, the final value due is superior to the
percentage indicated here. The Brazilian Revenue service has published a
mathematical formula that defines the right way to calculate them.
***Service
tax varies according to each city. It may be anywhere between 2% and 5%.
After due calculation, taxes above will
amount to about 42% of the software value. That is, the final cost for the end
user would be about 1.42 times the original price.
Please notice that the purchase of
software developed in Brazil are subject to a taxation of about 8% (factor of 1.08
the original price). This reflects the Brazilian policy of favoring foreign
direct investment instead of importation.
It is important to highlight that, if the
custom made software is imported through a physical medium, such as a CD, then
it must be subject to clearance at the customs. Also, the physical medium will
be subject to import duties, calculated solely on the value of such medium
(e.g. a 2 dollar CD-ROM).
Although the taxation of the physical
medium is neglectable, the procedures to obtain clearance are troublesome and
demand specialized help. Therefore, the use of download is recommended.
If the end user gets access to the source
code, and not only acquire a license to use the software, the operation may be
considered as transference of technology that must be filed before the
Brazilian Institute of Intellectual Property (INPI).
Federal courts have recently decided that payments remitted abroad for
the payment of services rendered by foreigners shall be exempted from Income
Tax, as long as the supplier is located in a country that keeps tax treaties
with Brazil, and provided that the foreign supplier does not keep any permanent
business establishment in Brazil.
Unfortunately, the Federal Revenue Service has not updated its policies
to reflect the Federal rulings. This means that, more often than not, the
importer will have to collect the Income Tax and request a refund later, either
before the Revenue Service or before a Federal Court.
In spite of the trouble, the economy of 15% usually makes it worthwhile pursuing
the lawsuit.
----------------------------------------------------------------------------------------------------------------------
Adler Martins has teamed up with Alternative Latin Investor (ALI) to contribute to their cutting edge coverage of Latin America . ALI’s newest issue, August/ September 2012, takes a look at the retail sector in Latin America.
Click here to read Adler’s article “Software Importation by End Users in Brasil” in Alternative Latin Investor:
About Alternative Latin Investor: ALI is the first digital and print publication to offer highly coveted information and actionable analysis regarding alternative investments in Latin America. Topics include Wealth Advisory, Commodities, Forex, Private Equity, Wine, Art, Regulation, Philanthropy, Hedge Funds, Agribusiness, Renewable Energy, Emerging Markets and Real Estate.
For more information, contact – Tiffany Swenson – tiffany@
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