quinta-feira, 14 de março de 2019

People purchasing software via credit card also pay withholding tax

A reader asked me interesting questions about the taxation of software licenses sold to Brazilian individuals (end customers). 

He linked me to this article about problems foreign companies face to invoice Brazilian customers. 

The article is very good in laying down a practical business perspective of the problem. 

His questions to me was: "is there realy a withholding tax when you send a normal invoice or get a payment via credit card, made by an individual"?

Apparently, his accountants thought it was very odd that a country would limit its online sales in such way. 

Here is my answer: 

The withholding income tax works the same for companies and individuals, for the greater part. 

In short, withholding tax is due even when payments are made via credit card. However, there is little government oversight so most customers just don't bother to pay it. 

But, if you start selling to hundreds or thousands of customers in Brazil, the local bank, credit card company or payment gateway will probably start asking questions and will try to make you responsible for collectint the income tax. 

Also, you won't be able to sell to corporate clients in Brazil, who simply cannot dodge the taxation. 

The usual solutions are: 

a) sale of a master license to your distributor in Brazil, who will then resell it;
b) incorporate in Brazil"
You may find more information about this topic in this post:

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