With over 43 years of experience, CLM Controller has closely monitored the trends and challenges faced by Brazilian companies in international trade. One of the most critical and often overlooked aspects is software import non-compliance, which results in tax non-compliance due to the import of software and technological services. In this article, we explore the risks involved and how companies can protect themselves from potential penalties from the Federal Revenue Service (Receita Federal).

 

 

The Danger of Tax Non-Compliance in Software Imports

 

Many Brazilian companies are unaware of their tax obligations related to the import of services and software. The Federal Revenue Service requires the payment of taxes on these imports, and non-compliance can result in severe fines. The Annual Audit Report of the Federal Revenue Service for 2024 highlights the notification of taxpayers who have not declared or paid taxes on the import of services and software, with fines ranging from 20% to 300% of the amount owed, depending on the situation.

 

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The Reality of Service and Software Imports

 

Companies of all sizes frequently acquire foreign services such as cloud storage, management software, payment tools, among others. When these purchases are made without the proper issuance of invoices in Brazil, companies need to issue their own guides and pay the corresponding taxes. Otherwise, they risk accumulating significant debts and facing software import non-compliance issues.

 

Main Taxes on the Import of Services and Software

 

In Brazil, the import of services and software is subject to six main taxes:

 

  1. Withholding Income Tax (IRRF): Can reach up to 25% for payments to countries considered tax havens.
  2. CIDE-Remittances Abroad: 10% on payments related to the acquisition of technology and technical services.
  3. PIS-Import and COFINS-Import: 1.65% and 7.6%, respectively.
  4. Tax on Financial Operations (IOF): 0.38% on exchange operations and 4.38% via credit card.
  5. Tax on Services of Any Nature (ISSQN): 2% to 5%, depending on the municipality.

 

Self-Regulation Process to Avoid Non-Compliance

 

Initially, companies will be called to a self-regulation process, where they will have the opportunity to pay their debts before fines are applied. A deadline will be granted for payment, and the fine can be up to 20% of the amounts. This process offers companies a chance to correct their tax obligations without facing harsher penalties and helps prevent software import non-compliance.

 

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Rigorous Inspection in 2024 to Enforce Compliance

 

The Federal Revenue Service plans to intensify the inspection of CIDE-Remittances and PIS/COFINS-Import, especially in services, royalties, and technical or administrative assistance sent abroad. Companies that have not declared or collected these taxes in recent years are at risk of notification and possible fines due to software import non-compliance.

 

Review of Taxation Understanding on Software

 

Recently, the Federal Revenue Service of Brazil (RFB) published consultation solutions (nº 75 and 107) that expressed a new understanding of the taxation of remittances made abroad for software licensing payments. This review follows the decisions of the Supreme Federal Court (STF) in Direct Actions of Unconstitutionality (ADIs) nº 1.945 and nº 5.659 and Extraordinary Appeal (RE) nº 688.223, which determined that software licensing for tax purposes should be understood as services.

 

The RFB now understands that the payments in question are subject to:

 

Withholding Income Tax (IRRF): General rate of 15% (or 25% for payments to tax havens), as they are considered royalties.

 

Contributions for the Social Integration Program (PIS) and the Social Security Financing Contribution (COFINS): Joint rate of 9.25%, remunerating the “intellectual effort employed in the creation and maintenance of the software.”

 

Contribution of Intervention in the Economic Domain (CIDE): Rate of 10% for payment for technical services, “understood to occur when updating the version of the software itself, as long as it does not originate new licensing.”

 

The Importance of Tax Compliance in Software Imports

 

Lisandro Vieira, CEO of WTM International, highlights the importance of understanding and complying with tax obligations: “Thousands of companies in Brazil consume online services from foreign technology. The lack of knowledge about the taxes due can result in enormous debts over time.” Vieira, who also serves as a Board Member of the Brazilian Foreign Trade Association (AEB), emphasizes that tax compliance is crucial to avoid sanctions that could compromise the financial health of companies and prevent software import non-compliance.

 

Conclusion: Stay Compliant with CLM Controller’s Expertise

 

The import of foreign services and software can bring significant benefits to Brazilian companies, but it is essential to be aware of tax obligations to avoid fines and other penalties. CLM Controller is ready to help your company navigate this complex tax landscape, offering specialized support in accounting, tax, financial, and more. Stay compliant and protect your business from tax risks with the expertise of CLM Controller.

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