Witholding Income Tax
The Coordenação Geral de Tributação – COSIT, Federal Revenue Service – RFB, issued the Discrepancy Solution no. 18, of March, 27th. 2017, changing the former Discrepancy Solution no. 27, of March 30th 2008, both on the Withholding Income Tax levy on international remittances in connection with software distribution and commercialization for final consumers.
Abstract: SOFTWARE COMMERCIALIZATION OR DISTRIBUTION LICENSE. REMITTANCE ABROAD IN CONSIDERATION. ROYALTIES. TAXATION.
Consideration remitted abroad in connection with software distribution and commercialization for final consumers who, in turn, receive a software use license, fall into the concept of royalties and are subject to a 15% (fifteen per cent) withholding Income Tax rate.
DISCREPANCY SOLUTION THAT OVERRULES THE DISCREPANCY SOLUTION NO. 27, OF MAY 30TH 2008.
In a nutshell, the new Discrepancy Solution has altered the Federal Revenue Service understanding in force up to that moment, stating that the Withholding Income Tax levies on remittances abroad in connection with commercial transactions that effectively transfer a software license property to a final consumer, recasting such transactions in order to fit them under the royalty concept. Taxpayers who have followed the previous Revenue Service ruling are subject to be challenged.