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CARF determines that licensing of software developed abroad constitutes import

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In trial conducted on October 27, 2021, the 1st Panel of the 2nd Chamber of the 3rd District of the Administrative Tax Appeals Board (“CARF”) delivered understanding as to consider the licensing / assignment of right of use of software developed outside Brazil as an import.

One of the consequences of the decision is the regime to be adopted by the taxpayer regarding the contribution to the Program of Social Integration (“PIS”) and Contribution to Social Security Financing (“COFINS”).

In the case of PIS and COFINS, which are contributions included in the tax burden of all Brazilian companies, there are two types: cumulative and noncumulative. When we refer to cumulative regime, it means that, in a production chain, such contributions have been paid in the previous operation and shall be payable again on the following stage, without possibility of abatement. In this regime, the rates are 0.65% for PIS and 3% for COFINS.

The noncumulative type allows for the abatement of sums already accrued in previous transactions. The rates are 1.65% for PIS and 7.6% for COFINS.

It is important to note that, in the case of software import, paragraph 2 of article 10 of Law no. 10.833/03 provides that the regime applicable to PIS and COFINS is of the noncumulative type.

In the case tried by CARF, the operation developed by the taxpayer consisted of the sale of a software key developed by Microsoft. In their defense, the taxpayer claimed the import of the program is not their responsibility, reason why PIS and COFINS were collected on the monthly figures of the revenues with the licensing/assignment of right of use of software under the cumulative regime, which has lower rates.

For this purpose, the taxpayer used Law no. 10.833/03 as legal basis, specifically item XXV of article 10, which establishes the cumulative regime of PIS and COFINS for computer services, among which is the licensing or assignment of right of use.

The taxpayer’s argument was based on the fact that, although the company Microsoft is based in the United States of America (“USA”), there was no proper software import. However, from the supervisions’ standpoint, the mere custody of the key does not impair the import operation, considering that for there to be access to such key, it is necessary to acquire the software, which would constitute import thereof (since it is developed abroad).

By the considerations of the Reporting Councilor, who used distinct legal bases that describe the concept of imported software, there would be no software import if the client downloaded from Microsoft’s platform.

Nonetheless, a divergence was raised by another councilor, who evoked the applicability of paragraph 2 of article 10 of Law no. 10.833/03, which addresses the PIS and COFINS regime applied to the imported software, regardless of how and why it was imported.

In this case, the majority of the councilors followed the divergence and, therefore, the understanding that the operation in question involved software import prevailed, being the noncumulative regime applicable to the collection of PIS and COFINS contribution.


Written by Camila Cabral, Tax Consultant at Drummond Advisors

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