Taxes on the Import and Export of Cloud Services in Brazil

Cloud computing had a relatively recent adoption in Brazil, but it has grown exponentially over the past few years with extensive investment and the introduction of new players. In this article we will explain how the taxation works for the import and export of cloud services in Brazil.

Cloud computing has become a major trend in the Brazilian IT sector over the past few years, displaying a large rate of adoption among businesses of all sizes. Popularization came due to the practicality and efficiency these services usually provide, charging relatively lower prices than the entire installation of IT infrastructures. The commercialization of such services in the country started in 2008, being widely adopted a few years later in accordance to the developments of this technology globally.

The Brazilian IT industry is the 7th largest in the world, with annual investment of USD 60 billion in 2014, of which 23% were represented by services. The cloud service market registered revenue of USD 14 billion in the same year. Although faced with great expectations, the market for cloud computing in Brazil still lacks proper regulation, since the definition of these technologies and services remain somewhat uncertain for regulatory agencies, raising many questions on how tax reports and other declarations should be treated. This also impacts the understanding of the taxation applied for such services, especially if they are imported or exported.

Taxation of Cloud Services

The main problem with taxation of cloud services in Brazil lies with the misinterpretation of the service functionalities. Since there is no physical product involved nor transportation between nations is required, some mistakes can be made on applying the legislation, concerning its contextualization on the existing one. For example, companies that provides cloud computing services to another country may not issue a Nota Fiscal, and submit the Siscoserv forms.

Receita Federal, the Brazilian Federal Revenue Service, specifies taxation on services offered by locals to organizations located outside Brazil, and on services received from other countries to be used by a local data center company. Taxes are applied to the revenue or the price paid for the service, although major adaptations on regulations and legal directives are still necessary to fully service this market.

Siscoserv

Siscoserv, or the Integrated System of Foreign Service Trade, was created in 2012, aiming to track all cross-border commerce of services and intangibles. The system is applicable to residents and institutions housed in Brazil, that perform commerce services with residents or institutions housed outside Brazil, including exports and imports.

In order to supervise such operations, Siscoserv demands completing a registration according to the type of operation, available on the system’s website. Siscoserv is composed of two modules: Venda, or sales, and Aquisição, or acquisition. Each one contains a specific service delivery mode, identified according to the location of the players involved, as listed below. Cloud services are included in modes 1, 2 and 4.

The sales module for Siscoserv contains the following modes:

• Mode 1 - Consumo Transfronteiriço, or Cross-border trade
• Mode 2 - Consumo no Brasil, or Consumption in Brazil
• Mode 3 - Presença Comercial no Exterior, or Commercial presence abroad
• Mode 4 - Movimento Temporário de Pessoas Físicas, or Temporary movement of individuals

The acquisition module contains the following modes:

• Mode 1 - Consumo Transfronteiriço, or Cross-border trade
• Mode 2 - Consumo no Exterior, or Consumption abroad
• Mode 4 - Movimento Temporário de Pessoas Físicas, or Temporary movement of individuals

The sales module specifies the registry for exports from Brazil. The module also covers operations performed through local distributors located outside the country, such as branch offices. The registries for this module are the following:

• RVS, Registro de Venda de Serviços or Registry for Service Sale
• RF, Registro de Faturamento or Registry of Total Sales
• RPC, Registro de Presença Comercial or Registry of Commercial Presence

The acquisition module specifies the registry for the import of the services. The registries are the following:

• RAS, Registro de Aquisição de Serviços or Registry for Service Acquisition
• RP, Registro de Pagamento or Registry of Payment

Cloud services are not specified as a service or intangible under the Siscoserv terms, since it involves, simultaneously, the delivery of a service and the supply of a product. In case of exports it must follow the procedures to complete the RVS and RF registries. For imports the RAS and RP registries must be completed. In order to access the Siscoserv system the company is required to have a digital certificate.

Import and Export of Cloud Services

Cloud services do not require registration with INPI, the National Institute of Industrial Property, for import to Brazil. This procedure is only applied in cases for trademark usage such as in branch offices, patent exploitation or technology supply.

Taxes are specific for different types of services as listed below:

Infrastructure as a Service - IaaS

Importation of IaaS includes the following taxes:

• IRRF - 15%, calculated on the revenue
• CIDE - 10%, calculated on the price payed for the service
• PIS/COFINS - 9,25%, on profits obtained in Brazil
• ISS - 5%, according to the service pricing
• IOF/Exchange - 0,38%

Exportation of IaaS from Brazil is not taxed, according to specific directives of the Brazilian Tax Legislation. However the income from the service delivery is taxed normally by IRPJ and CSLL, according to their calculation basis. The operation may be subjected to tax in the receiving country.

In case of services hired from a local distributor inside Brazil, the following taxes are applied:

• PIS/COFINS - 9,25%, on the service delivery price
• ISS - 5%

Software as a Service - SaaS

For the importation of SaaS the following taxes are applied:

• IRRF - 15%, calculated on the revenue
• PIS/COFINS - 9,25%
• ISS - depends on the service location. For example, the rate is 5% in the state of Rio de Janeiro and 2% in São Paulo
• IOF/Exchange - 0,38%

Exportation of SaaS is also not taxed, although IRPJ and CSLL are applied under the same conditions as stated above.

In case of domestic sales of SaaS, the following taxes are applied:

• PIS/COFINS - 9,25%
• ISS - the rate may vary according to the location