A discussion that was dormant for many years resurfaced recently with the publication in erasing the 2015 lights, the ICMS 181 of CONFAZ (National Council for Financial Policy), which guides the collection of VAT by the State Farms in commercial operations of standardized software, with a tax rate of 5%.
The Law No. 9609 of 1998, known as the Free Software Law defines software as the expression of an organized set of instructions to make equipment work mode and for certain purposes. There is this standard no qualification that can distinguish the software for tax effect Supplementary Law No. 116 of 2003 – through 1:05 code the list of services – establishes the collection of ISS (Service Tax) on the assignment and licensing operations software. Thus, the requirement of the ICMS (Tax on Goods and Services), as proposed in the Covenant 181 of CONFAZ, would set double taxation, act ruled unconstitutional in Brazil.
Perhaps the adverse economic situation, the need search of additional revenue, has caused the State Finance have decided to advance the ICMS collection in some operations with software, creating a distinction between “standard software” and “non-standard” in order to assign the first to mandatory collection of ICMS. The fact is that the CONFAZ not competent to define the incidence of this tax on a good and / or service, superimposing a federal law, in this case the Supplementary Law No. 116
Since 1992, ie even before of the Software Law (Law 9609 of 1998), and Complementary Law 116 (2003), the State of São Paulo, for example, charged VAT in transactions involving software only on the value of the carrier medium (CD, DVD, Blu-ray , manuals, etc.), recognizing that he had no jurisdiction to levy on the total value of the software.
In September 2015, Decree 61 522 repealed the law and the State of São Paulo wanted to start charging VAT with the rate of 18% on the total value of sales transactions of “standardized software.”
Now in January, the government of São Paulo has published a specific Decree adopting the foundations of the Covenant 181 of CONFAZ, excluding ICMS billing software purchased via electronic transfer “until it is defined the place of occurrence of the fact generated to determine the establishment liable to pay the tax,” according to the text. Thus, only the operations accompanied by physical means software will charge 5% in the state territory.
Supplementary Law No. 116 provides that, although the software is accompanied by physical means, it should not be subject ICMS. So even the payment of this tax charged by the State of São Paulo until the end of last year – as having reserve base the electronic format – was not provided for by Federal law. Still, some software companies established in the State chose to collect sales tax because it is a low tax, although also recolhessem the ISS on the total value of the transaction, suffering therefore double taxation on part of the value.
This was another drama of the chapter that the industry has faced in the harsh Brazilian tax environment. Despite being one of the sectors recognized for its ability to boost the economy, the Information Technology sector saw last year, come into force on payroll reoneração, the revocation of the benefits of the Good Law which can bring back informality to the segment, among other measures that have reached their performance
Businesses who choose to pay the two taxes not incur municipal or state assessment. – because there is no news that any municipality cease to charge ISS – probably will transfer this tax increase to prices and, in the end, the negative impact of these successive measures will directly reflect in the whole society, which relies on technology as a transformation agent and as a tool to leverage business in all sectors of economy.
* Jorge Sukarie is president of Abes (Brazilian Association of Software Companies) and a founding partner of Brasoftware.
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