The Federal Revenue Service of Brazil has issued guidance clarifying that payments for software licenses and the use of computer programs are subject to Withholding Income Tax (IRRF). According to Consultation Solution Cosit 75/2023, taxpayers who acquire or renew software licenses from residents or domiciled individuals abroad must remit IRRF at a rate of 15% on the amounts paid. According to the agency, this measure is provided for in Law No. 9,532 of 1997, which deals with the taxation of profits and income of legal entities.
It is worth noting that if the software license is acquired or renewed in a country with favorable taxation, the IRRF rate to be applied increases to 25%.
The rule also applies to “off-the-shelf” software, which is not customized to the buyer’s needs. For the Federal Revenue Service, the tax applies because payments are in the nature of royalties (remuneration for the right to exploit the intellectual property of the software), as the use of software constitutes a transfer of usage rights.
Therefore, taxpayers who acquire or renew these licenses from residents or domiciled individuals abroad must remit IRRF at the 15% rate, as established in the aforementioned regulation, to avoid penalties and ensure compliance with current tax regulations.