Taxation of Services Contracted Abroad


With advancements in communication technology and the ease of establishing cross-border relationships, it is increasingly common for companies and even individuals to contract services from providers located abroad. The main reason for this is the easy access to specialized expertise and potential cost savings. However, this practice brings with it a series of tax implications that deserve special attention. Below, we clarify the main tax aspects related to contracting services abroad.

Service Tax (ISS)

Firstly, it is essential to understand that the Service Tax (ISS) is a municipal tax. This means it is governed by the specific legislation of each Brazilian municipality. Generally, ISS is due at the location of the service provider’s establishment. However, in the case of services originating from abroad or whose provision started outside Brazil, the tax is due at the location of the service recipient’s establishment in Brazil. Typical rates range between 2% and 5%.

Withholding Income Tax (IRRF)

The Withholding Income Tax (IRRF) is another relevant tax in this discussion. When a company or individual in Brazil contracts a service from a foreign supplier, the payment for this service is usually subject to income tax withholding. The rate may vary depending on the nature of the service provided and any international agreements that may exist between Brazil and the service provider’s country of domicile.

Typically, the standard rate is 15%, but it can reach up to 25% for countries with favored taxation or tax havens.

PIS and COFINS on Imports

On the remittance of payments abroad for contracted services, federal social contributions such as PIS/PASEP and COFINS are also levied. These contributions are calculated based on the amount paid to the foreign service provider, and the rates may vary according to the type of service.

  • PIS/PASEP: The PIS rate is 1.65% on the payment.
  • COFINS: The general COFINS rate is 7.6% on the amount paid to the foreign supplier.

These contributions are applied under the cumulative payment regime when it comes to remittances abroad for service payments.


In the specific case of services involving the payment of royalties or technology, the Economic Domain Intervention Contribution (CIDE) may also be applicable. This contribution is intended to encourage Brazilian technological and scientific development and is charged on the remuneration sent abroad in exchange for licenses to use or distribute software rights, for example.

The CIDE rate on remittances abroad for royalties or technology is 10%.


Contracting services from abroad requires not only an understanding of these tax obligations but also particular attention to the necessary documentation to prove the transaction and comply with the respective tax obligations.


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