What are importers of services?
Importers of services are legal entities or individuals who purchase/contract a certain service, the provision of which is carried out by companies or professionals located abroad (resident or domiciled) and the result of which takes place on national territory.
Generally, the search for such services stems from the need for expertise or technical specificities not found on national soil. With the consolidation of digital platforms, the import of services is growing rapidly.
The services commonly imported are related to software and technology development, digital services and marketing, consultancy, technical advice, among others.
Tax regimes currently applied to these professionals
Currently, companies importing services can opt for 3 tax regimes: Simples Nacional, Lucro Presumido or Lucro Real.
For each tax regime there is a specific tax burden. Below is a structured summary. Check it out!
[1] Sub-limit of R$3,600,000.00 created for ISS.
[2] It is worth mentioning that, in order to calculate the tax due for the month, the taxpayer calculates the effective rate (gross revenue accrued in the last 12 months (x) rate provided for in Annex II (-) portion to be deducted (/) gross revenue accrued in the last 12 months). Furthermore, if the ratio between payroll and gross revenue in Simples Nacional is less than 28%, Annex V will apply, which imposes higher taxation, with rates varying between 15.50% and 30.50%, according to the bands described (R Factor).
[3] It is important to note that some services can use the reduced rates, based on the exceptions provided for by law/instruction (for example: Normative Instruction No. 1700 of 2017).
[4] Levied on the portion of profits that exceeds an annual amount of R$240,000.00 (equivalent to R$20,000.00 per month).
[5] Activities related to trade in services.
It is also worth clarifying that, in the event of the import of technology and IT services, for example, remittances abroad for payment are subject to taxation.
Below, by way of example, is a differentiation between some services in the technology sector:
Another point to be highlighted concerns technology research and development activities, which have some tax incentives, such as those related to the Lei do Bem (Law No. 11.196/2005), providing a better improvement of the technologies used on Brazilian soil.
Impact of the Tax Reform on the services sector
The unification of taxes and the simplification of the tax collection system are positive steps.
In addition, the tax reform seeks to create less distortion in the economic effects of the production chain by adopting the Value Added Tax (VAT) system, i.e. taxpayers will have the full right to use credits and taxation at destination.
The adoption of Value Added Tax (VAT) allows companies to benefit from the right to a tax credit for all the taxes (IBS and CBS) levied in the previous chain, with the right to offset these amounts against the taxes (IBS and CBS) levied on the provision of services.
Complementary Bill No. 68/2024
The first bill to regulate the Tax Reform was approved by the Chamber of Deputies and now goes to the Federal Senate for consideration and presidential sanction.
PLP 68/2024 is responsible for instituting the Tax on Goods and Services – IBS, the Social Contribution on Goods and Services – CBS and the Selective Tax – IS. The approved basic text included an estimated 26.5% cap on the rate of the future Value Added Tax (VAT).
The proposal states that an assessment will be made in 2031 to check whether the sum of the CBS and IBS rates, which will come into full effect in 2033, will result in a figure higher than 26.5%. In the event that the figure is higher than estimated, a new bill will have to be sent by the Executive Branch, in conjunction with the Management Committee, in order to propose a reduction in benefits for sectors or products.
What will change with the approval of the Tax Reform?
Taxation will take place through the application of a maximum rate estimated at 26.5% on company revenue. It is therefore undeniable that the service sector will suffer a real increase in the tax burden.
However, unlike some segments of the service sector, importers have not been granted any of the reductions provided for in the text approved by the Chamber of Deputies, through the “Differentiated Taxation Regimes”.
The only reduction approved was a 60% reduction in tax rates for goods and services related to information security and cyber security.
Although this reduction is not directly linked to imported services, the innovation allows the services contracted to protect software, networks or sensitive/secure data, in accordance with the regulatory rules implemented in business activities, to be reduced, which can directly influence the costs paid by companies operating in this sector.
In addition, the approved text establishes that IBS and CBS will be levied on service imports by individuals or companies, regardless of the purpose of the import.
Thus, when a Brazilian company contracts a service or acquires a right from a foreign company, it is only importing these “service or right” quantities. However, not all of the service or right is consumed in Brazil.
In view of this, the supplementary bill provides that only the part actually used in Brazilian territory will be considered an import and therefore subject to the rules and taxes applicable to imports. Here is an example table:
The above examples demonstrate how the taxation of importers of services applies in a specific way to the different parts of a service contracted from abroad, since only the stages that are consumed in Brazil will be considered as imports, which highlights the importance of assessing where each part of the service is actually used.
With regard to the IBS and CBS rates applicable to the import of intangible goods (including rights), these will be equivalent to the rates applied to the supply of the same goods or rights within the country. This equivalence respects the specific rules governing the setting of rates for imports subject to differentiated tax regimes.
In this sense, only the part of the service or intangible good actually consumed in Brazilian territory will be considered for the respective taxes. The main aim of this approach is to ensure that the tax burden is proportional, as well as that the rates are equivalent to those practiced in the domestic market.
In general terms, the segment will be impacted by a possible increase in the tax burden, given the lack of reductions approved in the text, which in itself already demonstrates its projected increase.
The table below summarizes the main changes brought about by the tax reform compared to the current system:
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