BR Supreme Court decides that ISS, not ICMS, is levied on the licensing and assignment of software.

The Brazilian Supreme Court (STF) concluded on Thursday (Feb. 18), the trial of Direct Unconstitutionality Action (ADI) # 1945 and # 5659, which deal with taxation of software and digital goods. The Court, by majority vote, decided for the levy of ISS (Service Tax), and not ICMS (Tax on Circulation of Goods and Services), on software licensing and assignment of rights of use.

In ADI 1945, from 1999, the then Brazilian Democratic Movement Party (PMDB) claimed that Law 7098/98, of the State of Mato Grosso, was unconstitutional. Now, more than 20 years after the ADI was filed, the STF has finally defined the merit of the issue, deciding for the levy of ISS.

In ADI 5659, from 2017, the National Confederation of Services (CNS) sought a declaration of unconstitutionality of provisions of the State of Minas Gerais, namely, Decree 46.877/15, article 5 of Law 6.763/75 and article 1, I and II, of Decree 43.080/02, as well as article 2 of Federal Supplementary Law 87/96, to exclude operations with computer programs - software - from the events of ICMS assessment. Following the same line of thought of ADI 1945, the STF decided for the levy of ISS on the aforementioned operations.

It's important to remind that the issue is still pending of decision from the STF in three other cases, ADI 5576/2016, which challenges rules of the State of São Paulo, ADI 5958/2018, challenging ICMS Agreement 106/2017, and RE 688223/2012 - PR, in which a cell phone company is challenging the levy of ISS on licensing agreements or assignment of the right to use custom-developed computer programs (tailor made software).

Notice: This article is informative and generic and does not constitute a legal opinion for any specific operation or business. For any additional information, please contact us at reginaldo@rastaxlaw.adv.br

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Credit: Wix Midia