Understanding the modulation of effects of the decision on software taxation, defined by the STF.

By majority vote, the Brazilian Supreme Court (STF) decided on Wednesday (Feb. 24th) that the decision that ruled out the ICMS assessment on the licensing or assignment of the right to use computer programs (software) will be effective, in general, as from the publication of the judgment minutes of the Direct Actions of Unconstitutionality (ADIs) 1945 and 5659.

According to the Supreme Court's understanding, the tax levied on these operations is ISS (Service Tax), not ICMS (taxation on goods). See in the following paragraphs below the possible solutions and their effects, depending on the situation of each taxpayer.

Possible taxpayer situations and the practical effects of modulation

1) Taxpayers who paid only the ICMS: they are not entitled to the refund of the amounts, and the municipality cannot collect the ISS, under penalty of double taxation.

2) Taxpayers who collected only the ISS: they must confirm the validity of the payment, and the state cannot collect the ICMS.

3) Taxpayers who have not collected any of the taxes up to the day before the publication of the minutes of the judgment: in this case, only the ISS can be collected by the municipalities.

4) Taxpayers who have paid both taxes: they may file a lawsuit for recovery of undue payment of the ICMS, under penalty of unjust enrichment of the state.

5) Lawsuits pending judgment by taxpayers against states or municipalities: the decision should follow the STF guidance, i.e. levy only the ISS.

6) Lawsuits pending judgment brought by states or municipalities against taxpayers: the decision must follow the STF guidance, that is, ISS only.

Administrative proceedings (Tax Assessment Notices)

Special attention should be paid to administrative proceedings (infraction notices). Not all state and municipal laws dealing with administrative proceedings provide for the automatic application of court decisions in Direct Actions of Unconstitutionality. Some may condition the decision to the removal of the rule deemed unconstitutional from the legal system.

In the above case, it is recommended that the taxpayer expresses its opinion in the respective administrative proceedings and, even so, if an unfavorable decision is reached, the taxpayer must file a lawsuit based on the STF's decision in ADIs 1945 and 5659.

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

Total or partial reproduction is allowed provided the source is cited.

Credit: Wix Media