Royalties taxation in Brazil is a relevant topic for companies that use or license intellectual property, technologies, brands and other rights.
These transactions are subject to several Brazilian tax rules that impact both companies paying and receiving royalties.
We highlighted the 5 main points:
1. Withholding Tax (IRRF) on Royalties Abroad: royalties paid to foreign entities are subject to IRRF, with a rate generally of 15%, but which may vary depending on the nature of the royalties and the existence of international double taxation treaties.
2. Contributions on Imports of Services: imports of services, including royalties, may be subject to Contribution to PIS/PASEP and Cofins, with combined rates of 9.25%.
3. Deductibility of Royalties Paid by Brazilian Companies: for Brazilian companies, royalties paid can be deducted as an operational expense in income tax calculations, as long as they are properly documented and respect market conditions to avoid questions from the tax authorities.
4. Taxation on Royalties Received: royalties received by Brazilian companies are considered operating income subject to income taxes (34%) and contributions to PIS/PASEP and Cofins (9,25%).
5. Importance of Tax Planning: The correct management of royalty taxation requires attention to the applicable tax rules. Companies that operate internationally must consider regulations in both countries, including transfer pricing rules, to optimize the tax burden and avoid double taxation.
Taxation on royalties is complex and requires detailed planning and an in-depth understanding of tax regulations, both nationally and internationally.
