ICMS Convention No. 106/2017 (“Convention”), published on October 5 in the Official Gazette, establishes ICMS collection procedures for transactions involving digital goods and merchandise traded by means of electronic data transfer, and grants exemption from taxation on sales prior to those intended for the end consumer.

The Convention covers transactions concerning digital goods and merchandise such as software programs, electronic games, applications, electronic files and others, that are standardized, even if they have been or may be adjusted, and traded through electronic data transfer.

The ICMS will be collected on internal transactions and on imports made through a website or electronic platform that sells or makes available, even if through recurring payments, digital goods and merchandise through electronic transfer of data in the State in which the purchaser is domiciled or established.

In this case, the taxpayer will be the legal entity that owns the website or electronic platform that sells or makes available digital goods and merchandise, and must accordingly register in the states in which the internal sales or imports destined for the end consumer are performed. It is worth emphasizing that this registration may be waived in accordance with each Brazilian state.

The Convention also provides for the possibility of assigning the responsibility for collecting the tax to the following legal entities and individuals:

(i) the one who makes the offer, sale or delivery of the digital goods or merchandises to the consumer, by means of electronic data transfer, by way of an agreement executed with the seller;

(ii) the financial intermediary, including the credit card administrator or other means of payment regarding sales transactions;

(iii) the purchaser of the digital goods or merchandise, in the event that the taxpayer or the persons described in the preceding items are not registered in the state in which the internal sales or imports destined for the end consumer are performed;

(iv) the credit or debit card administrator or the financial intermediary responsible for the exchange, in the import transactions.