On 1 April 2019, the Brazilian Federal Revenue ("RFB") issued Conflict Resolution Ruling No. 02/2019, stating that the values paid abroad as royalties related to software are not characterized as remuneration for services and are not therefore subject to PIS/COFINS-Import.

As a general rule, services paid abroad are subject to PIS/COFINS-Import in Brazil. In this light, RFB considered whether the values designated as being paid for licenses to use software should be classified as a payment for services or not.

According to the RFB, computer programs are considered as intellectual property protected by the copyright law (Article 7, XII, of Law 9,610/1998). However, income derived from the economic exploitation of copyrights is classified as "royalties" and not as service remuneration, in line with Section 22, "d", of Law 4,506/1964.

In this sense, the amounts paid as royalties for a simple license for use and distribution of software — when there is no provision of services linked to such a license — are not subject to PIS/COFINS-Import.

Nevertheless, RFB highlighted that where any service is rendered in connection with such licensing, and the amount owed in respect of this service is clearly indicated in the underlying contracts, then PIS/COFINS-Import will only be levied on that amount.

On the other hand, if the document that supports the operation is not sufficiently clear to distinguish between what represents payment for the service and what constitutes the royalties payment, the total value of the remittances would be considered as being related to the service, and thus subject to taxation.