Brazil: Rio de Janeiro adopts ICMS rules for digital goods

On 20 April 2020, the State of Rio de Janeiro enacted Law No. 8,795/2020, which incorporates ICMS Agreement No. 106/2017 regarding sales of digital goods into its local law and extends the responsibility for the payment of ICMS to financial intermediaries.

ICMS Agreement No. 106/2017

Brazil’s National Council of Treasury Policy (CONFAZ) enacted ICMS Agreement No. 106/2017 on 29 September 2017, to implement the procedures for collecting ICMS (state VAT) on local and import transactions involving digital goods sold via electronic data transfer, e.g., software, electronic games, applications, etc. regardless of whether the digital good is standardized or whether it has been or can be adapted.

ICMS is levied only on sales to final customers (consumers), and is payable to the state where the consumer is located.

The agreement also granted states the authority to assign the responsibility for the payment of the VAT to the following parties:

• The entity that makes the offer, sale or delivery of the digital good to the consumer under a contract signed with the seller or a communication service provider, if the entity also facilitates the related payment transaction;
• The financial intermediary, including a credit card or other payment administrator; or
• The acquirer of the digital good.

Currently, most of the states have incorporated ICMS Agreement No. 106/2017 into their local legislation, either by fully reproducing the text of the agreement or simply by adding an article to their law stating that the agreement is adopted. However, neither approach extends the tax payment responsibility to the parties mentioned above.

Source Credit – Deloitte

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