Brazil: Proposed COFINS regime for digital sector taxpayers
Brazil: Proposed COFINS regime for digital sector
A legislative proposal (Bill No. 131/2020) would introduce a separate COFINS* tax regime for legal entities in the digital economy sector.
*COFINS (contribuição para o financiamento da seguridade social) refers to a social contribution program for social security financing.
The proposal (COFINS-Digital) would, if enacted, affect companies that operate in the digital sector and would focus on the gross monthly revenue earned in relation to digital services from:
- Electronic communications and digital interface that allows interaction between users with regard to the delivery of goods or provision of services
- Marketing to advertisers or agents for placing targeted advertising messages on a digital interface based on user data
Under the proposal, the COFINS-Digital rate would be 10.6% on the revenues earned in relation to the subject activities. Companies in Brazil are already subject to COFINS tax; the proposed COFINS-Digital rate would represent an increase of three percentage points over the COFINS rate applicable in the non-cumulative PIS / COFINS regime. Revenues from activities not identified as taxable events (above) would continue to be taxed at the normal rate of COFINS (7.6%) on a non-cumulative basis.
COFINS-Digital taxpayers would be legal entities, regardless of the location of their establishment, that cumulatively recognize monthly revenue:
- Greater than U.S. $20 million (or the equivalent in another currency) for services provided worldwide (annualized at U.S. $240 million per year)
- Greater than R $ 6.5 million in Brazil (or R $ 78 million a year)
The bill is at present subject to legislative action and evaluation by the Senate Plenary. It will be submitted to all legislative processes before being approved and enacted.
Read a July 2020 report (Portuguese) prepared by the KPMG member firm in Brazil
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