Import taxes on professional services for implemantation of computer software for businesses.
Our company (iTi) sells a software solution framework called Ekho. It is widely used in Pulp & Paper, Mining & Metals, Oil & Gas, Food & Beverage, Chemicals, and in Renewable Energy (Wind, Solar, Biofuels). The software is used to address a wide range of functions in operations, including Production, Downtime, Quality, Maintenance, Health & Safety, Energy Management, etc. The key benefit of the software lies in our ability to:
- to extract real time data from the Operations
- to analyze this data and prepare Performance Analytics – generating Key Performance Indicators (KPI’s), and statistics for Overall Equipment Effectiveness (OEE), and
- providing information to support real time decision making.
The Ekho software is not only an integrated functional solution for Operations, but it provides a platform for generating Operational Intelligence, which can be used in performance improvement and/or continuous improvement initiatives. For more details, please see http://www.inexcontech.com.
Implementation of the software involves agreements for three different components:
- Software licenses – sale of a perpetual license for use of the software (the intellectual property) by the customer.
- Implementation Services – delivery of professional services for Project Management, Software Installation and Configuration, Training, and Implementation Support.
- Continuing Support – providing ongoing services for software support, including bug fixing, operating a help desk, and providing upgrades to the software over time.
It is anticipated that the Implementation and Support Services will initially be provided by iTi, from our offices in Canada or the USA, but over time, these skills will be developed within a local partner company in Brazil.
So the bottom line questions are
- What are the import taxes payable on the above components relating to our intellectual property?
- What are the best ways to minimize taxation on the importing of these items?
- What are the best ways to minimize taxation on these items over time, by cooperating with a Brazilian partner?
It’s relatively extensive questions you have here and it will usually some level of custom consulting in order to find the optimal solution, however I will try to answer your questions as general as possible for a professional service company.
Import of intellectual property
The topic of importing intellectual property to Brazil is something I covered in my article “Cost of Importing Services to Brazil”. The basic taxation logic is the same for services and other non-physical properties.
How to minimize taxes in Brazil something that better people than myself have tried to answer on thousands of pages. The simple answer is:
- Establish a subsidiary in Brazil
- Make sure that the mother company of the subsidiary is based in a country that have Double Tax Treaties with Brazil
- Pay sales and corporate taxes in Brazil as a Brazilian entity and pay out dividend to the foreign mother company.
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