Transactions with software are deemed as services and will be taxed by the municipal service tax
On February 24, 2020, the Brazilian Federal Supreme Court (STF) delivered a final decision related to the taxation of software in Brazil, defining that the transactions with software are deemed as services and therefore shall be taxed by the municipal service tax (ISS), with rates that vary from 2% to 5%.
This judgment puts an end to a long discussion started in 1999, when Direct Action of Unconstitutionality (ADI 1945) was filed against a law of the state of Mato Grosso that established the levy of the state-VAT (ICMS) on the download of software. Another Direct Action of Unconstitutionality (ADI 5965) also challenged a similar matter, but related to the state of Minas Gerais, and was judged together with ADI 1945 by the STF.