The Brazilian Federal Constitution provides in article 150(VI)(d), that no taxes are to be imposed on books, newspapers, periodicals and paper used for print. This clause aims to provide additional freedom of expression and to facilitate access to education by Brazilians.
Brazil’s Federal Supreme Court (Supremo Tribunal Federal, “STF”) ruled in March 2017 that taxes (i.e. impostos, which does not include contribuições) cannot be levied on any book format, whether the book is in physical or electronic form and that the same principle is applicable to reading devices, even if they may be equipped with ancillary features other than being simply an electronic book reader. This immunity was also found to apply to parts or electronic components distributed with the books that are designed exclusively as teaching materials.
Additionally, photography paper, handouts, sticker albums, telephone directories and any other related materials and components which become part of the final product were found to be within the scope of the constitutional tax immunity. However, the immunity was found not to apply to paper used solely for advertisements and inputs that are not part of the final product.
The immunity applies only on taxes levied to the product itself – for instance ICMS (tax over the movements of goods and services), import tax and IPI (tax over industrialised products) – contributions, duties and related fees fall outside of the scope of the immunity. Therefore, there is no immunity for company taxes nor the overall revenue of the company that publishes books. On 21 November 2017 the Brazilian Federal Revenue Department (Receita Federal do Brasil, “RFB”) reiterated these views in Private Ruling 519/2017 (“SC 519/2017”), where it found that the tax immunity applies to the goods referred in article 150(VI)(d) of the Brazilian Constitution, but it does not apply to companies which explore economical activities related to those goods.
Furthermore, the RFB recently published Private Ruling 393/2017 (“SC 393/2017”) to clarify that two Federal social contributions (PIS-Import and Cofins-Import) set at 0% only applies to the importation of goods set out in article 2 of Law 10,753/2003. The list of the goods is to be interpreted strictly to the following goods and works:
• physical books;
• publications of any nature that represent a book;
• printed materials related to a book;
• reading scripts for control and study of literature or textbooks;
• drawing or colouring books;
• geographical, historical, anatomical atlas and maps;
• texts as part of books or originals, produced by publishers via a publishing agreement with the author, to be used in any type of media or print;
• virtual, magnetics or optical books for exclusively use by people with visual disabilities; and
• books in Braille.
However, in relation to e-books the RFB held that PIS-Import and Cofins-Import’s 0% rate will only apply to those imported specifically for people with impaired vision. Hence, imported electronic books for people without disabilities will give rise to a liability of PIS-Import and Cofins-Import rate of 2.1% and 9.65%, respectively.
After strictly interpreting article 2 of Law 10,753/2003 the RFB also held that the digital storage containing texts deriving from books or original material will be subject to PIS-Import and Cofins-Import at the rate of 0%, even if the media is not made for people with impaired vision.
Note that the taxation of online periodicals and journals is likely to be treated differently by the RFB. See further here.
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Last modified: December 1, 2017